Gila County

The County did not maintain documentation that it verified 1 vendor was not suspended or debarred, increasing the risk it paid federal program monies to unallowable vendors Assistance Listings number(s) and name(s): 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award number(s) and year(s): SLFRP0665 March 3, 2021 through December 31, 2026 Federal agency: U.S. Department of the Treasury Compliance requirement(s): Suspension and debarment Questioned costs: None Condition Contrary to federal regulations, the County did not maintain documentation that it had verified 1 of 5 vendors we tested was not suspended or debarred from doing business with the federal government prior to making the purchases. The vendor was paid program monies totaling $623,187, or 17% of the program’s total federal award expenditures of $3.6 million. Effect As the County could not demonstrate that at the time of the purchases it obtained services from a vendor that had not been suspended or debarred from doing business with the federal government, the County was at increased risk that it could have paid federal program monies to unallowable vendors. Subsequently, we performed additional audit procedures and verified the vendor had not been suspended or debarred by the federal government. Finally, the County is at risk that this finding applies to other federal programs it administers. Cause The County had informal procedures that were not consistently applied and lacked policies and procedures to verify that vendors were not suspended or debarred from doing business with the federal government each year and to maintain documentation of this verification within the procurement files. Criteria Federal regulations require the County to verify that vendors being paid more than $25,000 in federal program monies have not been suspended or debarred by either checking their suspension and debarment status, obtaining the vendor’s certification stating they are not suspended or debarred, and/or adding a condition regarding suspension and debarment to the purchase contract with the vendor (2 CFR §§180.220 and 180.300). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to the County Verify and maintain documentation that a vendor being paid more than $25,000 in federal program monies has not been suspended or debarred from doing business with the federal government. Develop policies and procedures and train staff to: Verify the vendor’s suspension and debarment status prior to making purchases by examining the federal government’s sam.gov website, obtaining certification from the vendor, or adding a condition in the vendor contract. Maintain documentation of this verification within the procurement files. This finding is similar to prior year finding 2024-101 and was initially reported in fiscal year 2024. Views of responsible officials County management concurs with this finding. The County’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.

Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award number and year: SLFRP0665, March 3, 2021 through December 31, 2026 Federal agency: U.S. Department of the Treasury Compliance requirement: Suspension and debarment Questioned costs: None

Condition—Contrary to federal regulations, the County did not maintain documentation that it had verified 5 of 9 vendors we tested were not suspended or debarred from doing business with the federal government prior to making the purchases. The vendors were paid program monies totaling $740,467, or 49 percent of the program’s total federal award expenditures of $1.5 million.

Effect—As the County could not demonstrate that at the time of the purchases it obtained services from vendors that had not been suspended or debarred from doing business with the federal government, the County was at increased risk that it could have paid federal program monies to unallowable vendors. Subsequently, we performed additional audit procedures and verified the vendors had not been suspended or debarred by the federal government. Finally, the County is at risk that this finding applies to other federal programs it administers.

Cause—The County had informal procedures that were not consistently applied and lacked policies and procedures to verify that vendors, including those procured by the State of Arizona or through cooperative agreements, were not suspended or debarred from doing business with the federal government each year and to maintain documentation of this verification within the procurement files.

Criteria—Federal regulations require the County to verify that vendors being paid more than $25,000 in federal program monies have not been suspended or debarred by either checking their suspension and debarment status, obtaining the vendor’s certification stating they are not suspended or debarred, and/or adding a condition regarding suspension and debarment to the purchase contract with the vendor (2 CFR §180.300). Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).

Recommendations—The County should:

1. Verify and maintain documentation that a vendor being paid more than $25,000 in federal program monies has not been suspended or debarred from doing business with the federal government. 2. Develop policies and procedures and train staff to: a. Verify the vendor’s suspension and debarment status prior to making purchases by examining the federal government’s sam.gov website, obtaining certification from the vendor, or adding a condition in the vendor contract. b. Maintain documentation of this verification within the procurement files.

Assistance Listings number and name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award number and year: SLFRP0665, March 3, 2021 through December 31, 2026 Federal agency: U.S. Department of the Treasury Compliance requirement: Reporting Questioned costs: Not applicable

Condition—The County's Finance Department (Department) did not review and approve all 4 federal program reports (quarterly reports) before submitting them to the federal agency. Specifically, the Department was advanced $10,492,363 of program monies, and of this amount, the Department reported expenditures of $6,165,253 on the quarterly reports as of June 30, 2023. However, the Department did not perform an independent review and approval of these required reports prior to submission to ensure the $6,165,253 of reported expenditures was accurate, agreed to County records, and contained only allowable expenditures. Our testing of the 4 quarterly reports found the following inaccuracies:

• Understatements of $242,886 of current program expenditures and $330,294 of obligations and cumulative expenditures on the October 31, 2022, progress report. • An overstatement of $1,393,449 and an understatement of $187,826, respectively, of current program expenditures and cumulative program expenditures on the December 31, 2022, progress report. • Misstatements of $19,284 and $168,542 of current program expenditures and cumulative program expenditures, respectively, on the March 31, 2023, progress report. • Overstatements of $669,492 and $109,892 of current program expenditures and cumulative program expenditures, respectively, on the June 30, 2023, progress report.

Effect—The Department's reporting inaccurate and erroneous program information results in the federal agency being unable to rely on the reports to effectively monitor the Department's program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program's success. The County is also at risk that this finding applies to other federal programs it administers.

Cause—The County did not have policies and procedures requiring the Department to perform and document and independent review and approval of the program's reports before submitting them to the federal agency. Although the Department reported that it had performed independent reviews and approvals of the reports, it did not document these independent reviews and approvals, nor did these reviews detect the errors we noted above.

Criteria—Federal agency guidance requires the County to verify and confirm that all program information that it reports is accurate and approved before submitting it.1 Additionally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303).

Recommendation—The County’s management should:

1. Develop policies and procedures requiring the Department to: a. Perform and document an independent review and approval of all federal program reports before submitting them to the federal agency to ensure reports are accurate, agree to County records, and contain only allowable expenditures. b. Reconcile program expenditure amounts reported to the County's accounting records. 2. Adjust or resubmit reports for detected errors on reports that the Department already submitted to the federal agency so that it is informed of errors on previously submitted reports. 3. Train Department employees responsible for preparing and reviewing reports on what information to gather to prepare the reports and on the County's policies and procedures.

The County’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.

This finding is similar to prior-year finding 2022-103 and was reported in fiscal year 2022.

1 U.S. Department of the Treasury. (2022.) State and Local Fiscal Recovery Funds: Project and Expenditure Report User Guide, Section IV, Part i.— Subawards or Direct Payments. Retrieved on 4/6/2023 from https://home.treasury.gov/system/files/136/April-2022-PE-Report-User-Guide.pdf