Audit 303558

Type of Finding: Material Weakness in Internal Control over Compliance Federal Agency: U.S. Department of Defense Federal Program Name: Natural Resource Survey and Habitat Enhancement Assistance Listing Number: 12.005 Federal Award Identification Number and Year: H79TI083313 - 2020 Pass-Through Agency: U.S. Army Corps of Engineers, Seattle District Pass-Through Number(s): W912DW-20-2-0003 Award Period: September 28, 2020, through September 27, 2025 Criteria or specific requirement: 2 CFR 200.320 requires non-federal entities to have and use documented procurement procedures. 2 CFR 200.318(i) states that "the non-Federal entity must maintain record sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price". In addition, 2 CFR 200.320(a)(2)(i) states that "... If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity". Condition: During our testing, it was noted that the Organization was not performing suspension and debarment checks prior to entering into vendor contracts to ensure the vendor was not listed in the suspended or debarred database maintained by the General Services Administration. In addition, The Organization does not have an established procurement policy nor procedures in place at the time of the audit in compliance with Uniform Guidance. CLA tested all purchases exceeding $3,500 (the minimum micropurchase threshold before it was increased by the FAR to $10,000 for those with an established policy). For the 8 sampled procurement selections, documentation was not retained for the adequate number of price comparisons prior to exercising the procurement, as required by 2 CFR 200.320. Questioned costs: None. Context: A sample of 8 was made from a population of 29 procurement transactions charged to the major program that exceeded $3,500 ((the minimum micropurchase threshold before it was increased by the FAR to $10,000 for those with an established policy), amounting to $69,944.43. Of the 8 sampled costs, all were found to be out of compliance with the Procurement requirements, as a written procurement policy was not in place and documentation was not retained for the adequate number of price comparisons. Cause: Staff were not aware of the specific compliance requirements and procedures for procurement, suspension and debarment status. Effect: Purchases may occur that do not follow the procurement, suspension and debarment standards as required by Uniform Guidance, and contracts to vendors that had been suspended or debarred could be awarded and not detected. Repeat Finding: No. Recommendation: We recommend the Organization design controls to ensure an adequate review process is in place to review potential contractors to determine they are not suspended or debarred. These procedures should include documenting the date that suspension and debarment verifications are made. In addition, we recommend The Organization formally adopt a Procurement, Suspension and Debarment policy in accordance with Uniform Guidance. Views of responsible officials: There is no disagreement with the audit finding.

Type of Finding: Significant Deficiency in Internal Control over Compliance and Compliance Federal Agency: U.S. Department of Defense Federal Program Name: Natural Resource Survey and Habitat Enhancement Assistance Listing Number: 12.005 Federal Award Identification Number and Year: H79TI083313 - 2020 Pass-Through Agency: U.S. Army Corps of Engineers, Seattle District Pass-Through Number(s): W912DW-20-2-0003 Award Period: September 28, 2020, through September 27, 2025 Criteria or specific requirement: The Organization, as part of their stated controls, require that expenditures must be approved by the ED, CFO, or program directors / managers. In addition, § 200.303(a) requires The Organization to 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: During our testing, it was noted that 11 of 60 samples did not include sufficient records to substantiate approval of the disbursement. Questioned costs: None. Context: A sample of 60 was made from a population of over 250 disbursements charged to the major program. Of the 60 sampled costs, 11 did not have sufficient records to substantiate adequate approval. Cause: Authorized individuals with approval privileges did not log back into a shared spreadsheet to document their approval of expenditures. Effect: Without adequate controls in place to ensure costs are reasonable and intended for the program charged, the Organization could incorrectly charge expenditures to the federal program, report fraudulent expenditures, or not request appropriate reimbursement that the Organization is entitled to under the terms of the grant. Repeat Finding: No. Recommendation: CLA recommends that additional emphasis of documentary evidence of approvals be made, and such evidence should be obtained and retained by the Organization as proof of oversight of expenditure of federal funds. CLA would also recommend the use of an AP voucher, or similar, for each type of disbursement that leaves the Organization (check, EFT, credit card, etc.) to improve documentary evidence that costs are being reviewed and approved for appropriateness. Views of responsible officials: There is no disagreement with the audit finding.

