Grant CountyLocal Government

The County did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements, and it did not comply with federal reporting requirements. Assistance Listing Number and Title: 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide government services to the extent COVID-19 caused a reduction in revenues collected, make necessary investments in water, sewer or broadband infrastructure, and provide emergency relief from natural disasters or their negative economic impacts. In 2024, the County spent $5,035,140 in program funds. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.   Suspension and debarment Federal requirements prohibit recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts paid all or in part with federal funds, it must verify the contractors are not suspended, debarred or otherwise excluded from participating in federal programs. The County may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The County must verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement. Reporting Counties with a population less than 250,000 residents that are allocated more than $10 million in SLFRF funding are required to submit a Project and Expenditure Report on financial data, projects funded, expenditures, and contracts and subawards more than $50,000. This report is due by January 31, 2022, and then 30 days after the end of each quarter thereafter. The U.S. Department of the Treasury identified the following key line item as containing critical information: Obligations and expenditures • Current period obligation • Cumulative obligation • Current period expenditure • Cumulative expenditure Description of Condition Suspension and debarment Our audit found the County did not have internal controls to verify one contractor that it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. We consider this deficiency in internal controls to be a significant deficiency. Reporting Although the County had a process to ensure reports were submitted, its controls were inadequate for ensuring key line items were accurate. The County’s reports of expenditures to date and obligations were not supported by its general ledger or supporting award documentation, which showed the Project and Expenditure Reports to be underreported or overreported for three quarters tested in fiscal year 2024. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and debarment The County provided the funds to the district court department, which was not aware they needed to check for suspension and debarment for the contractor. Reporting The County had turnover in the grants manager position during the course of the Coronavirus State and Local Fiscal Recovery funding period, which resulted in documentation and tracking of expenditures inconsistencies. Effect of Condition Suspension and debarment The County did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify the contractor it paid $360,665 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the County made to an ineligible party would be unallowable and the awarding agency could potentially recover them. The County subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning costs. Reporting The U.S. Department of the Treasury uses the reports for oversight purposes, and any inaccurate information limits its ability to ensure transparency of program spending and fulfill its legal obligations. Failing to submit accurate reports diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Line item Quarter 1, 2024 overreported (underreported) Quarter 2, 2024 overreported (underreported) Quarter 3, 2024 overreported (underreported) Current period obligations ($80,230) ($288,509) $949,970 Current period expenditures $20,040 ($136,239) $293,045 Cumulative obligations $2,000,169 $3,972,409 $2,849,262 Cumulative expenditures ($18,596) $833,963 $44,984 Recommendation Suspension and debarment We recommend the County strengthen its internal controls to verify all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and maintain documentation demonstrating compliance with this requirement. Reporting We recommend the County review Treasury’s reporting guidance including the Compliance and Reporting Guidance and the Project and Expenditure Report User Guide, as well as the reporting webinars available on Treasury’s State and Local Fiscal Recovery Funds website, for all reporting requirements. We also recommend the County maintain quarterly records that trace the Project and Expenditure Reports to underlying documentation to ensure a clear audit trail and thoroughly review these reports for completeness and accuracy before submitting them to Treasury. County’s Response The County would like to thank SAO & Staff for its audit of Grant County, with every audit we are becoming better. The County has established processes to verify that contractors are not suspended or debarred; however, due to significant turnover in key positions across multiple departments, we were unable to demonstrate that these verifications were completed during the audit period. We are committed to strengthening our internal controls and ensuring full compliance with all federal requirements. To address the issues identified, the County is updating relevant policies, standardizing documentation practices, and providing additional training to staff responsible for these compliance activities. These steps will help ensure consistent adherence to requirements and reduce the risk of gaps during periods of staffing transition. Auditor’s Remarks We thank the County for its cooperation and assistance during the audit and acknowledge its commitment to improve the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. U.S. Department of the Treasury’s Compliance and Reporting Guidance State and Local Fiscal Recovery Funds, Part 2: Reporting Guidance, provides the reporting requirements for the Project and Expenditure Report. U.S. Department of the Treasury’s Project and Expenditure Report User Guide State and Local Fiscal Recovery Funds, a supplement to the Compliance and Reporting Guidance, provides detailed reporting guidance, instructions, and FAQ’s for award recipients in using Treasury’s Portal for submitting the Project and Expenditure Reports. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

