Grays Harbor County

The County?s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements. Assistance Listing Number and Title: 21.027 ? COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the 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 Description of Condition The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) 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. In 2022, the County spent $8,441,435 in program funds. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Federal requirements prohibit grant recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The County may accomplish this verification by collecting 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 perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Our audit found the County?s controls were inadequate for ensuring staff verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. Specifically, the County did not verify that two of the six contractors we tested were not suspended and debarred from participating in federal programs before entering into contracts with them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Not all County staff were aware of the federal program?s suspension and debarment verification requirements, and they were unable to provide documentation to support that they verified the two contractors were not suspended or debarred. Effect of Condition 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 federal agency could potentially recover them. Through a search of SAM.gov, we verified all two contractors were not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the County strengthen internal controls to ensure all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before entering into contracts or purchasing. In addition, the County should maintain documentation demonstrating compliance with this federal requirement. County?s Response Grays Harbor County (?County?) thanks the State Auditor?s Office (?State Auditor?) for bringing this issue to the County?s attention. In February 2022, the County adopted a procurement policy (?Policy?) applicable to all contracts funded by the Coronavirus State and Local Fiscal Recovery program (?Program?). The Policy requires the County to, prior to entering into such a contract, verify that the contractor has not been suspended, debarred, or otherwise excluded. Despite having this Policy, the County did not verify the contractors identified by the State Auditor. Auditor?s Remarks We thank the County for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the County?s corrective action 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 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

Grays Harbor County January 1, 2021 through December 31, 2021 2021-001 The County?s internal controls were inadequate for ensuring compliance with federal procurement requirements. CFDA Number and Title: 66.468 ? Capitalization Grants for Drinking Water State Revolving Funds Federal Grantor Name: Environmental Protection Agency Federal Award/Contract Number: DWL23456 Pass-through Entity Name: Washington State Department of Health Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Description of Condition The Drinking Water State Revolving Fund (DWSRF) program is a federal-state partnership to help maintain safe drinking water. Created by the 1996 Amendments to the Safe Drinking Water Act (Act), the program provides financial support to water systems and to state safe water programs. States can use capitalization grant funds to establish a revolving loan to assist public water systems, finance the costs of infrastructure needed to achieve or maintain compliance with the Act?s requirements, and protect the public health objectives of the Act. During fiscal year 2021, the County spent $951,088 in federal funding for a water system improvement project. 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. Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR ? 200.318-327. The procedures must reflect the most restrictive of applicable federal requirements, state laws or local policies. When using federal funds to procure goods and services, governments must apply the more restrictive requirements by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Although the County has a written procurement policy, it does not conform to the most restrictive methods and thresholds for procuring public works projects. Additionally, the County?s policy does not include other required procedures for procuring transactions, such as piggybacking, contract cost and price analysis, bonding requirements, and more. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition The County?s Board of Commissioners approved its current procurement policy in 2016. County management and staff said they did not know about the updated federal requirements for written procurement policies, which went into effect in July 2018. Effect of Condition Although the County?s policies did not conform to Uniform Guidance, our testing found the County complied with federal requirements for sealed bidding for a public works contractor. However, without adequate procurement policies, the County is at a greater risk of noncompliance with following the most restrictive procurement procedures when procuring contractors paid all or in part with federal funds. Recommendation We recommend the County update its procurement policy to be in compliance with the most restrictive requirements and include all elements required by Uniform Guidance. County?s Response Grays Harbor County (?County?) would like to thank the State Auditor?s Office for bringing this issue to the County?s attention. The County has been in the process of updating its procurement policy so that the policy specifically incorporates federal procurement requirements under Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The County intends that the policy will comply with the most restrictive requirements, and include all elements required by the Uniform Guidance. The County anticipates policy completion and implementation in the near future. Further, the County has implemented a specific procurement policy for expenditures of all federal assistance received from the American Rescue Plan Act (?ARPA?) and Coronavirus State and Local Fiscal Recovery Funds (?LFRF?). The specific purpose of this policy is to ensure that the County?s internal controls are adequate for ensuring compliance with federal procurement requirements. Auditor?s Remarks We thank the County for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the County?s corrective action 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 318, General procurement standards, establishes requirements for written procedures.

