The District did not have adequate internal controls and did not comply with federal suspension and debarment requirements.
Assistance Listing Number and Title: 21.027 – COVID 19 - Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S Department of the Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: Washington State Department of Health
Pass-through Award/Contract Number: CLH3102
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Description of Condition
During fiscal year 2023, the District spent $249,000 in federal funding under the Coronavirus State and Local Fiscal Recovery Funds program to provide resources needed to support distribution of COVID-19 information.
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 the contractors are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by checking for exclusion records in the U.S General Services Administration’s System for Award Management (SAM.gov), obtaining a written certification from the contractor, or inserting a clause or condition into the contract stating the contractor is not suspended or debarred. The District must verify this before entering into the contract, and must keep documentation demonstrating compliance with this federal requirement.
Our audit found the District’s internal controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. The District did not obtain a written certification from the contractor, include a clause in the contract, or check for exclusion records at SAM.gov to verify that the one contractor we tested was not suspended or debarred before entering into the contract or purchasing from them. The District entered into this contract in June 2023 and paid the contractor $110,000 during fiscal year 2023.
We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
District staff did not know about the suspension and debarment verification requirement until the last audit, which was after they entered into the contract.
Effect of Condition
Without adequate internal controls, the District increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them.
We subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning costs.
Recommendation
We recommend the District strengthen internal controls to verify 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 entering into contracts or purchasing from them, and maintain documentation demonstrating compliance with this requirement
District’s Response
This finding is a duplicate of last year’s audit finding, which was immediately addressed by OCPHD and then fully corrected on 12/12/2023 with passage of OCPHD’s procurement policy by the Board of Health. OCPHD wasn’t aware of the suspension and debarment verification until September 20, 2023 upon the release of the last audit finding. For a more complete explanation regarding OCPHD’s corrective actions (and timing of the same), please reference the Corrective Action Plan submitted in response to finding 2023-001.
Auditor’s Remarks
We appreciate the District's commitment to resolving the issues 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 on Agencies on Governmentwide Department and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
The District did not have adequate internal controls and did not comply with federal suspension and debarment requirements.
Assistance Listing Number and Title: 21.027 – COVID 19 - Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S Department of the Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: Washington State Department of Health
Pass-through Award/Contract Number: CLH3102
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Description of Condition
During fiscal year 2023, the District spent $249,000 in federal funding under the Coronavirus State and Local Fiscal Recovery Funds program to provide resources needed to support distribution of COVID-19 information.
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 the contractors are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by checking for exclusion records in the U.S General Services Administration’s System for Award Management (SAM.gov), obtaining a written certification from the contractor, or inserting a clause or condition into the contract stating the contractor is not suspended or debarred. The District must verify this before entering into the contract, and must keep documentation demonstrating compliance with this federal requirement.
Our audit found the District’s internal controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. The District did not obtain a written certification from the contractor, include a clause in the contract, or check for exclusion records at SAM.gov to verify that the one contractor we tested was not suspended or debarred before entering into the contract or purchasing from them. The District entered into this contract in June 2023 and paid the contractor $110,000 during fiscal year 2023.
We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
District staff did not know about the suspension and debarment verification requirement until the last audit, which was after they entered into the contract.
Effect of Condition
Without adequate internal controls, the District increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them.
We subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning costs.
Recommendation
We recommend the District strengthen internal controls to verify 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 entering into contracts or purchasing from them, and maintain documentation demonstrating compliance with this requirement
District’s Response
This finding is a duplicate of last year’s audit finding, which was immediately addressed by OCPHD and then fully corrected on 12/12/2023 with passage of OCPHD’s procurement policy by the Board of Health. OCPHD wasn’t aware of the suspension and debarment verification until September 20, 2023 upon the release of the last audit finding. For a more complete explanation regarding OCPHD’s corrective actions (and timing of the same), please reference the Corrective Action Plan submitted in response to finding 2023-001.
Auditor’s Remarks
We appreciate the District's commitment to resolving the issues 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 on Agencies on Governmentwide Department and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.