The Potato Commission lacked adequate internal controls over and did not comply with federal suspension and debarment requirements.
Assistance Listing Number and Title: 10.170 - Specialty Crop Block Grant Program
Federal Grantor Name: United States Department of Agriculture
Federal Award/Contract Number: N/A
Pass-through Entity Name: Washington State Department of Agriculture
Pass-through Award/Contract Number:
21SCBPWA1112
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
During fiscal year 2023, the Commission spent $984,969 in federal funds from the Specialty Crop Block Grant Program (SCBGP). The SCBGP aims to enhance the competitiveness of specialty crops. Specialty crops are defined as fruits, vegetables, tree nuts, dried fruits, horticulture and nursery crops (including floriculture). The SCBGP issues noncompetitive, formula grants to state departments of agriculture to leverage efforts to market and promote specialty crops; assist producers with research and development relevant to specialty crops; expand availability and access to specialty crops; and address local, regional and national challenges confronting specialty crop producers.
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 Commission 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 from participating in federal programs. The Commission may verify this by collecting 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 Commission must verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Our audit found the Commission did not have internal controls to ensure staff verified all four contractors paid more than $25,000 with program funds during 2023 were not suspended or debarred from participating in federal programs.
We consider this internal control deficiency to be a material weakness that led to material noncompliance.
Cause of Condition
This audit was the Commission’s first federal grant compliance audit and staff responsible for managing the grant were unaware of suspension and debarment requirements.
Effect of Condition
The Commission did not obtain a written certification, insert a clause into the contract or check SAM.gov to verify that all four contractors paid a total of $984,969 were not suspended or debarred before entering into the contracts. Without this verification, the Commission increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any program funds the Commission used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them.
We subsequently verified the contractors were not suspended and debarred, so we are not questioning costs.
Recommendation
We recommend the Commission improve its internal controls to ensure compliance with federal requirements. Specifically, we recommend the Commission ensure all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with them.
Commission’s Response
The Washington State Potato Commission (WSPC) acknowledges the audit finding and appreciates the recommendations provided by the auditors. Moving forward, we are committed to ensuring full compliance with federal requirements for the Specialty Crop Block Grant Program (SCBGP).
To address this issue, the WSPC will implement stronger internal controls to verify that all contractors paid $25,000 or more, either fully or partially with federal funds, are not suspended or debarred from federal programs prior to entering into contracts. This will include:
Regularly checking exclusion records in the U.S. General Services Administration’s System for Award Management (SAM.gov) before performing work with contractors included in SCBGP contracts.
By adopting these measures, we are confident in preventing any future noncompliance and ensuring proper stewardship of federal funds.
Auditor’s Remarks
We appreciate the steps the Commission is taking to resolve the issue, we will follow up in the net 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 Potato Commission lacked adequate internal controls over and did not comply with federal suspension and debarment requirements.
Assistance Listing Number and Title: 10.170 - Specialty Crop Block Grant Program
Federal Grantor Name: United States Department of Agriculture
Federal Award/Contract Number: N/A
Pass-through Entity Name: Washington State Department of Agriculture
Pass-through Award/Contract Number:
21SCBPWA1112
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
During fiscal year 2023, the Commission spent $984,969 in federal funds from the Specialty Crop Block Grant Program (SCBGP). The SCBGP aims to enhance the competitiveness of specialty crops. Specialty crops are defined as fruits, vegetables, tree nuts, dried fruits, horticulture and nursery crops (including floriculture). The SCBGP issues noncompetitive, formula grants to state departments of agriculture to leverage efforts to market and promote specialty crops; assist producers with research and development relevant to specialty crops; expand availability and access to specialty crops; and address local, regional and national challenges confronting specialty crop producers.
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 Commission 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 from participating in federal programs. The Commission may verify this by collecting 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 Commission must verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Our audit found the Commission did not have internal controls to ensure staff verified all four contractors paid more than $25,000 with program funds during 2023 were not suspended or debarred from participating in federal programs.
We consider this internal control deficiency to be a material weakness that led to material noncompliance.
Cause of Condition
This audit was the Commission’s first federal grant compliance audit and staff responsible for managing the grant were unaware of suspension and debarment requirements.
Effect of Condition
The Commission did not obtain a written certification, insert a clause into the contract or check SAM.gov to verify that all four contractors paid a total of $984,969 were not suspended or debarred before entering into the contracts. Without this verification, the Commission increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any program funds the Commission used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them.
We subsequently verified the contractors were not suspended and debarred, so we are not questioning costs.
Recommendation
We recommend the Commission improve its internal controls to ensure compliance with federal requirements. Specifically, we recommend the Commission ensure all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with them.
Commission’s Response
The Washington State Potato Commission (WSPC) acknowledges the audit finding and appreciates the recommendations provided by the auditors. Moving forward, we are committed to ensuring full compliance with federal requirements for the Specialty Crop Block Grant Program (SCBGP).
To address this issue, the WSPC will implement stronger internal controls to verify that all contractors paid $25,000 or more, either fully or partially with federal funds, are not suspended or debarred from federal programs prior to entering into contracts. This will include:
Regularly checking exclusion records in the U.S. General Services Administration’s System for Award Management (SAM.gov) before performing work with contractors included in SCBGP contracts.
By adopting these measures, we are confident in preventing any future noncompliance and ensuring proper stewardship of federal funds.
Auditor’s Remarks
We appreciate the steps the Commission is taking to resolve the issue, we will follow up in the net 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.