The District did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements.
Assistance Listing Number and Title: COVID 19 – Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: Washington State Department of Health, Spokane County
Pass-through Award/Contract Number: CLH3128, 22ARP1054
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected and make necessary investments in water, sewer or broadband infrastructure.
In 2023, the District spent $884,974 in program funds to respond to the public health emergency and address the negative economic impacts the emergency caused.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that the contractors are not suspended, debarred or otherwise excluded. The District may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Our audit found the District did not have adequate controls to verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs.
We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
District staff were aware of the requirement to verify the suspension and debarment status for contractors but did not know the requirement applied when they purchased from contractors procured by the Washington State Department of Enterprise Services.
Effect of Condition
The District did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify one contractor it paid $618,712 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the District used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the contractor was not suspended or debarred, we are not questioning costs.
Recommendation
We recommend the District strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them.
District’s Response
In April 2021, Spokane Regional Health District signed an Interagency Agreement with the Washington State Department of Enterprise Services (DES). The purpose of this Interagency Agreement IAA No. K7000 was to provide assistance to SRHD with energy reduction and operational costs through the DES Energy Program. Through the utilization of this Interagency Agreement, DES is responsible for following both the federal and state procurement rules and regulations.
In August 2023, an Interagency Amendment IAA No. 7000, #1, was entered between SRHD and DES for the Building Envelope Phase I project. This project was funded through ARPA funding provided by Spokane County. The Amendment provided for the hiring of an Energy Service Company (ESCO) by DES and the management of the project. The Interagency Agreement/Amendment required that all federal and state procurement laws be followed. In addition, any ESCO involved in such a project must also follow all applicable federal and state laws. In August of 2023, DES entered into an Agreement with Millig as the ESCO for the Building Envelope Phase I Project. This Agreement required that the ESCO follow all federal and state procurement rules.
As SRHD’s contract was with DES and not Millig, SRHD ran the SAM on DES in 2023. At no time was Millig a direct contractor of SRHD.
On February 9, 2024, SRHD performed a desk audit with DES for the purpose of monitoring, discussing and obtaining backup documentation pertaining to the ARPA project. At that time, SRHD staff requested a SAM report and other backup documentation regarding Millig as DES’ subcontractor. SRHD received the SAM report run by DES dated April 2024, but DES was unable to locate the 2023 SAM report. SRHD is aware that DES did reach out to all of the ESCOs, including Millig in September 2023 and request confirmation of their SAM registration.
All SRHD contracts contain both a provision within the body of the Agreement as well a non-debarment certification form required to be signed by all SRHD contractors. In addition, SRHD performs a SAM.gov lookup on all contractors and vendors regardless of the amount of the Agreement.
In this case, SRHD did not look up Millig as it did not have a direct contract and DES directed SRHD to make the payment directly to their subcontractor Millig.
In the future, prior to payment SRHD will ensure all subcontractors will be looked up in the SAM.gov system and verification of non-debarment or suspension will be retained.
This is the first time SRHD has used DES contracted services for a construction project.
The District appreciates the efforts of the State Auditor’s Office in providing a thorough and detailed explanation of the appropriate compliance requirement. The District takes its responsibility to safeguard public funds seriously and is committed to improving internal controls to ensure the compliance with federal regulations.
Auditor’s Remarks
We appreciate the District’s commitment to resolving the issued noted and will follow up 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 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
The District did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements.
Assistance Listing Number and Title: COVID 19 – Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: Washington State Department of Health, Spokane County
Pass-through Award/Contract Number: CLH3128, 22ARP1054
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected and make necessary investments in water, sewer or broadband infrastructure.
In 2023, the District spent $884,974 in program funds to respond to the public health emergency and address the negative economic impacts the emergency caused.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that the contractors are not suspended, debarred or otherwise excluded. The District may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Our audit found the District did not have adequate controls to verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs.
We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
District staff were aware of the requirement to verify the suspension and debarment status for contractors but did not know the requirement applied when they purchased from contractors procured by the Washington State Department of Enterprise Services.
Effect of Condition
The District did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify one contractor it paid $618,712 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the District used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the contractor was not suspended or debarred, we are not questioning costs.
Recommendation
We recommend the District strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them.
District’s Response
In April 2021, Spokane Regional Health District signed an Interagency Agreement with the Washington State Department of Enterprise Services (DES). The purpose of this Interagency Agreement IAA No. K7000 was to provide assistance to SRHD with energy reduction and operational costs through the DES Energy Program. Through the utilization of this Interagency Agreement, DES is responsible for following both the federal and state procurement rules and regulations.
