Round Valley Indian Tribes

Procurement, Suspension and Debarment – Material Weakness in Internal Control Over Compliance and Material Non-Compliance Criteria: Non-federal entities are prohibited from contracting with or making sub-awards under covered transactions to parities that are suspended or debarred or whose principals are suspended or debarred. “Covered transactions” include those procurement contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to be equal or exceed $25,000 or meet certain other specified criteria. Additionally, the recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in §200.318 of the Uniform Guidance. Condition/Context: We selected a statistically valid random sample of transactions charged to the programs to tests controls of procurement, suspension and debarment and found the following: ALN 15.035: Forestry on Indian Lands • For 1 of 1 vendor tested that met the suspension and debarment threshold, the Tribes were unable to provide documentation indicating that a suspension and debarment check was conducted prior to contracting with the vendor. However, we were able to verify during the course of the audit that this vendor was not previously suspended or debarred. • For 1 of 1 vendor tested that met procurement requirements, the Tribes could not provide support that procurement policies were followed to obtain three or more bids or documentation to justify sole source prior to contracting with the vendor. ALN 21.027: COVID-19 Coronavirus State and Local Fiscal Recovery Fund • For 4 of 4 vendors tested that met the suspension and debarment threshold, the Tribes were unable to provide documentation indicating that a suspension and debarment check was conducted prior to contracting with the vendors. However, we were able to verify during the course of the audit that these vendors were not previously suspended or debarred. • For 3 of 4 vendors tested that met procurement requirements, the Tribes could not provide support that procurement policies were followed to obtain three or more bids or documentation to justify sole source prior to contracting with the vendors. Cause: The programs did not follow the Tribes’ procurement policy’s documentation requirements to obtain multiple bids or document sole source justification and obtain verification that a suspension and debarment check was conducted prior to contracting with the vendor. Effect: If vendors are retained and paid from federal funds and are later found to be suspended or debarred, or if it is determined that programs did not assure full and open competition, the Tribes could be subject to questioned costs or other sanctions from funding agencies. Questioned costs: The questioned costs associated with procurement, suspension, and debarment was not determinable. Due to lack of multiple bids, we are unable to determine whether the Tribes would have received a different contract price if procurement policies were followed. Repeat finding: This is not a repeat finding from the prior year. Recommendation: The Tribes should ensure procurement policies are followed and procedures are in place to verify suspension and debarment requirements are followed prior to contracting with vendors exceeding the suspension and debarment threshold. Views of responsible officials and planned corrective action: The Tribes will ensure compliance with procurement policies by strengthening procedures to verify suspension and debarment requirements before entering into contracts exceeding the applicable threshold. The Procurement Department will maintain supporting documentation for all bid processes and sole source justifications to ensure adherence to federal and tribal procurement standards.

Special Tests and Provisions – Material Weakness in Internal Control Over Compliance and Material Non-Compliance Criteria: Per 25 U.S. Code Sec 450e-3, “Advance payments made by the Department of the Interior (DOI) to Indian tribes, tribal organizations, and tribal consortia pursuant to the Indian Self-Determination and Education Assistance Act (ISDEAA) may be invested, before such funds are expended for the purposes of the grant, compact, or annual funding agreement, so long as such funds are (1) invested by the Indian tribe, tribal organization, or consortium only in obligations of the United States, or in obligations or securities that are guaranteed or insured by the United States, or mutual (or other) funds registered with the Securities and Exchange Commission and which only invest in obligations of the United States or securities that are guaranteed or insured by the United States or (2) deposited only into accounts that are insured by an agency or instrumentality of the United States, or are fully collateralized to ensure protection of the funds, even in the event of a bank failure.” Condition/Context: Of the Tribes’ advanced DOI grant proceeds recognized as unearned revenues of $5,855,829 as of December 31, 2022, $5,605,829 was uninsured and uncollateralized or not invested in securities that are guaranteed by the United States. Questioned costs – There were no reportable instances of questioned costs. Cause: Lack of sufficient training over specific compliance requirements and insufficient internal controls over this compliance requirement may have contributed to this finding. Effect: The advance payments of grants pursuant to the ISDEAA are exposed to custodial credit risk and the Tribes are not in compliance with the requirements for investment of advance funding. Repeat finding: This is not a repeat finding from the prior year. Recommendation: We recommend the Tribes consider either entering into a collateralization agreement with a bank or invest the advanced federal grant payments in U.S. backed securities to ensure they are in compliance with grant agreements. Views of responsible officials and planned corrective action: The Tribes will evaluate options to either enter into a collateralization agreement with a financial institution or invest advanced federal grant funds in U.S. government-backed securities to ensure compliance with grant requirements. Additionally, staff will receive training on applicable federal regulations governing advanced payments.