Type of Finding: Significant Deficiency in Internal Control over Compliance and Compliance Federal Agency: U.S. Department of Defense Federal Program Name: Natural Resource Survey and Habitat Enhancement Assistance Listing Number: 12.005 Federal Award Identification Number and Year: H79TI083313 - 2020 Pass-Through Agency: U.S. Army Corps of Engineers, Seattle District Pass-Through Number(s): W912DW-20-2-0003 Award Period: September 28, 2020, through September 27, 2025 Criteria or specific requirement: Per the award agreement for contract W912DW-20-2-0003, "Recipient shall submit to the Agreement Administrator (see paragraph 1.2.1) progress reports on a quarterly basis utilizing the form included in Attachment B of this agreement. Reports are due no later than 30 days following the end of each reporting period. A final performance progress report shall be submitted within 90 days after the expiration date of the award." Condition: During our testing, it was noted that 2 of the 3 performance reports tested were filed after the filing deadline. Questioned costs: None. Context: A sample of 5 reports were taking from the population of 8 required report forms. Of the 5 sampled, 2 were not filed timely. Cause: Late filing is due to a lack of administrative staff and consistent payroll issues, which made submitting the quarterly reports with the financial reports unable to be performed on time. Effect: The untimely filing of reports can present risks, such as outdated and unreliable information or the inability to detect potential fraud or irregularities. In addition, delayed reports can impede regulatory authorities' ability to monitor compliance, detect patterns or trends, and assess risks in a timely manner. Repeat Finding: No. Recommendation: CLA recommends for the Organization to place emphasis on stronger controls around the timely filing of required reports, such as retaining a monthly checklist of required reconciliations and reports. The Organization has also taken steps to increase administrative support by hiring two individuals into the financial team. Views of responsible officials: There is no disagreement with the audit finding.

Type of Finding: Significant Deficiency in Internal Control over Compliance and Compliance Federal Agency: U.S. Department of Defense Federal Program Name: Natural Resource Survey and Habitat Enhancement Assistance Listing Number: 12.005 Federal Award Identification Number and Year: H79TI083313 - 2020 Pass-Through Agency: U.S. Army Corps of Engineers, Seattle District Pass-Through Number(s): W912DW-20-2-0003 Award Period: September 28, 2020, through September 27, 2025 Criteria or specific requirement: 2 CFR 200.302(a) on Financial management states that "... the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award". The current form of documentation did not clearly agree between the invoiced amount and what was presented in the general ledger for the period requested for reimbursement. In addition, 2 CFR 200.305(b) states that "For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means". Condition: During our testing, it was noted that each of the 4 samples selected did not include sufficient documentation to agree all amounts requested for reimbursement for the month in question to the expenditures listed in the general detail by program. Questioned costs: Unknown. Context: A sample of 4 monthly reimbursement requests were taken from a population of 12. Of the 4 sampled, each were insufficiently supported to agree the amounts requested for reimbursement for the month in question to the expenditures listed in the general detail by program. Cause: The Organization is using a cumulative profit and loss to file monthly reimbursement requests (beginning of the year through the reimbursement month). In addition, reimbursement requests are not always prepared and filed each month. In these instances, The Organization will often catch up on expenditures that had been made in previous months and request them in the current period. Effect: The Organization is currently in noncompliance with federal regulations with regard to adequate documentation and the reduction of time between expenditures being made and requesting for federal reimbursement. Without adequate documentation in place to ensure costs are evidenced and reconcile to the expenditures documented in the underlying accounting information that is used to prepare the SEFA, the Organization could incorrectly charge expenditures to the federal program, or not request appropriate reimbursement that the Organization is entitled to under the terms of the grant. Delayed reimbursement requests puts the Organization at continued noncompliance with federal regulations and can result in delayed payment, putting further financial strain on the Organization. Repeat Finding: No. Recommendation: CLA recommends that the Organization move away from using a cumulative profit and loss report and instead run monthly general ledger details by program as support for their monthly reimbursement requests. This will enhance clarity of costs attributable to each monthly period and reduces the chance that costs will be missed when requesting for reimbursement. Any reconciling transactions can be clearly tracked in an Excel file of the general ledger detail by program. In addition, CLA recommends that the Organization emphasize to program management staff the importance of filing reimbursement requests each month and in a timely manner to reduce administrative and financial burden. Views of responsible officials: There is no disagreement with the audit finding.

