Navajo County

Earmarking (Material Weakness in Internal Control and Noncompliance) Cluster name: WIOA Cluster Assistance Listings number and program name: 17.258 WIOA Adult Program 17.259 WIOA Youth Program 17.278 WIOA Dislocated Worker Formula Grants Recommendation: The County should strengthen WIOA Youth Activities program policies and procedures to ensure no less than the required 20 percent of its monies is spent to provide in-school and out-of-school youth with paid and unpaid work experience, retain qualified in-school and out-of-school youth, and consistently monitor the County's and subrecipients spending throughout the award period. Contact Person(s): Adam Garrard, WIOA Executive Director Anticipated completion date: June 30, 2026 County Discussion: Concur: The County will take corrective actions to strengthen WIOA Youth program policies, procedures, and oversight to ensure compliance with the 20 percent work experience requirement. This includes ongoing monitoring and oversight of sub-recipient expenditures, addressing barriers to work experience opportunities, and increasing engagement and enrollment of both in-school and out-of-school youth. These activities will include the following: 1) include local school counselors and administrators to support recruitment of in-school youth; 2) engage community partners with access to out-of-school youth; and 3) support outreach, enrollment, and retention strategies to attract eligible youth participants.

Matching (Significant Deficiency in Internal Control and Noncompliance) Assistance Listings number and program name: COVID-19 93.354 Public Health Emergency Recommendation: The County should establish procedures to track matching requirements in the general ledger, ensure all in-kind contributions are supported by proper documentation (e.g., timesheets), and review match compliance before use of federal funds. Contact Person(s): Catrina Jenkins, Emergency Management Manager Anticipated completion date: June 30, 2026 County Discussion: Concur: In coordination with the Arizona Department of Health Services (ADHS), the County will implement procedures to ensure matching activity is properly tracked within the general ledger. The County will also ensure that all in-kind contributions are supported by appropriate documentation, such as timesheets or other relevant supporting records, in accordance with federal grant requirements. Additionally, the County will implement a review process to verify that matching requirements are properly documented and met prior to the drawdown or use of federal funds. These measures are intended to strengthen internal controls and ensure compliance with federal grant matching requirements.

During our audit, we noted that the County charged payroll costs to federal grants based on budgeted time allocations rather than actual time spent on grant activities. The County lacked sufficient documentation to support the actual time worked on the grant program and did not perform a true-up or reconciliation process to adjust these charges to reflect the actual effort expended on the grant projects.The absence of a reconciliation process between budgeted and actual time spent on grant activities may have resulted in inaccurate charges to federal awards. This could potentially lead to questioned costs and impact the allowability of payroll expenses charged to the grants. The County’s policies and procedures did not include a process for reconciling budgeted payroll allocations to actual time spent on grant activities. Additionally, there was a lack of understanding among some department personnel regarding the requirement to base final charges on actual effort rather than budget estimates. As provided in 2 CFR §200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Payroll distribution records must reasonably reflect an employee’s total activity and support the allocation of salary or wages across specific activities. The County should strengthen its comprehensive internal control policies and procedures to ensure that payroll costs charged to federal awards are accurate, allowable, and properly supported. Additionally, the County should implement a process to reconcile the budgeted payroll allocations with actual time spent on grant activities. The County's corrective action plan at the end of this report includes the views and planned actions of its responsible officials. We are not required to audit and have not audited these responses or corrective actions and therefore we provide no assurances as to their accuracy.

The County failed to allocate 20 percent, $83,949, of the Workforce Innovation and Opportunity Act (WIOA) Youth Activities spending to provide in-school and out-of-school youth with paid and unpaid work experiences. Instead, the County spent only 13 percent, or $57,365, of the required 20 percent and spent the remaining 7 percent, or $26,584, for other youth activities. The minimum appropriation of funding was not received by County youth through paid and unpaid work experiences. The County did not properly monitor the WIOA Youth Activities monies to ensure the 20 percent earmarking requirement was met. As provided in 20 CFR §681.590 of the Uniform Guidance, grantees must not expend less than 20 percent of the WIOA Youth Activities program funding to provide eligible in-school and out-of-school youth with paid and unpaid work experiences. The County should strengthen WIOA Youth Activities program policies and procedures to ensure no less than the required 20 percent of its monies is spent to provide in-school and out-of-school youth with paid and unpaid work experience, retain qualified in-school and out-ofschool youth, and consistently monitor the County's and subrecipients spending throughout the award period. The County's corrective action plan at the end of this report includes the views and planned actions of its responsible officials. We are not required to audit and have not audited these responses or corrective actions and therefore we provide no assurances as to their accuracy.

The County failed to comply with subrecipient monitoring requirements as mandated by federal regulations and the grant terms. The County did not conduct regular oversight and monitoring of its subrecipients' programmatic and financial activities. The non-compliance with 2 CFR §200.330-332 (Subrecipient Monitoring) increases the likelihood of unallowable costs, misallocated resources, and non-compliance with program objectives. There was a change in key personnel responsible for the County's compliance with guidelines related to the federal program. Per 2 CFR §200.330-200.332, pass-through entities must monitor subrecipients to ensure compliance with federal statutes, award terms, and program objectives The County should strengthen its internal control procedures to ensure that the subaward agreement includes a clause for subrecipient monitoring activities and conduct monitoring reviews on a regular basis. The County's corrective action plan at the end of this report includes the views and planned actions of its responsible officials. We are not required to audit and have not audited these responses or corrective actions and therefore we provide no assurances as to their accuracy.