Allowable Activities – Advanced Grant Payments Used for Interfund Borrowing – Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria – 31 CFR Part 35 codified the guidance from the Department of Treasury COVID-19 State and Local Fiscal Recovery Funds Interim Final Rule that was published on May 17, 2021, with amendments. Such regulations provide guidance on the allowable uses of the Department of Treasury COVID-19 State and Local Fiscal Recovery Funds (SLFRF). Although the regulations allow broad use of funds under the revenue loss calculation for the provision of government services, such uses should be for costs incurred (i.e., expenditures) beginning on or after March 3, 2021. Condition and context – The Tribe received $30,842,698 of State and Local Fiscal Recovery Funds and expended $13,878,875 (cumulatively) on allowable activities, which should have resulted in the Tribe having $16,963,824 of cash available to expend on future award activities and included in the financial statements as unearned revenues. The Tribes’ unexpended advance payments (unearned revenues) for all grants were $24,598,026 as of December 31, 2022. Also, as of December 31, 2022, the Tribes’ grants fund had total pooled cash and investments of only $19,321,293, resulting in insufficient cash or investments to cover unexpended advanced payments. The Tribes effectively used advanced payments from SLFRF funds to provide interfund loans to cover expenses of other grants funded on a reimbursement basis and the general fund. Such loans to other funds were not determined to be an allowable use of funds. We believe that such interfund borrowing was not tied to a cost that had been incurred and therefore have determined such use was not an allowable activity under the program. Such interfund borrowing is properly not reported as an expenditure in the Tribe’s schedule of expenditures of federal awards. Questioned costs – The Tribes had insufficient cash and investments to cover unexpended advanced payments. Because the Tribe pools its cash accounts, we are unable to specifically determine the portion of cash loaned from the Department of the Treasury SLFRF funds. Cause – The Tribe failed to implement procedures to disallow interfund borrowing from unexpended advanced payments (unearned revenues). Effect – The advanced payments for awards pursuant to the SLFRF were used for interfund borrowing to the Tribes other grant programs and the general fund. Repeat finding – This is not a repeat finding from the prior year. Recommendation – We recommend that the Tribes review their cash flow projection and monitoring processes and perform the following activities: • Obtain external funding (line of credit, debt, additional funds from Tribal businesses) to meet the cash needs of the Tribes general fund and reimbursement-type grants and reimburse advance-funded grants for all interfund borrowing incurred. • Evaluate general fund budgets to ensure sufficient cash is available to cover proposed expenditures. • Improve timeliness of billing and collection of reimbursement grants. Views of responsible officials and planned corrective action: The Tribes, in collaboration with the Interim CFO, will review cash flow projection and monitoring processes to strengthen the management of operating and grant funds. They will obtain external funding as needed to meet general fund and reimbursement grant cash requirements and to reimburse advance-funded grants for any interfund borrowing incurred. General fund budgets will be evaluated to ensure sufficient cash is available for planned expenditures, and procedures will be enhanced to improve the timeliness of billing and collection for reimbursement-based grants.

Reporting – Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria – Per 2 CFR 200.303, the Tribes must “Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award”. Condition and context – We selected a statistically valid random sample of financial reports required to be submitted for the programs and found the following: ALN 15.021: Consolidated Tribal Governments • The Tribes were unable to provide documentation indicating that the required SF-425 Federal Financial Reports were submitted for the program. • The Tribes were unable to provide documentation indicating that the required Federal Funding Accountability and Transparency Act Reports were submitted for the program. ALN 15.035: Forestry on Indian Lands • The Tribes were unable to provide documentation indicating that the required SF-425 Federal Financial Reports were submitted for the program. Questioned costs – There were no reportable instances of questioned costs. Cause – The Tribes do not have a process in place to ensure reports are prepared and submitted to the funding agency. Effect – Required performance and special reports were not submitted. Repeat finding – This was not reported as a finding for ALN 15.021 and ALN 15.035 in the prior year. Recommendation – The Tribes should review the terms and conditions of all grant awards to ensure they have an understanding of all reporting requirements necessary under each grant. Additionally, the Tribes should implement policies and procedures to monitor reporting deadlines to ensure that reports are prepared and submitted as applicable. Views of responsible officials and planned corrective action: The Tribes will ensure compliance with future reporting requirements, such as review and enhancement of reporting procedures, personnel training, and monitoring and oversight by management.

Allowable Costs – Indirect Costs – Noncompliance Criteria – Indirect costs charged to federal programs must be calculated in accordance with the approved Indirect Cost Rate Agreement and applicable federal regulations. Condition and context – The Tribes charged $93,615 in indirect costs to the Indian Child Welfare Improvement Project program (ALN 16.583) from fiscal years 2019 through 2022. Based on the Tribes’ Indirect Cost Negotiation Agreement and their direct cost base for the program during this period, the maximum amount of allowable indirect costs that should have been charged to the program was $66,677. Questioned costs – The Tribes overcharged indirect costs to the program, resulting in questioned costs of $26,938. Cause – The Tribes calculated total indirect costs on total expenditures for the program without excluding capital expenditures as required by their Indirect Cost Negotiation Agreement. Effect – The overcharge resulted in questioned costs totaling $26,938, representing the amount by which indirect costs exceeded the allowable calculation. Repeat finding – This is not a repeat finding from the prior year. Recommendation – We recommend the Tribes implement procedures to review their indirect cost calculations for accuracy. The total direct cost base should be reduced by capital expenditures and passthrough funds in accordance with the approved Indirect Cost Rate Agreement. Views of responsible officials and planned corrective action: The Tribes, in collaboration with the Interim CFO, will review and verify indirect cost calculations to ensure accuracy and compliance with the approved indirect cost rate agreement.