The County did not have adequate internal controls for ensuring compliance with federal subrecipient monitoring requirements. Assistance Listing Number and Title: 21.027 – COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: WA State Department of Commerce Pass-through Award/Contract Number: 21-4619C-108 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. During 2023, the County spent $8,167,780 in program funds. Of this, it passed through $5,777,956 of the Washington State Department of Commerce’s Eviction Rent Assistance program funding to three subrecipients. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Whenever the County passes on federal funding to subrecipients, federal regulations require it to monitor subrecipients to ensure they comply with the terms and conditions of the federal award. For this subaward, monitoring would include verifying the subrecipients only provided assistance to participants who met the program eligibility requirements. Further, subrecipient requirements require the County to verify whether the awardee received an audit if they expended more than $750,000 in federal awards, and to follow up on any findings issued. Description of Condition Our audit found the County did not have internal controls in place to monitor its subrecipients, as federal regulations require. Specifically, the County did not obtain documentation from three subrecipients to ensure the program participants were eligible for the Eviction Rent Assistance Program from the Washington State Department of Commerce. Further, the County did not ensure it checked whether one subrecipient expended more than $750,000 in federal awards or received an audit. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition During 2023, the County experienced turnover in the position responsible for performing subrecipient monitoring procedures, and it did not have procedures to ensure it performed the required monitoring. Effect of Condition The County did not monitor subrecipients to ensure they complied with the terms and conditions of the subaward and appropriately used federal program funds. Since the County did not monitor its subrecipients, it was unable to confirm only eligible households received assistance. Further, without verifying a subrecipient received a single audit, the County would be unaware if any findings were issued relating to program requirements that would require follow-up. Recommendation We recommend the County establish procedures to perform monitoring activities, including verifying whether participants were eligible for services and ensuring subrecipients receive an audit as required by federal regulations. County’s Response Grant County and staff thank the State Auditor’s Office for their time in conducting a thorough audit. Unfortunately, staff turnover and transition of acquainted and well-versed personnel in key departments are contributing factors to the deficiencies noted. The County is committed to continuing to improve processes and procedures over internal controls and in making internal controls a priority by putting in place necessary policies and procedures to ensure all grant contracts/agreements have internal controls identified and monitored. The County will put in place a sub-recipient agreement/contract checklist to be completed at the department level. This checklist will provide internal controls to ensure all items for this type of agreement/contract have been met per Uniform Guidance. A review of the checklist to ensure all required items have been addressed will be performed annually, if not more frequently. Auditor’s Remarks We thank the County for its cooperation and assistance during the audit and acknowledge its commitment to improve the condition described. We will review the status of this issue during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for passthrough entities, establishes the requirements for subrecipient monitoring and management requirements for pass through entities

2020-001 The County had inadequate internal controls for ensuring compliance with federal requirements for subrecipient monitoring. CFDA Number and Title: 21.019, COVID 19 ? Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Commerce Pass-through Award/Contract Number: 20-6541C-013/21-4614C-108 Questioned Cost Amount: $0 Description of Condition The purpose of the Coronavirus Relief Fund program is to provide payments to state, territorial, tribal and certain eligible local governments to cover necessary expenditures incurred because of the COVID-19 pandemic. During 2020, the County spent $6,069,548 in relief funds, which included $3,788,815 that it passed through to three subrecipients to provide assistance to small businesses, eviction rental assistance and address public health needs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Whenever the County passes on federal funding to subrecipients, federal regulations require the County to clearly identify the subaward contracts as federal awards and include all applicable program requirements. Further, the County must monitor its subrecipients to ensure they comply with the terms and conditions of the federal award. To determine the appropriate level of monitoring, the County must evaluate the subrecipients? risk of noncompliance with federal requirements. For these awards, monitoring would include verifying that the subrecipients only provided assistance to participants who met program eligibility requirements. The amount of verification required would depend on the subrecipients? risk of noncompliance. The County had three subrecipients and did not perform risk assessments for two of them. The County also did not monitor one of its three subrecipients, as federal regulations require. We consider these deficiencies in internal controls to be a material weakness that led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition With the effects of COVID-19, it was urgent for the County to disburse funds to subrecipients quickly in order to assist with public health and housing rental needs. The County does not routinely pass funds to subrecipients, and County staff responsible for implementing the subrecipient contracts were not aware the County was required to perform risk assessments for all subrecipients and monitor whether they were only disbursing funds to eligible participants. Effect of Condition Because the County did not perform risk assessments and monitor one of the subrecipients, we gave the County the opportunity to verify the eligibility of program participants. The County randomly selected 15 participants and verified that they were eligible for program assistance. We reviewed the County?s verification and found it had adequate documentation supporting its eligibility criteria for the selected participants. Therefore, we are not questioning costs. Recommendation We recommend the County assess subrecipients? risk and monitor them accordingly to verify they are complying with the terms and conditions of the award and only providing funds to eligible participants. County?s Response Grant County and staff thank the State Auditor?s Office for their time in conducting a thorough audit and recognizing that we as a team have improved and implemented controls based on previous audit recommendations. Unfortunately, staff turnover and transition of acquainted and well-versed personnel in key departments are contributing factors to the deficiencies noted. The County is committed to continuing to improve processes and procedures over internal controls and in making internal controls a priority by putting in place necessary policies and procedures to ensure all grant contracts/agreements have internal controls identified and monitored in a manner acceptable to the State Auditor. As such, the County will put in place a sub-recipient agreement/contract checklist to be completed at the department level. This checklist will provide internal controls to ensure all items for this type of agreement/contract have been met per Uniform Guidance. A review of the checklist to ensure all required items have been addressed will be performed annually, if not more frequently. Auditor?s Remarks We appreciate the County?s commitment to resolving the issues noted and will follow up during the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes subrecipient monitoring and management requirements for pass-through entities. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.