Type of Finding: Material Weakness in Internal Control over Compliance Federal Agency: U.S. Department of Defense Federal Program Name: Natural Resource Survey and Habitat Enhancement Assistance Listing Number: 12.005 Federal Award Identification Number and Year: H79TI083313 - 2020 Pass-Through Agency: U.S. Army Corps of Engineers, Seattle District Pass-Through Number(s): W912DW-20-2-0003 Award Period: September 28, 2020, through September 27, 2025 Criteria or specific requirement: 2 CFR 200.320 requires non-federal entities to have and use documented procurement procedures. 2 CFR 200.318(i) states that "the non-Federal entity must maintain record sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price". In addition, 2 CFR 200.320(a)(2)(i) states that "... If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity". Condition: During our testing, it was noted that the Organization was not performing suspension and debarment checks prior to entering into vendor contracts to ensure the vendor was not listed in the suspended or debarred database maintained by the General Services Administration. In addition, The Organization does not have an established procurement policy nor procedures in place at the time of the audit in compliance with Uniform Guidance. CLA tested all purchases exceeding $3,500 (the minimum micropurchase threshold before it was increased by the FAR to $10,000 for those with an established policy). For the 8 sampled procurement selections, documentation was not retained for the adequate number of price comparisons prior to exercising the procurement, as required by 2 CFR 200.320. Questioned costs: None. Context: A sample of 8 was made from a population of 29 procurement transactions charged to the major program that exceeded $3,500 ((the minimum micropurchase threshold before it was increased by the FAR to $10,000 for those with an established policy), amounting to $69,944.43. Of the 8 sampled costs, all were found to be out of compliance with the Procurement requirements, as a written procurement policy was not in place and documentation was not retained for the adequate number of price comparisons. Cause: Staff were not aware of the specific compliance requirements and procedures for procurement, suspension and debarment status. Effect: Purchases may occur that do not follow the procurement, suspension and debarment standards as required by Uniform Guidance, and contracts to vendors that had been suspended or debarred could be awarded and not detected. Repeat Finding: No. Recommendation: We recommend the Organization design controls to ensure an adequate review process is in place to review potential contractors to determine they are not suspended or debarred. These procedures should include documenting the date that suspension and debarment verifications are made. In addition, we recommend The Organization formally adopt a Procurement, Suspension and Debarment policy in accordance with Uniform Guidance. Views of responsible officials: There is no disagreement with the audit finding.

Type of Finding: Significant Deficiency in Internal Control over Compliance and Compliance Federal Agency: U.S. Department of Defense Federal Program Name: Natural Resource Survey and Habitat Enhancement Assistance Listing Number: 12.005 Federal Award Identification Number and Year: H79TI083313 - 2020 Pass-Through Agency: U.S. Army Corps of Engineers, Seattle District Pass-Through Number(s): W912DW-20-2-0003 Award Period: September 28, 2020, through September 27, 2025 Criteria or specific requirement: The Organization, as part of their stated controls, require that expenditures must be approved by the ED, CFO, or program directors / managers. In addition, § 200.303(a) requires The Organization to 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: During our testing, it was noted that 11 of 60 samples did not include sufficient records to substantiate approval of the disbursement. Questioned costs: None. Context: A sample of 60 was made from a population of over 250 disbursements charged to the major program. Of the 60 sampled costs, 11 did not have sufficient records to substantiate adequate approval. Cause: Authorized individuals with approval privileges did not log back into a shared spreadsheet to document their approval of expenditures. Effect: Without adequate controls in place to ensure costs are reasonable and intended for the program charged, the Organization could incorrectly charge expenditures to the federal program, report fraudulent expenditures, or not request appropriate reimbursement that the Organization is entitled to under the terms of the grant. Repeat Finding: No. Recommendation: CLA recommends that additional emphasis of documentary evidence of approvals be made, and such evidence should be obtained and retained by the Organization as proof of oversight of expenditure of federal funds. CLA would also recommend the use of an AP voucher, or similar, for each type of disbursement that leaves the Organization (check, EFT, credit card, etc.) to improve documentary evidence that costs are being reviewed and approved for appropriateness. Views of responsible officials: There is no disagreement with the audit finding.

