2025-003) Procurement, Suspension and Debarment U.S. Department of Transportation 20.507 Federal Transit Formula Grant Grant No(s): LA-2024-010-00, LA-2024-030-00, LA-2025-011-00 Questioned Costs: Undetermined - The questioned costs could not be determined due to the entity’s failure to maintain sufficient documentation to demonstrate compliance with Build America, Buy America (BABA) requirements. Specifically, supporting evidence was not available to identify which costs, if any, were associated with non-compliant materials, and therefore the auditor was unable to quantify the amount of questioned costs. Criteria: Section 70914 of the Infrastructure Investment and Jobs Act (IIJA), commonly referred to as the Build America, Buy America (BABA) Act, requires that all iron, steel, manufactured products, and construction materials used in federally funded infrastructure projects be produced in the United States unless a waiver is properly obtained. Federal awarding agency guidance and implementing regulations further require recipients and subrecipients to maintain sufficient documentation to demonstrate compliance with these domestic sourcing requirements. Additionally, in accordance with 2 CFR 200.303, non-federal entities are required to establish, document and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with applicable statutes, regulations, and the terms and conditions of the federal award. Condition: The entity did not maintain sufficient, contemporaneous documentation to demonstrate compliance with the BABA requirements applicable to federally funded infrastructure projects. Specifically, documentation supporting that iron, steel, manufactured products, and construction materials used in the project were produced in the United States, or that an approved waiver was obtained where applicable, was not available for inspection during the audit period. While a consultant has been engaged to support program compliance and management indicated that documentation is expected to be compiled during project closeout, the entity maintained only a listing of materials and supplies purchased. The list did not include or reference supporting evidence demonstrating compliance with BABA requirements, such as domestic sourcing certifications or approved waivers, where applicable. As of the date of audit procedures, documentation sufficient to support compliance had not been obtained, maintained, or made available for review. As a result, the auditor was unable to verify that procurementactivities and expenditures complied with BABA requirements. Universe/Population:Only one contractor was paid during the audit period and selected to test for procurement compliance testing. Effect:The lack of documentation and supporting controls increases the risk that materials used in federally funded projects may not comply with BABA requirements, resulting in potential noncompliance with federal regulations. This could lead to questioned costs, disallowances, delays in reimbursement, or potential repayment of federal funds. Additionally, the absence of documentation limits the entity’s ability to demonstrate compliance during audits or federal oversight reviews. Cause: The City-Parish did not establish, document or implement adequate internal controls and procedures to identify applicable BABA requirements and ensure retention of supporting documentation demonstrating compliance. Specifically, processes for verifying domestic sourcing requirements with vendors and contractors and maintaining related compliance documentation were not clearly defined or consistently applied. Recommendation: We recommend that management enhance its existing processes over Build America, Buy America (BABA) compliance to ensure that documentation supporting domestic sourcing requirements is obtained and maintained contemporaneously throughout the project lifecycle, rather than solely at project closeout. While management has engaged a consultant to support program compliance and has indicated that documentation will be compiled during closeout, reliance on postcompletion documentation increases the risk that sufficient and accurate support may not be available or may be difficult to validate. Management should establish formal procedures, in coordination with its consultant, to: Clearly define responsibilities for obtaining and retaining BABA compliance documentation during procurement and construction phases; Require contractors and vendors to submit certifications or supporting documentation at the time of purchase or installation; Implement periodic monitoring or interim reviews of BABA compliance documentation prior to project closeout; and Ensure that all required documentation is centralized, reviewed, and retained in accordance with federal requirements. Strengthening these processes will improve the entity’s ability to demonstrate timely compliance with BABA requirements and reduce the risk of noncompliance, questioned costs, or audit findings. Views of Responsible Officials: Although currently being enforced by the Department of Transportation and Drainage, current guidelines and procedures will be reassessed and improved upon to ensure record-keeping compliance with BABA and any other applicable federal acts moving forward. These remedies will include the following: Trimble Unity Construct (TUC) software will continue to be used as a repository for all relevant construction project documentation; Compliance certification letters must be submitted and approved through the established construction submittal workflow process, or other future processes, in TUC for applicable BABA materials; a specific field for BABA compliant documentation will now be required to ensure that a pay item or any of its components satisfy BABA requirements prior to completing a material submittal process; Guidance that certification letters must be provided for review concurrently with material submittals will be provided to Construction Document Controls staff; Continue to maintain the BABA compliance tracking document for internal record-keeping and for federal internal audits at an established interval based upon the duration or cost of the contract. This will be executed by a designated audit review team established by the Department of Transportation and Drainage through use of audit checklists based on specific grant requirements. Any deficiencies discovered during the audit will be communicated through a Grant Compliance Remediation Plan with deadline identified for corrections. In order to bring the documentation into compliance for construction materials installed on active grants, the Department of Transportation and Drainage proposes to perform the following immediate actions: Update the current BABA log to include additional information not already captured for materials, installed and expected, the status of each item’s compliance letter, if the letter contains the required five criteria and where the letter is stored; Hold an initial BABA regroup meeting with the contractor to discuss materials installed, materials expected, and status letters for all items, with subsequent bi-weekly meetings to address any identified deficiencies; and review all letters, currently stored and to be received, submitted by the Prime Contractor into TUC to ensure the letters contain the five criteria required for federal compliance and enter the conformity into the BABA log.
