Whitman CountyLocal Government

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Whitman County January 1, 2022 through December 31, 2022 2022-001 The County lacked 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: Yes Description of Condition In 2022, the County spent $6,428,673 in federal funding from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF). This program gives funding 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. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding various grant requirements and monitoring the effectiveness of established program 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 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. Our audit found the County?s controls were ineffective for ensuring that it verified all parties receiving $25,000 or more in federal funds were not suspended or debarred. During 2022, the County paid one contractor $26,713 in federal funds, and did not verify the contractor was not suspended or debarred before entering into the contract. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. The issue was reported as a finding in the prior audit. Cause of Condition County staff responsible for managing this program did not know about the suspension and debarment requirement until the fiscal year 2021 audit was completed in September 2022. The County implemented corrective action measures, but the purchase applicable to this requirement occurred before the prior audit was completed. 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. The County subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the County strengthen internal controls to ensure that all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into the contract, and maintain documentation demonstrating compliance with this federal requirement. County?s Response This is the second year in a row the County has received this finding. The 2021 finding was not brought to the attention of the County until early fall 2022 thus, a correction could not be made to the 2022 work that had already happened thus the finding had to be reissued for the 2022 financial year as well. The Counties response is the same as it was for the 2021 financial year: The County understands the importance of following 2 CFR 200, Uniform Guidance. In this situation, a County employee who was unfamiliar with the administration of Federal grants was responsible for the accounting of the SLRF (ARPA) fund (due to an extreme shortage of staff at the time). While this employee verified that all entities receiving the funds were in good standing with Washington State and were, indeed, valid businesses; verification from the federal websites for suspension and debarment was mistakenly missed. After the County was made aware of this issue, it did utilize the federal websites and fortunately, all businesses were clear of suspension and debarment, so they were eligible for federal funding. Going forward, the Finance staff will train employees who are new to administering a federal grant, ensuring that all requirements are met. Additionally, the County has now discussed this matter with all of the department accounting liaisons and the process for correct debarment verification is now included in the County?s Grant Policies and Procedures. 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.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Whitman County January 1, 2021 through December 31, 2021 2021-001 The County?s internal controls were inadequate for ensuring compliance with federal requirements for suspension and debarment. CFDA 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: 1505-0271 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Description of Condition During fiscal year 2021, the County spent $1,084,061 in federal funding from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF). The objective of the 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. 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 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 contractor has not been suspended, debarred or otherwise excluded. The County can verify a contractor?s status by reviewing the U.S. General Services Administration?s Excluded Parties List System (EPLS), obtaining a written certification from the contractor, or inserting a clause into the contract stating the contractor is not suspended or debarred. The County must perform this verification before entering into the contract or paying the contractor more than $25,000, and it must keep documentation demonstrating compliance with this federal requirement. The County did not have controls for ensuring staff verified all three contractors it paid more than $25,000 in SLFRF funds during 2021 were not suspended or debarred from participating in federal programs before entering into the contracts. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition The employee responsible for managing the SLFRF program does not routinely manage federal programs for the County. As a result, the employee did not have adequate experience with federal funding, and they did not know about the suspension and debarment verification requirement. Effect of Condition The County did not obtain written certifications, insert a clause into the contracts, or check the EPLS to verify three contractors were not suspended or debarred before contracting. Without this verification, 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 grantor could potentially recover them. During our audit, the County verified the contractors were not suspended or debarred. Therefore, we are not questioning costs for these payments. Recommendation We recommend the County improve its internal controls to ensure employees attend training when they are new to managing federal programs, and that contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them. County?s Response The County understands the importance of following 2 CFR 200, Uniform Guidance. In this situation, a County employee who was unfamiliar with the administration of Federal grants was responsible for the accounting of the SLRF (ARPA) fund (due to an extreme shortage of staff at the time). While this employee verified that all entities receiving the funds were in good standing with Washington State and were, indeed, valid businesses; verification from the federal websites for suspension and debarment was mistakenly missed. After the County was made aware of this issue, it did utilize the federal websites and fortunately, all businesses were clear of suspension and debarment, so they were eligible for federal funding. Going forward, the Finance staff will train employees who are new to administering a federal grant, ensuring that all requirements are met. Additionally, the County has now discussed this matter with all of the department accounting liaisons and the process for correct debarment verification is now included in the County?s Grant Policies and Procedures. 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.