The County did not comply with the grantor's requirements for the timely submission of deliverables. Specifically, required monthly reimbursement reports and quarterly programmatic reports were submitted up to 120 days past their prescribed deadline. Failure to submit accurate and complete reports within the required timelines may result in delayed payments or retention of fund by the grantor. The delay in report submissions was attributed to a change in key personnel responsible for ensuring compliance with federal program guidelines. This transition resulted in lapses in oversight and adherence to reporting deadlines. The quarterly programmatic reports are due within 30 days after the end of each quarter. Monthly reimbursement reports should be prepared and submitted in a timely manner to avoid payment delays and minimize the risk of omitting information crucial for the reimbursement process. The County should strengthen its internal control procedures to ensure the required reports are prepared accurately and submitted within 30 days of the reporting period. The County's corrective action plan at the end of this report includes the views and planned actions of its responsible officials. We are not required to audit and have not audited these responses or corrective actions and therefore we provide no assurances as to their accuracy.

During our audit, we noted that the County charged payroll costs to federal grants based on budgeted time allocations rather than actual time spent on grant activities. The County lacked sufficient documentation to support the actual time worked on the grant program and did not perform a true-up or reconciliation process to adjust these charges to reflect the actual effort expended on the grant projects. The absence of a reconciliation process between budgeted and actual time spent on grant activities may have resulted in inaccurate charges to federal awards. This could potentially lead to questioned costs and impact the allowability of payroll expenses charged to the grants. The County’s policies and procedures did not include a process for reconciling budgeted payroll allocations to actual time spent on grant activities. Additionally, there was a lack of understanding among some department personnel regarding the requirement to base final charges on actual effort rather than budget estimates. As provided in 2 CFR §200.430(i) of the Uniform Guidance, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Payroll distribution records must reasonably reflect an employee’s total activity and support the allocation of salary or wages across specific activities. The County should strengthen its comprehensive internal control policies and procedures to ensure that payroll costs charged to federal awards are accurate, allowable, and properly supported. Additionally, the County should implement a process to reconcile the budgeted payroll allocations with actual time spent on grant activities. The County's corrective action plan at the end of this report includes the views and planned actions of its responsible officials. We are not required to audit and have not audited these responses or corrective actions and therefore we provide no assurances as to their accuracy.

Cluster name: WIOA Cluster Assistance Listings numbers and names: 17.258 WIOA Adult Program 17.259 WIOA Youth Activities 17.278 WIOA Dislocated Worker Formula Grants Award number and year: DI21-002285 A1, April 1, 2021 through June 30, 2023 Federal agency: U.S. Department of Labor Pass-through grantor: Arizona Department of Economic Security Compliance requirements: Earmarking Questioned costs: $32,344

Condition—Contrary to federal regulation, the County's Workforce Innovation and Opportunity Act (WIOA) Department failed to ensure that it spent the required 20 percent, or $74,233, of WIOA Youth Activities monies earmarked to provide in-school and out-of-school youth with paid and unpaid work experiences from April 2021 through June 2023. Instead, the County spent only 11 percent, or $41,889, of the required 20 percent and spent the remaining 9 percent, or $32,344, for other youth activities, such as education and youth development.

Effect—County youth did not receive $32,344 of paid and unpaid work experience services that the federal program intended. Also, the Department may have received $32,344 in federal program monies that it was not entitled to.

Cause—The Department used a tracking mechanism to accurately report its paid and unpaid work experiences spending throughout the fiscal year but did not properly monitor its WIOA Youth Activities spending to ensure the 20 percent earmarking requirement was met. Although the Department had worked on developing strategies, training materials, and presentations for employers and potential participants to follow, these materials were not effectively implemented by the end of the grant award to recruit and retain qualified in-school and out-of-school youth who would benefit from paid and unpaid work experiences. Further, the Department failed to ensure it monitored its paid and unpaid work experience expenditures throughout the award period, and adjusted spending when work experience participation was lower than expected.

Criteria—Federal regulation requires the Department to earmark and spend no less than 20 percent of its WIOA Youth Activities monies to provide in-school and out-of-school youth with paid and unpaid work experiences. Additionally, federal regulation also requires the Department to monitor such expenditures and report them to the pass-through grantor monthly throughout the award period to ensure it is spending the monies in a timely manner to meet the earmarking requirement (20 Code of Federal Regulations [CFR] §681.590). Federal regulation also 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).

Recommendations—The Department should:

1. Spend no less than the required 20 percent of its WIOA Youth Activities monies to provide in-school and out-of-school youth with paid and unpaid work experiences. 2. Include a process in its WIOA Youth Activities program’s policies and procedures to: a. Fully implement new strategies to recruit and retain qualified in-school and out-of-school youth who will benefit from the paid and unpaid work experience the program provides. b. Monitor both the County and its subrecipient’s paid and unpaid work experiences spending throughout the award period. c. Adjust spending to meet the earmarking requirement if work experience participation is lower than expected.

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 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 initially reported in fiscal year 2019.