Criteria: Coronavirus Aid, Relief, and Economic Security (CARES) Act, Pub. L. No. 116-36m Division A, Title V (2020) requires that the Coronavirus Relief Fund (CRF) monies must be used to cover costs that are: 1. Necessary expenditures incurred due to the public health emergency with respect to COVID-19; 2. Not accounted for in the governments' most recently approved budget as of March 27, 2020; and 3. Incurred during the period that begins on March 1, 2020 and ends on December 31, 2021. Additionally, 2 CFR 200.303 requires the recipient of federal funds establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Condition/Context: We selected a statistically valid random sample of transactions charged to the program of 40 emergency assistance transactions and 12 general disbursement transactions to test controls of disbursement costs charged to the major program and found the following: - One general disbursement transaction was not supported with appropriate documentation. - Emergency Assistance transactions were for checks written in 2020 but inappropriately recorded in 2021. Cause: The primary factor that contributed to the deficiencies was the lack of sufficient controls implemented to appropriately review and monitor disbursement activity and ensure amounts were properly recorded in the general ledger. Effect: Disbursement transactions were being processed incorrectly. We were unable to obtain sufficient assurance over compliance, and the major program received a qualified opinion. Questioned Costs: Known and likely questioned costs did not exceed $25,000. Repeat finding: This finding is a repeat of finding 2020-005 from the prior year. Recommendation: In order to ensure disbursement transactions are properly reviewed, approved, and supporting documentation is maintained, we recommend the Tribes ensure controls over disbursement procedures are designed and operating effectively. Views of responsible officials and planned corrective action: The Tribes commit to a comprehensive corrective action plan, including a thorough review of document processes, implementing additional controls for disbursements transactions, ensuring proper documentation review in the future, enhancing controls over the timing of expenditure recognition, and providing additional training, to personnel involved in disbursement process.

Criteria: Per 2 CFR 200.303, the Tribes must "Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal Statutes, regulations, and the terms and conditions of the Federal Award." Condition/Context: We randomly selected four performance and special reports for testing and found that one of four performance and special reports were not prepared and filed with funding agency. Cause: The Tribes do not have a process in place to ensure reports are prepared and submitted to the funding agency. Effect: Required performance and special reports were not submitted. Questioned costs: There were no reportable instances of questioned costs. Repeat finding: This is not a repeated finding from the prior year. Recommendation: The Tribe should review the terms and conditions of all grant awards to ensure they have an understanding of all reporting requirements necessary under each grant. Additionally, the Tribe should implement policies and procedures to monitor reporting deadlines to ensure that reports are prepared and submitted as applicable. Views of responsible officials and planned corrective action: The Tribes will ensure compliance with future reporting requirements, such as review and enhancement of reporting procedures, personnel training, and monitoring and oversight by management.

Criteria: American Rescue Plan Act of 2021, Pub. L. No. 117-2, requires that the Coronavirus State and Local Fiscal Recovery Fund monies must be used to cover costs that are: 1. Support public health expenditures, by funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff; 2. Address negative economic impacts caused by the public health emergency, including economic harms to works, households, small business, impacted industries, and the public sector; 3. Replace lost public sector revenue to provide government services; recipients may use this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic; 4. Provide premium pay for essential works, offering additional support to those who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors; and 5. Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and to expand access to broadband internet. Additionally, 2 CFR 200.303 requires the recipient of federal funds establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition/Context: We selected a statistically valid random sample of transactions charged to the program of 40 emergency assistance transactions to test controls of disbursement costs charged to the major program and found the following: - One emergency assistance disbursement transaction was not supported with appropriate documentation. - There were expenses in the amount of $3,717,000 recognized for the program as of December 31, 2021 related to checks for emergency assistance payments to individuals that did not complete an application indicating eligibility. An entry was recorded by the Tribes to appropriately adjust these expenses from as of December 31, 2021. Cause: The primary factor that contributed to the deficiencies was the lack of sufficient controls implemented to appropriately review and monitor disbursement activity and ensure amounts were properly recorded in the general ledger. Effect: Emergency assistance transactions were being processed incorrectly. We were unable to obtain sufficient assurance over compliance, and the major program received a qualified opinion. Questioned costs: We tested $120,000 emergency assistance transactions out of federal expenditures of $12,768,000. Known and likely questioned costs totaled $322,200. Repeat finding: This is not a repeat finding from the prior year. Recommendation: In order to ensure disbursement transactions are properly reviewed, approved, and supporting documentation, maintained, we recommend the Tribes ensure controls over disbursement procedures are designed and operating effectively. Views of responsible officials and planned corrective action: The Tribes will ensure compliance with future program allowable costs and allowable activities requirements, such as documentation review and enhanced controls to ensure accurate recognition of expenditures.

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