Whitman County January 1, 2020 through December 31, 2020 2020-001 The County did not have adequate internal controls for ensuring compliance with federal requirements for subrecipient monitoring. "See Schedule of Findings and Questioned Costs for chart/table" 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 $5,495,421 in relief funds, which included $1,256,721 that it passed through to three subrecipients to provide assistance to small businesses and County residents. 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 a subrecipient, federal regulations require the County to clearly identify the subaward as a federal award 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 subrecipient?s risk of noncompliance with federal requirements. For this award, monitoring would include verifying two of the subrecipients only provided assistance to participants who met program eligibility requirements and that one subrecipient only used funds to provide COVID-19-related mental health services to County residents. The amount of verification would depend on each subrecipient?s risk of noncompliance. The County did not include all required elements in the subawards, and it did not perform a risk assessment and monitor each subrecipient, as federal regulations require. We consider this deficiency in internal control 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 With the effects of COVID-19, it was urgent for the County to disburse funds to subrecipients quickly in order to assist businesses and County residents. The County does not routinely pass funds to subrecipients and employees were not aware that the subrecipient agreements required more elements than the County included in the contracts. Further, the County contracted with a grant consultant to assist in monitoring its subrecipients and ensuring compliance with program requirements. However, County employees and the contracted consultant were not aware the County was required to perform risk assessments for all subrecipients and monitor whether subrecipients were only disbursing funds to eligible participants or using funds for COVID-19-related mental health services. Effect of Condition The County did not include all of the required information in the three subrecipient contracts, such as the subrecipient?s unique entity identifier, federal award date, CFDA number and program name. Without this information, subrecipients are at an increased risk of not knowing that the award comes from a federal program. This also increases the risk that subrecipients would not know that they need to comply with specific program requirements, which could potentially lead to spending funds for unallowable purposes. Because the County did not perform risk assessments and monitor the three subrecipients, we gave the County the opportunity to perform monitoring during the audit and verify if subrecipients complied with the terms and conditions of the subaward. The County randomly selected 42 participants who received assistance from two of the subrecipients to verify they obtained documentation demonstrating the participants were eligible for program assistance based on the County?s established criteria. The County found one subrecipient did not obtain all required documentation from the selected participants and determined it is likely the subrecipient did not obtain required documentation from the remaining participants. Therefore, we identified $218,100 in known and $781,900 in estimated unsupported payments for this subrecipient. Additionally, the County selected five expenditures from the third subrecipient and verified it used the funds for providing COVID-19-related mental health services to County residents as required. Recommendation We recommend the County clearly identify its subawards as federal awards and include all required elements in its subrecipient agreements. We also recommend the County assess subrecipients? risk and monitor them accordingly to verify they are complying with the terms and conditions of the subaward. County?s Response Whitman County (County) appreciates the time and effort the Washington State Auditor?s Office (SAO) spent working through the Single Federal Audit with County staff. SAO was generous in allowing the County time to complete some of the required risk assessments and documentation review during the audit, and that generosity is appreciated. The County has no recollection of receiving a Federal grant that involved passing funds through to sub-recipients, so the County was unfamiliar with the requirements that were unique to this type of Federal funding contract. Additionally, the experienced department head the County would normally have dedicated to oversee this work, our Administrative Services Director, resigned prior to the receipt of the CARES funds. The County was left without the services of an experienced grant manager. Nonetheless, the Whitman County Board of County Commissioners believed it essential to distribute these pandemic relief funds as quickly as possible to mitigate the COVID-19 pandemic?s impact while also maintaining accountability to the public for use of these funds. As such the County sought out a qualified grant management contractor to do the CARES grant work until such time as we