2025-001 The Commission did not have adequate internal controls 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: Yes, Finding 2024-001 Background During fiscal year 2025, the Commission spent $1,255,566 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, document and maintain effective 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 verify the two contractors it paid more than $25,000 in federal funds were 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 At the time the Commission entered into the contracts, staff responsible for managing the grant were unaware of suspension and debarment requirements. Effect of Condition The Commission did not obtain a written certification from the contractors, insert a clause into the contracts or check for exclusion records at SAM.gov to verify contractors it paid $165,040 with federal funds were not suspended or debarred before contracting. Without adequate internal controls, the Commission increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the Commission made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the Commission strengthen its 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 and maintain documentation demonstrating compliance with this requirement. 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 this 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.