Okanogan CountyLocal Government

2023-001       The County did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds program. 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       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 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 2023, the County spent $1,417,951 in SLFRF program funds. 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. Under the SLFRF program, direct recipients with a population less than 250,000 residents that are allocated less than $10 million in SLFRF funding must submit annual Project and Expenditure reports to the U.S. Department of the Treasury (Treasury). Treasury identified the following key line items in the report that contain critical information and must be accurate and complete: 1.Obligations and Expenditures Current period obligation Cumulative obligation Current period expenditure Cumulative expenditure Description of Condition The County did not have an effective process for ensuring it prepared an accurate and complete report based on supporting documentation and Treasury’s guidance for SLFRF. Specifically, the County did not report seven of the eight projects that it paid with program funds. We consider these internal control deficiencies to be a material weakness that led to material noncompliance. We did not report this issue as a finding in the prior audit. Cause of Condition Staff responsible for completing the reports did not have a comprehensive understanding of the reporting requirements and did not receive the appropriate training. Effect of Condition The Project and Expenditure Report the County submitted in 2023 did not include information for seven of eight projects totaling $1.4 million. 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. By not establishing adequate internal controls, the County cannot ensure that information reported to the federal awarding agency is complete and accurate. Recommendation We recommend the County: Establish internal controls to prepare accurate and complete reports Provide resources and training necessary for staff to improve report preparation so that it complies with federal reporting guidance and system requirements Refer to Treasury’s Project and Expenditure Report User Guide for instructions on correcting the data County’s Response The County respectfully concurs with the finding and understands the importance of compliance with federal program requirements. The County did experience issues with the reporting portal for these funds.  When we requested assistance, we received generic responses and little assistance from the Treasury.  It wasn’t until November 2024 that we were finally able to gain the assistance we needed to gain full access to the Treasury portal as well as some guidance on the reports.  On January 1, 2025, the Treasury provided guidance that is helpful to us in understanding the reporting requirements.  Now that we have the access and guidance we need, all reports will be submitted accurately and on time. 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. 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 Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, Section B, page 17, provides the reporting requirements for the Project and Expenditure Report.  Section V of the Treasury’s current Project and Expenditure User Guide provides guidance for editing and revising report data (see Section IV of the January 2023 Guide).

2022-001 The County did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements. Assistance Listing Number and Title: 20.205 Highway Planning and Construction Federal Grantor Name: Federal Highway Administration U.S. Department of Transportation Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation Pass-through Award/Contract Number: LA-10283, LA-10284, LA 10156, LA-10151, LA-10157, LA – 10340, LA-10328, LA-9782, LA - 9920 Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2022, the County spent $1,594,832 in Highway Planning and Construction grant funds. The County used this grant funding for the Washington State Department of Transportation Improvements project. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal requirements prohibit 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 and 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 keep documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the County did not have controls in place to ensure staff verified one of two contractors paid more than $25,000 in Highway Planning and Construction grant funds during 2022 was not suspended or debarred from participating in federal programs. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Cause of Condition County staff responsible for the program said they were unable to create an account on SAM.gov. Instead, they searched the contractor’s status in a state-debarred contractors list. However, this website only lists contractors who are not allowed to work on public works projects in Washington due to violations of state law and does not list contractors who are debarred from participating in federally funded projects. Effect of Condition The County did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify that one of two contractors was not suspended or debarred before entering into the contract. Without this verification, the County increases its risk of awarding federal funds to parties 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. We subsequently verified the contractor was not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County improve its internal controls to ensure compliance with federal requirements. Specifically, we recommend the County ensure all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs. County’s Response The County respectfully concurs with the finding and understands the importance of compliance with federal program requirements. The County will implement internal controls that ensures that staff who are responsible for purchasing goods or services with federal dollars are obtaining a written certification whether by language within a contract or documentation from SAM.gov are vendors that are not suspended or debarred from participating in federal programs. Auditor’s Remarks We appreciate the County’s commitment to resolving this issue. We will review the condition 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.