Grays Harbor County January 1, 2021 through December 31, 2021 2021-002 The County lacked adequate internal controls for ensuring it met subrecipient monitoring requirements. CFDA Number and Title: 21.023 ? COVID-19 Emergency Rental Assistance Program 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: 21-4616C-109 Questioned Cost Amount: $0 Background During fiscal year 2021, the County spent $2,141,308 in federal funding from the Emergency Rental Assistance (ERA 1) Program, which included $2,091,364 passed through to one subrecipient. The objective of the program is to respond to the COVID-19 pandemic?s negative effects on housing, rental debt, and evictions by providing assistance to households unable to pay past-due rent and utility bills. 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 clearly identify the award as a subaward by providing the information described in the regulation and including all applicable program requirements in the agreement. 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 each subrecipient?s risk of noncompliance with federal requirements. For awards dependent on participant eligibility, monitoring would include verifying the subrecipients only provided assistance to participants who met program eligibility requirements. The amount of verification would depend on each subrecipient?s risk of noncompliance. Description of Condition The County provided funds to one subrecipient to administer COVID-19 assistance programs to County households. The County did not include all required elements in the subaward, and it did not perform a risk assessment and sufficiently monitor the subrecipient, as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition County employees said they were not aware of all the elements that needed to be included in the subrecipient agreement. The County further said the required information was communicated to the subrecipient, but not in the agreement. The County has worked with the subrecipient for more than 10 years, and management and staff thought a risk assessment performed yearly, rather than for each subaward, would comply with federal requirements. Further, staff and management said they were not aware of the requirements for subrecipient monitoring for awards dependent on participant eligibility. Instead, they thought that reviewing detailed expenditure reports from the subrecipient was sufficient for complying with monitoring requirements. Effect of Condition We found the County did not include required elements in its subrecipient agreement, such as the subrecipient?s unique entity identifier, the federal award identification number (FAIN), federal award date and the Assistance Listing Number (ALN). Without this information, the subrecipient is at an increased risk of not knowing that the award comes from a federal program. This also increases the risk that the subrecipient would not know that they need to comply with specific program requirements, which could potentially lead to spending funds for unallowable purposes. The County also did not complete a risk assessment for this subaward. Without performing a risk assessment, the County is at risk of not performing adequate monitoring and its subrecipient not complying with program requirements. By not performing adequate monitoring, the County cannot be sure that its subrecipient used federal funds appropriately. Additionally, the County did not identify that the subrecipient used verbal attestations to collect beneficiary information instead of written attestations, as federal regulations require. As a result, we identified $2,091,364 in unsupported payments to the subrecipient. Recommendation We recommend the County improve its internal controls to ensure compliance with federal requirements. Specifically, we recommend the County establish subaward agreements that include all required elements for all federal awards passed through to subrecipients. Additionally, we recommend the County assess subrecipients? risk for each subaward and sufficiently monitor them accordingly to verify they are complying with federal regulations and the terms and conditions of the subaward. County?s Response Grays Harbor County Public Health (?Public Health?) would like to thank the State Auditor?s Office for bringing these issues to Public Health?s attention. Public Health is now in the process of identifying federal awards as subawards in subrecipient agreements by providing the information required by federal regulations, and including all applicable program requirements. Public Health will evaluate each subrecipient?s risk of non-compliance with federal requirements by verifying that risk assessments have been completed, and by developing additional tools for subrecipient risk assessments. Public Health has also begun developing processes for organizing and documenting subrecipient monitoring activities. Such processes will include client file reviews and verification by Public Health supervisors. Public Health anticipates full implementation of these measures in the near future. Auditor?s Remarks We thank the County for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the County?s corrective action 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 331, Subrecipient and contractor determinations, and 332, Requirements for pass-through entities, establishes the requirements for identifying whether the party is a subrecipient or contractor and subrecipient monitoring and management requirements for pass through entities.

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