could complete the process of hiring and onboarding a new Administrative Services Director and get them up to speed. In 2020 the County was awarded Federal Coronavirus Relief Funds (CRF) to cover necessary expenditures incurred due to the COVID-19 pandemic. The County awarded CRF funds to three sub-recipients to help mitigate the pandemic?s effects on the local nonprofits, homelessness, low-income families, mental health, and small businesses. The County had an extremely short timeline to distribute these funds, continually experienced new amendments to the original CRF contract, and navigated constant changes to the interpretation of allowable funding uses. While these amendments resulted in additional funding, the distribution timeline grew even more rushed. The County feels, however, that these funds made a significant contribution to the community and were essential in helping many County residents and businesses. As stated above, the County contracted with a grant manager to manage the contracts in the absence of our Administrative Services Director. After reviewing references and the interview process, we believed the individual capable of properly managing the CARES grant. However, due to the unique nature of the CARES funds, the County now recognizes the individual did not, in all cases, have the necessary experience to properly oversee certain aspects of the grant process. The County relied on the contractor?s expertise when interpreting all of the unique requirements and believed that all of the required elements of the risk assessment and monitoring tasks were being appropriately handled. Going forward we are following the County?s current procedure for similar Federal Contracts, which is to have our Administrative Services Director oversee COVID-19 relief fund contracts. The County hired a new Administrative Services Director in August 2020. The director was immediately involved in the financial accounting process for the CARES funds but did not take over the Federal contract paperwork until the end of December 2020 when the contractor?s contract ended. Since January 1, 2021 our Admin Services Director has been in charge of the American Rescue Plan Act of 2021 (ARPA) contract procedures and award processes. The Administrative Services Director created a written process to ensure Federal contract requirements are met going forward. The County agrees that the level of monitoring provided during the 2020 financial year was not nearly what it should have been as defined by Federal regulations. The short turnaround times and the COVID-19 pandemic made such in-depth monitoring difficult. However, the County believes that there were some monitoring efforts made. While the County and the hired consultant did not perform either of these tasks to the required level that was detailed in the minutiae of the Federal contract agreement, the hired consultant did perform some risk assessment and monitoring tasks. The hired consultant looked into any questionable costs of a sub-recipient via phone and email. Unfortunately, those tasks were done verbally, and no written documentation was performed by the hired consultant. During the SAO audit and the subsequent analysis by the County, one of the sub-recipients failed to collect all of the required documentation per the signed agreement with the County. The SAO identified that the payments made to this sub-recipient were not substantially supported by backup documentation. While the County acknowledges this, it does not feel that these funds were used inappropriately because most of the outcomes from the use of these funds were visible to the community. Several small businesses are still operating, very specific community members in need have been helped, and our non-profit agencies are still afloat. The County believes that the lack of proper documentation occurred due to its deficiency of Federal grant subrecipient-specific knowledge, the trust in the expertise of the hired consultant, and the extremely short required turnaround time to disperse the funds. The County will formally adopt the written procedures created by the Administrative Services Director?s department prior to March 31, 2022 as Countywide policy. This includes that all Federal grants containing subrecipient agreements be initially reviewed by the County?s Prosecuting Attorney and the Board of County Commissioners to verify that all proper policies are in place before any contracts are signed. Beyond the initial agreements and contracts, the County will continually monitor Federal awards and how those funds are being spent. In addition, the County has learned how to assess risk with sub-recipients and what standards SAO requires that the County follow. The County appreciates the sub-recipient information and direction SAO supplied during the audit, and that information was discussed with departmental accounting staff and has been dispersed to those departments that could be affected. Auditor?s Remarks We appreciate the County?s commitment to resolve this finding and thank the County for its cooperation and professionalism during the audit. We will review the corrective action taken 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. 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.