In August 2023, an Interagency Amendment IAA No. 7000, #1, was entered between SRHD and DES for the Building Envelope Phase I project. This project was funded through ARPA funding provided by Spokane County. The Amendment provided for the hiring of an Energy Service Company (ESCO) by DES and the management of the project. The Interagency Agreement/Amendment required that all federal and state procurement laws be followed. In addition, any ESCO involved in such a project must also follow all applicable federal and state laws. In August of 2023, DES entered into an Agreement with Millig as the ESCO for the Building Envelope Phase I Project. This Agreement required that the ESCO follow all federal and state procurement rules.
As SRHD’s contract was with DES and not Millig, SRHD ran the SAM on DES in 2023. At no time was Millig a direct contractor of SRHD.
On February 9, 2024, SRHD performed a desk audit with DES for the purpose of monitoring, discussing and obtaining backup documentation pertaining to the ARPA project. At that time, SRHD staff requested a SAM report and other backup documentation regarding Millig as DES’ subcontractor. SRHD received the SAM report run by DES dated April 2024, but DES was unable to locate the 2023 SAM report. SRHD is aware that DES did reach out to all of the ESCOs, including Millig in September 2023 and request confirmation of their SAM registration.
All SRHD contracts contain both a provision within the body of the Agreement as well a non-debarment certification form required to be signed by all SRHD contractors. In addition, SRHD performs a SAM.gov lookup on all contractors and vendors regardless of the amount of the Agreement.
In this case, SRHD did not look up Millig as it did not have a direct contract and DES directed SRHD to make the payment directly to their subcontractor Millig.
In the future, prior to payment SRHD will ensure all subcontractors will be looked up in the SAM.gov system and verification of non-debarment or suspension will be retained.
This is the first time SRHD has used DES contracted services for a construction project.
The District appreciates the efforts of the State Auditor’s Office in providing a thorough and detailed explanation of the appropriate compliance requirement. The District takes its responsibility to safeguard public funds seriously and is committed to improving internal controls to ensure the compliance with federal regulations.
Auditor’s Remarks
We appreciate the District’s commitment to resolving the issued noted and will follow up 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 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
The District did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements.
Assistance Listing Number and Title: COVID 19 – Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: Washington State Department of Health, Spokane County
Pass-through Award/Contract Number: CLH3128, 22ARP1054
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected and make necessary investments in water, sewer or broadband infrastructure.
In 2023, the District spent $884,974 in program funds to respond to the public health emergency and address the negative economic impacts the emergency caused.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that the contractors are not suspended, debarred or otherwise excluded. The District may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Our audit found the District did not have adequate controls to verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs.
We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
District staff were aware of the requirement to verify the suspension and debarment status for contractors but did not know the requirement applied when they purchased from contractors procured by the Washington State Department of Enterprise Services.
Effect of Condition
The District did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify one contractor it paid $618,712 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the District used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the contractor was not suspended or debarred, we are not questioning costs.
Recommendation
We recommend the District strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them.
District’s Response
In April 2021, Spokane Regional Health District signed an Interagency Agreement with the Washington State Department of Enterprise Services (DES). The purpose of this Interagency Agreement IAA No. K7000 was to provide assistance to SRHD with energy reduction and operational costs through the DES Energy Program. Through the utilization of this Interagency Agreement, DES is responsible for following both the federal and state procurement rules and regulations.
In August 2023, an Interagency Amendment IAA No. 7000, #1, was entered between SRHD and DES for the Building Envelope Phase I project. This project was funded through ARPA funding provided by Spokane County. The Amendment provided for the hiring of an Energy Service Company (ESCO) by DES and the management of the project. The Interagency Agreement/Amendment required that all federal and state procurement laws be followed. In addition, any ESCO involved in such a project must also follow all applicable federal and state laws. In August of 2023, DES entered into an Agreement with Millig as the ESCO for the Building Envelope Phase I Project. This Agreement required that the ESCO follow all federal and state procurement rules.
As SRHD’s contract was with DES and not Millig, SRHD ran the SAM on DES in 2023. At no time was Millig a direct contractor of SRHD.
On February 9, 2024, SRHD performed a desk audit with DES for the purpose of monitoring, discussing and obtaining backup documentation pertaining to the ARPA project. At that time, SRHD staff requested a SAM report and other backup documentation regarding Millig as DES’ subcontractor. SRHD received the SAM report run by DES dated April 2024, but DES was unable to locate the 2023 SAM report. SRHD is aware that DES did reach out to all of the ESCOs, including Millig in September 2023 and request confirmation of their SAM registration.
