Skagit CountyLocal Government

The County did not have adequate internal controls for ensuring compliance with federal requirements for suspension and debarment and subrecipient monitoring and it did not comply with 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: WA0290000 Pass-through Entity Name: N/APass-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 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 2024, the County spent about $10.4 million in program funds for these activities. Suspension and Debarment 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. 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 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. Subrecipient Monitoring Whenever it passes federal funding to subrecipients, federal regulations require the County to monitor them and ensure they comply with the federal award’s terms and conditions. To determine the appropriate level of monitoring, the County must evaluate each subrecipient’s risk of noncompliance with federal requirements. For these awards, monitoring would include verifying the subrecipients only provided assistance to participants who met eligibility requirements and claimed reimbursement for allowable costs. Description of Condition Suspension and Debarment Although the County has a process to verify the suspension and debarment status for contractors it pays $25,000 or more, our audit found the County did not follow this process and did not verify nine of 11 contractors we tested were not suspended or debarred before purchasing from them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Subrecipient Monitoring Although the County’s internal controls were adequate for ensuring it materially complied with subrecipient monitoring requirements, the County did not complete and document a risk assessment for one of its five subrecipients. Further, the County did not monitor the subrecipients’ activities to provide reasonable assurance that they administered the subaward in compliance with the subaward’s terms and conditions. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition Suspension and Debarment The County misunderstood program requirements and did not believe suspension and debarment requirements were applicable. Subrecipient Monitoring Because the subrecipient was a one-time subrecipient rather than its regular subrecipients, the County overlooked completing the monitoring activities. Effect of Condition Suspension and Debarment The County did not obtain a written certification, insert a clause into the contract or check for exclusion records at SAM.gov to verify the contractors it paid with federal funds were not suspended or debarred before contracting with them. Without adequate internal controls, the County increases its risk of awarding 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 contractors were not suspended or debarred. Therefore, we are not questioning costs. Subrecipient Monitoring The County did not perform required a risk assessment for one of its subrecipients. Without performing this analysis, the County cannot determine the proper level of monitoring of its subrecipient. Additionally, the County did not monitor the subrecipient’s activities to provide reasonable assurance the subrecipient administered the subaward in compliance with the subaward’s terms and conditions, including ensuring it provided assistance only to participants who met program eligibility requirements. Since the County did not monitor its subrecipients, there is no way for it to confirm the subrecipients spent the funds for allowable purposes, provided services to eligible participants, and complied with all program requirements.   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. Subrecipient Monitoring We recommend the County assess subrecipients’ risk and monitor them accordingly to verify they are complying with the award’s terms and conditions. County’s Response We agree with the above mentioned finding. All vendors were checked and none of the vendors paid with federal funds were suspended or disbarred but no documentation was maintained. For the subrecipient monitoring calls were made and inquiry on an ongoing basis but no documentation was maintained there as well. Policies have been put into place for suspension and debarment to be included in all contracts and those vendors with no contracts a search for suspension and debarment will take place before any purchases. Policies have also been put into place to have a uniform spreadsheet to document the monitoring of all subrecipients. Auditor’s Remarks 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. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes subrecipient monitoring and management requirements for pass-through entities.

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