2022-002 The County did not have adequate internal controls 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 Background 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 $985,217 in program funds. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal requirements prohibit 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 that the contractors have not been suspended, debarred, or otherwise excluded. The County may accomplish this verification 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 perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the County’s controls were ineffective for ensuring that staff verified all parties receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, County staff did not document on the SAM.gov printouts the date they verified three contractors’ suspension and debarment status. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. Cause of Condition County staff were aware of the federal suspension and debarment verification requirements, and they normally verify this information during the procurement process. However, when these contracts were entered into, County staff did not recognize the need to document the date of the checks on the SAM.gov printouts. Effect of Condition Because the SAM.gov printouts were not dated, the County cannot demonstrate it complied with suspension and debarment requirements. Without adequate internal controls, the County increases its risk of awarding federal funds to parties 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. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County improve its internal controls to ensure compliance with federal requirements. Specifically, we recommend the County ensure all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred, and maintain documentation demonstrating compliance with this requirement. County’s Response The County respectfully concurs with the finding and understands the importance of compliance with federal program requirements. The County will implement internal controls that ensures that staff who are responsible for purchasing goods or services with federal dollars are obtaining a written certification whether by language within a contract or documentation from SAM.gov are vendors that are not suspended or debarred from participating in federal programs. Auditor’s Remarks We appreciate the County’s commitment to resolving this issue. We will review the condition 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.

2020-001 The County lacked adequate internal controls for ensuring compliance with federal requirements for subrecipient monitoring, resulting in unallowable costs. CFDA Number and Title: 20.019, 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-024 Questioned Cost Amount: $246,603 Background The purpose of the Coronavirus Relief Fund program is to provide funding to state, territorial, tribal, and certain eligible local governments to cover necessary expenditures incurred because of the COVID-19 pandemic. The County used Coronavirus Relief Fund program funds to provide assistance payments to local businesses financially affected by COVID-19 and to cover additional costs associated with the health emergency. During fiscal year 2020, the County spent $2,938,570 in program funds, which included about $1.7 million that it passed through to subrecipients to fulfill components of the program?s objectives. 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 monitor them to ensure they comply with the terms and conditions of the federal award. For this award, monitoring would include verifying that subrecipient costs charged to the program were for contracted services they actually provided on a cost-reimbursement basis. Description of Condition The County contracted with one subrecipient to administer COVID-19 testing for the community. The County did not monitor the subrecipient to verify it provided services in accordance the terms and conditions of the subaward. We consider this internal control deficiency to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition The County received the new Coronavirus Relief Fund program funds while trying to react quickly to the COVID-19 pandemic. As a result, the County did not dedicate sufficient time and resources to adequately monitoring subrecipients and program expenditures. Effect of Condition and Questioned Costs The County charged $246,603 to the program for contracted services that were not performed within the period of performance required by the grant agreement. The subrecipient did not use these funds, and it did not return them to the County or the granting agency. As a result, we are questioning these costs. Recommendation We recommend the County strengthen its internal controls over subrecipient monitoring to ensure all subrecipient reimbursements are for incurred costs. Further, we recommend the County work with its subrecipient to return unspent funds to its granting agency. County?s Response Okanogan County would like to thank the State Auditor?s Office for conducting a thorough audit. The County concurs with the finding. Okanogan County is committed to improving processes and procedures to ensure adequate internal controls are in place for all funding sources. As such, the County will create additional internal controls regarding monitoring requirements to ensure timely monitoring of all subrecipients. Auditor?s Remarks We thank the County for its cooperation and assistance 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, Requirements for pass-through entities, establishes sub-recipient monitoring and management requirements for pass-through entities. Title 42 U.S. Code of Federal Regulations (CFR) Part 801, Coronavirus Relief Fund establishes allowable costs of the program.