Documentation of Written Internal Controls Over Compliance Required by Uniform Guidance Major Programs Impacted: U.S. Department of Transportation – Federal Transit Administration (FTA): 20.507; Federal Transit Formula Grant; 20.933 National Infrastructure Investment; Federal Highway Administration (FHWA) Passed Through Louisiana Department of Transportation of Development and Highways - 20.205 Highway Planning and Construction; U.S. Federal Aviation Administration - 20.106 Airport Improvement Program; U.S. Department of Treasury - 21.027 Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Health and Human Services - 93.600 Head Start Questioned Costs: None Grant No(s): All Associated Reported on SEFA Criteria: Pursuant to 2 CFR § 200.303(a), the non-Federal entity must establish, document, 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. These internal controls should align with the guidance in Standards for Internal Control in the Federal Government issued by the Comptroller General of the United States or the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The City-Parish did not consistently maintain documentation to support internal controls over compliance with certain direct and material compliance areas related to Federal awards. While some documentation of control activities existed, documentation was incomplete across all applicable compliance requirements and departments responsible for administering Federal programs. Specifically, documentation demonstrating the design and operation of controls over certain compliance areas was not readily available or did not fully address all relevant requirements. As a result, sufficient evidence of the City-Parish’s internal control over compliance was not consistently maintained. Universe/Population: The population consisted of internal control activities over compliance for direct and material compliance requirements identified for the Federal programs selected for audit in accordance with Uniform Guidance (2 CFR Part 200, Subpart F). This included control processes and related documentation maintained by departments responsible for procurement, program administration, financial reporting, and other functions supporting compliance with Federal statutes, regulations, and terms and conditions of Federal awards. Effect: The lack of complete and consistent documentation of internal controls over compliance increases the risk that noncompliance with Federal statutes, regulations, and award requirements may occur and not be prevented or detected in a timely manner. In addition, the absence of sufficient documentation limits the City-Parish’s ability to demonstrate compliance during audit or oversight activities, which could result in questioned costs, audit findings, or increased scrutiny from Federal awarding agencies and pass-through entities. Cause: The City-Parish’s internal control processes over Federal award compliance were not fully formalized across departments responsible for administering Federal programs. Specifically, while certain controls were in place, management did not establish clear, organization-wide expectations for documenting the design and operating effectiveness of controls over all direct and material compliance requirements. In addition, responsibilities for maintaining control documentation were decentralized, and sufficient oversight and monitoring procedures were not in place to ensure completeness and consistency of documentation across all compliance areas. As a result, documentation practices varied by department, and not all applicable compliance requirements were adequately documented. Recommendation: We recommend that management strengthen internal control documentation processes across all departments supporting Federal programs to ensure compliance with 2 CFR § 200.303. Specifically, management should: • Establish and document formal policies and procedures that clearly define internal controls over each applicable compliance requirement for Federal programs; • Ensure that all departments responsible for Federal program administration consistently document the design and operation of key controls over compliance; • Implement a centralized or coordinated approach for maintaining internal control documentation to promote completeness and consistency across the organization; • Perform periodic reviews to verify that documentation is complete, current, and aligned with applicable Federal requirements; and • Provide training to relevant personnel to reinforce expectations for documenting internal controls in accordance with Uniform Guidance and recognized frameworks (e.g., COSO or Green Book). Strengthening documentation practices will enhance the entity’s ability to demonstrate compliance, support audit requirements, and reduce the risk of noncompliance with Federal award requirements. Views of Responsible Officials:The EBR Head Start Program follows the established financial policies, procedures, and approval processes administered through the City of Baton Rouge and Parish of East Baton Rouge. EBR Head Start does not maintain a separate set of finance procedures independent of the City-Parish. Rather, the program operates within the existing City-Parish framework. These processes include the review, approval, and monitoring of activities necessary to support compliance with applicable Federal requirements. The finding identified an opportunity for the Head Start Program to demonstrate how it applies and maintains evidence of these existing controls within the department.procedures, identifying and maintaining required compliance documentation, establishing consistent record-retention practices, periodically reviewing documentation for completeness and accuracy, providing guidance to appropriate staff, and implementing any additional controls identified as necessary to comply with 2 CFR Part 200.303.