Type of Finding: Significant Deficiency in Internal Control over Compliance and Compliance Federal Agency: U.S. Department of Defense Federal Program Name: Natural Resource Survey and Habitat Enhancement Assistance Listing Number: 12.005 Federal Award Identification Number and Year: H79TI083313 - 2020 Pass-Through Agency: U.S. Army Corps of Engineers, Seattle District Pass-Through Number(s): W912DW-20-2-0003 Award Period: September 28, 2020, through September 27, 2025 Criteria or specific requirement: Per the award agreement for contract W912DW-20-2-0003, "Recipient shall submit to the Agreement Administrator (see paragraph 1.2.1) progress reports on a quarterly basis utilizing the form included in Attachment B of this agreement. Reports are due no later than 30 days following the end of each reporting period. A final performance progress report shall be submitted within 90 days after the expiration date of the award." Condition: During our testing, it was noted that 2 of the 3 performance reports tested were filed after the filing deadline. Questioned costs: None. Context: A sample of 5 reports were taking from the population of 8 required report forms. Of the 5 sampled, 2 were not filed timely. Cause: Late filing is due to a lack of administrative staff and consistent payroll issues, which made submitting the quarterly reports with the financial reports unable to be performed on time. Effect: The untimely filing of reports can present risks, such as outdated and unreliable information or the inability to detect potential fraud or irregularities. In addition, delayed reports can impede regulatory authorities' ability to monitor compliance, detect patterns or trends, and assess risks in a timely manner. Repeat Finding: No. Recommendation: CLA recommends for the Organization to place emphasis on stronger controls around the timely filing of required reports, such as retaining a monthly checklist of required reconciliations and reports. The Organization has also taken steps to increase administrative support by hiring two individuals into the financial team. Views of responsible officials: There is no disagreement with the audit finding.

Type of Finding: Significant Deficiency in Internal Control over Compliance and Compliance Federal Agency: U.S. Department of Defense Federal Program Name: Natural Resource Survey and Habitat Enhancement Assistance Listing Number: 12.005 Federal Award Identification Number and Year: H79TI083313 - 2020 Pass-Through Agency: U.S. Army Corps of Engineers, Seattle District Pass-Through Number(s): W912DW-20-2-0003 Award Period: September 28, 2020, through September 27, 2025 Criteria or specific requirement: 2 CFR 200.302(a) on Financial management states that "... the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award". The current form of documentation did not clearly agree between the invoiced amount and what was presented in the general ledger for the period requested for reimbursement. In addition, 2 CFR 200.305(b) states that "For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means". Condition: During our testing, it was noted that each of the 4 samples selected did not include sufficient documentation to agree all amounts requested for reimbursement for the month in question to the expenditures listed in the general detail by program. Questioned costs: Unknown. Context: A sample of 4 monthly reimbursement requests were taken from a population of 12. Of the 4 sampled, each were insufficiently supported to agree the amounts requested for reimbursement for the month in question to the expenditures listed in the general detail by program. Cause: The Organization is using a cumulative profit and loss to file monthly reimbursement requests (beginning of the year through the reimbursement month). In addition, reimbursement requests are not always prepared and filed each month. In these instances, The Organization will often catch up on expenditures that had been made in previous months and request them in the current period. Effect: The Organization is currently in noncompliance with federal regulations with regard to adequate documentation and the reduction of time between expenditures being made and requesting for federal reimbursement. Without adequate documentation in place to ensure costs are evidenced and reconcile to the expenditures documented in the underlying accounting information that is used to prepare the SEFA, the Organization could incorrectly charge expenditures to the federal program, or not request appropriate reimbursement that the Organization is entitled to under the terms of the grant. Delayed reimbursement requests puts the Organization at continued noncompliance with federal regulations and can result in delayed payment, putting further financial strain on the Organization. Repeat Finding: No. Recommendation: CLA recommends that the Organization move away from using a cumulative profit and loss report and instead run monthly general ledger details by program as support for their monthly reimbursement requests. This will enhance clarity of costs attributable to each monthly period and reduces the chance that costs will be missed when requesting for reimbursement. Any reconciling transactions can be clearly tracked in an Excel file of the general ledger detail by program. In addition, CLA recommends that the Organization emphasize to program management staff the importance of filing reimbursement requests each month and in a timely manner to reduce administrative and financial burden. Views of responsible officials: There is no disagreement with the audit finding.