Public Utility District No. 1 of Skamania CountyLocal Government

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Public Utility District No. 1 of Skamania County January 1, 2024 through December 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with time-and-effort requirements. Assistance Listing Number and Title: 11.307, Economic Adjustment Assistance Federal Grantor Name: U.S. Department of Commerce Federal Award/Contract Number: N/A Pass-through Entity Name: Economic Development Administration Pass-through Award/Contract Number: 07-79-07485 Known Questioned Cost Amount: $63,721 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $580,514 in federal funds from the Economic Adjustment Assistant grant. The primary objective of the Economic Adjustment Assistance program is to assist communities with revitalizing and expanding their physical and economic infrastructure and support the creation and retention of jobs for area residents by helping eligible recipients promote the economic development of their local economies. The District used federal funds for the upgrade of the North Bonneville substation and feeder upgrade project. 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. The District is responsible for ensuring it supports all payroll costs it charges to the program with adequate time-and-effort documentation, as required by federal regulations and the awarding agency. Description of Condition The District’s internal controls were ineffective for ensuring it supported all salaries and benefits it charged to the program with appropriate time-and-effort documentation, as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition District staff did not anticipate charging payroll costs to the grant. Therefore, the District did not establish a system of internal controls to track staff time that meets federal requirements. Effect of Condition and Questioned Costs The District did not obtain time-and-effort documentation for four employees whose payroll and benefits totaling $63,721 it charged to the program. Without adequate time-and-effort documentation, the District cannot demonstrate compliance with the awarding agency’s documentation requirement to support costs charged to federal programs. Further, the District cannot assure federal grantors that payroll costs it charged to the program were accurate and valid. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District does not have adequate documentation to support expenditures. Recommendation We recommend the District implement and follow internal controls to ensure it complies with federal requirements for obtaining signed time-and-effort documentation timely. District’s Response The District acknowledges allowable payroll expenses for grant reimbursement did not adequately satisfy time-and-effort documentation per federal regulation requirements. Project payroll expenditures were pre-approved in the project budget by the Economic Development Administration (EDA). In response to your recommendation, the District will track all grant project labor hours through an official approved timesheet. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’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, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Public Utility District No. 1 of Skamania County January 1, 2021 through December 31, 2021 2021-002 The District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Assistance Listing Number and Title: 11.307, Economic Adjustment Assistance Federal Grantor Name: Economic Development Administration, Department of Commerce Federal Award/Contract Number: 07 79 07485; 112341 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 Economic Adjustment Assistance (EAA) program helps state and local entities respond to a wide range of economic challenges. In fiscal year 2021, the District spent a total of $749,170 of its EAA award. 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. Under federal wage rate requirements, also known as the Davis-Bacon Act, contractors and subcontractors that work on construction contracts financed with more than $2,000 of federal money must pay laborers and mechanics wage rates that the U.S. Department of Labor considers being similar to what local workers have been paid for similar projects. For construction contracts subject to these wage rate requirements, the District must include a provision that the contractors and subcontractors comply with those requirements and the Department of Labor’s regulations. This includes a requirement for the contractor and its subcontractor to submit to the District weekly, for each week in which any contract work is performed, certified payroll reports. These reports must include a copy of the payroll and a signed statement of compliance. Description of Condition During fiscal year 2021, the District spent $162,241 to pay a contractor and its subcontractor to upgrade a substation, install an emergency generator at the District’s headquarters, and install radio system repeaters. Our audit found the District did not have adequate internal controls for ensuring compliance with federal wage rate requirements. Specifically, the District did not collect weekly certified payroll reports from the contractor and its subcontractor to confirm they paid laborers proper prevailing wages. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. Cause of Condition The District does not typically spend federal funds on construction projects. Because of this, District management did not know about the federal requirements to collect all certified payroll reports from the contractor and its subcontractor each week to confirm they paid laborers proper prevailing wages. Effect of Condition Without adequate internal controls that ensure it collects all weekly certified payroll reports, the District cannot demonstrate it complied with federal wage rate requirements. The District could also be liable for paying any additional wages if the contractor and its subcontractor did not pay prevailing wage rates to laborers working on the contract. During the audit period, the District was required to collect certified payroll reports from one contractor and one subcontractor. We found the District did not obtain any of the weekly certified payroll reports. Recommendation We recommend the District develop internal controls to ensure compliance with federal wage rate requirements. This should include implementing effective monitoring processes to collect and review all weekly certified payroll reports timely from contractors and subcontractors. District’s Response The District acknowledges certified payrolls were not received weekly from contractors. The District did verify certified weekly payrolls, confirmed wages were in compliance with Davis Bacon, and requested payrolls on a weekly basis, but the process was not documented. Timely receipt of payrolls is challenging, but the District will move forward with continuing to initiate and document certified payroll requests in the future. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review corrective action taken 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. Title 29 CFR, Section 3.3 – Weekly statement with respect to payment of wages, and Section 3.4 – Submission of weekly statements and the preservation and inspection of weekly payroll records, establishes requirements for contractor or subcontractor submission of weekly certified payroll reports. Title 29 CFR, Section 5.5 – Contract provisions and related matters, establishes the requirements for the contracting officer to insert in full any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part with federal funds the clauses listed, which includes but is not limited to the minimum wages to be paid and payrolls and basic records to be maintained (submission of weekly certified payrolls).