All SRHD contracts contain both a provision within the body of the Agreement as well a non-debarment certification form required to be signed by all SRHD contractors. In addition, SRHD performs a SAM.gov lookup on all contractors and vendors regardless of the amount of the Agreement.
In this case, SRHD did not look up Millig as it did not have a direct contract and DES directed SRHD to make the payment directly to their subcontractor Millig.
In the future, prior to payment SRHD will ensure all subcontractors will be looked up in the SAM.gov system and verification of non-debarment or suspension will be retained.
This is the first time SRHD has used DES contracted services for a construction project.
The District appreciates the efforts of the State Auditor’s Office in providing a thorough and detailed explanation of the appropriate compliance requirement. The District takes its responsibility to safeguard public funds seriously and is committed to improving internal controls to ensure the compliance with federal regulations.
Auditor’s Remarks
We appreciate the District’s commitment to resolving the issued noted and will follow up 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 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
The District did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements.
Assistance Listing Number and Title: COVID 19 – Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: Washington State Department of Health, Spokane County
Pass-through Award/Contract Number: CLH3128, 22ARP1054
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected and make necessary investments in water, sewer or broadband infrastructure.
In 2023, the District spent $884,974 in program funds to respond to the public health emergency and address the negative economic impacts the emergency caused.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that the contractors are not suspended, debarred or otherwise excluded. The District may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Our audit found the District did not have adequate controls to verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs.
We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
District staff were aware of the requirement to verify the suspension and debarment status for contractors but did not know the requirement applied when they purchased from contractors procured by the Washington State Department of Enterprise Services.
Effect of Condition
The District did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify one contractor it paid $618,712 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the District used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the contractor was not suspended or debarred, we are not questioning costs.
Recommendation
We recommend the District strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them.
District’s Response
In April 2021, Spokane Regional Health District signed an Interagency Agreement with the Washington State Department of Enterprise Services (DES). The purpose of this Interagency Agreement IAA No. K7000 was to provide assistance to SRHD with energy reduction and operational costs through the DES Energy Program. Through the utilization of this Interagency Agreement, DES is responsible for following both the federal and state procurement rules and regulations.
In August 2023, an Interagency Amendment IAA No. 7000, #1, was entered between SRHD and DES for the Building Envelope Phase I project. This project was funded through ARPA funding provided by Spokane County. The Amendment provided for the hiring of an Energy Service Company (ESCO) by DES and the management of the project. The Interagency Agreement/Amendment required that all federal and state procurement laws be followed. In addition, any ESCO involved in such a project must also follow all applicable federal and state laws. In August of 2023, DES entered into an Agreement with Millig as the ESCO for the Building Envelope Phase I Project. This Agreement required that the ESCO follow all federal and state procurement rules.
As SRHD’s contract was with DES and not Millig, SRHD ran the SAM on DES in 2023. At no time was Millig a direct contractor of SRHD.
On February 9, 2024, SRHD performed a desk audit with DES for the purpose of monitoring, discussing and obtaining backup documentation pertaining to the ARPA project. At that time, SRHD staff requested a SAM report and other backup documentation regarding Millig as DES’ subcontractor. SRHD received the SAM report run by DES dated April 2024, but DES was unable to locate the 2023 SAM report. SRHD is aware that DES did reach out to all of the ESCOs, including Millig in September 2023 and request confirmation of their SAM registration.
All SRHD contracts contain both a provision within the body of the Agreement as well a non-debarment certification form required to be signed by all SRHD contractors. In addition, SRHD performs a SAM.gov lookup on all contractors and vendors regardless of the amount of the Agreement.
In this case, SRHD did not look up Millig as it did not have a direct contract and DES directed SRHD to make the payment directly to their subcontractor Millig.
In the future, prior to payment SRHD will ensure all subcontractors will be looked up in the SAM.gov system and verification of non-debarment or suspension will be retained.
This is the first time SRHD has used DES contracted services for a construction project.
The District appreciates the efforts of the State Auditor’s Office in providing a thorough and detailed explanation of the appropriate compliance requirement. The District takes its responsibility to safeguard public funds seriously and is committed to improving internal controls to ensure the compliance with federal regulations.
Auditor’s Remarks
We appreciate the District’s commitment to resolving the issued noted and will follow up 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 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.