2024-007 Document Policies and Procedures over Federal Awards (Significant Deficiency) Cluster/Program: All Federal Programs Type of Finding: Compliance – Other Matters Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement: OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (UG) established significant requirements related to Federal awards. The requirements stipulate that federal award recipients must document their policies and procedures over certain aspects of financial program management. Specifically, written policies are required for the following: • Determination of allowable costs • Employee travel • Cash Management • Equipment and inventory • Procurement and Suspension and Debarment • Subrecipient monitoring and management. Condition: During our review of the Town's administration of federal awards, we noted that the Town had not formally established, documented, and adopted written policies and procedures addressing the applicable federal award requirements identified above. Specifically, the Town did not have a comprehensive set of written policies governing the determination of allowable costs, employee travel, cash management, equipment and inventory management, procurement and suspension and debarment, and subrecipient monitoring and management. The absence of formally documented policies and procedures limits the Town's ability to demonstrate that responsibilities, processes, and internal controls over federal award activities have been consistently established and communicated. Furthermore, without written guidance, the administration of federal awards relies on existing practices and individual knowledge rather than a formalized framework designed to promote consistent application of applicable federal requirements. Cause: The condition appears to be attributable to weaknesses in the formal documentation and implementation of internal controls over federal award administration. The Town had not established a process to ensure that written policies and procedures addressing the applicable Uniform Guidance requirements were developed, formally approved, periodically reviewed, and updated as necessary. Effect: The absence of written policies and procedures over federal award activities resulted in a lack of formalized guidance for administering federal funds in accordance with applicable requirements. This deficiency reduces the consistency and accountability of the Town's federal grant administration and limits management's ability to demonstrate that appropriate controls have been established over allowable costs, employee travel, cash management, equipment and inventory, procurement, and subrecipient monitoring and management. The lack of documented procedures also reduces the availability of a clear framework for employees responsible for administering federal awards and for management personnel responsible for overseeing compliance. As a result, the Town's internal control framework over federal award administration was not fully documented in accordance with the applicable requirements of the Uniform Guidance. Questioned Costs: There are no questioned costs associated with this finding, as the deficiency relates to the absence of required written policies and procedures rather than to specific questioned expenditures. No costs were identified as questioned as a result of this finding. Identification as Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Town develop, formally adopt, and implement written policies and procedures addressing all applicable federal award requirements under the Uniform Guidance. These policies should address the determination of allowable costs, employee travel, cash management, equipment and inventory management, procurement and suspension and debarment, and subrecipient monitoring and management, as applicable to the Town's federal award activities. The policies should clearly define employee responsibilities, establish required approval and documentation procedures, and identify the internal controls necessary to support compliance with applicable federal requirements. We further recommend that the Town designate appropriate personnel to oversee the development, implementation, and ongoing maintenance of these policies. Once adopted, the policies should be communicated to employees involved in administering federal awards and reviewed periodically to ensure they remain consistent with current federal requirements and the Town's operations. Establishing and implementing these procedures will strengthen the Town's internal control framework, promote consistent administration of federal funds, and provide documented support for the Town's compliance with the Uniform Guidance. Views of Responsible Officials: Management’s views and corrective action plan are included at the end of this report.
2024-006 Verification of Suspension and Debarment (Material Weakness) Federal Agency: U.S. Department of Agriculture Pass-through Agency: N/A Cluster/Program: Emergency Watershed Protection Program Assistance Listing Number: 10.923 Passed-through Identification: N/A Compliance Requirement: Suspension and Debarment Type of Finding: Internal Control over Compliance – Material Weakness Noncompliance Criteria or Specific Requirement: In accordance with 2 CFR 180.300, recipients of federal funds are required to ensure that contractors, subcontractors, and vendors receiving federal awards are not suspended or debarred from participating in federal programs prior to entering into covered transactions. For covered procurements exceeding $25,000, the non-federal entity must verify the eligibility of the contractor or vendor through the System for Award Management (SAM.gov), obtain a certification from the contractor or vendor, or include an appropriate suspension and debarment clause in the contract or agreement. Condition: During our review of the Town’s compliance with suspension and debarment requirements, we identified two vendors for which the Town was required to perform and document verification procedures. However, the Town was unable to provide evidence that it had completed the required verification for the two vendors tested. Specifically, the Town did not maintain documentation of a SAM.gov search, obtain a written suspension and debarment certificate from the vendors, or include the required suspension and debarment language within the applicable contracts or agreements. As a result, the Town did not maintain sufficient documentation to demonstrate that it had performed the required procedures to ensure that vendors receiving federal funds were eligible to participate in federally funded transactions. Cause: The Town has not established formal written procedures or implemented adequate internal controls to ensure that suspension and debarment verification requirements are identified, performed, and documented when applicable federal procurement transactions occur. Additionally, responsibility for performing and retaining documentation of these verification procedures has not been clearly defined within the Town’s procurement process. Effect: The absence of documented suspension and debarment verification procedures resulted in a lack of evidence that the Town complied with federal suspension and debarment requirements for applicable vendor transactions. Without adequate controls to verify and document vendor eligibility, the Town may not be able to demonstrate compliance with federal award requirements or support that federal funds were used only for allowable transactions with eligible vendors. Questioned Costs: None identified. Although the Town was unable to provide documentation demonstrating that suspension and debarment verification procedures had been performed at the time of our audit testing, subsequent to the audit, the Town performed verification searches through SAM.gov and confirmed that the vendors were not listed as suspended or debarred. Based on these subsequent procedures, there was no evidence identified that the vendors were ineligible to participate in federally funded transactions; therefore, no questioned costs are being reported. Identification as Repeat Finding: This is not a repeat finding from the prior year. Recommendation: We recommend that the Town strengthen its suspension and debarment procedures to ensure compliance with 2 CFR 180.300. Specifically, when federal funds are used for transactions exceeding the applicable threshold, the Town should establish procedures requiring verification of vendor eligibility through one of the allowable methods: (1) performing and retaining documentation of a SAM.gov search, (2) obtaining a written certification from the vendor, or (3) including suspension and debarment language in the contract or agreement. The Town should also establish responsibility for completing and retaining this documentation as part of its procurement process and implement a review process to ensure the required verification procedures are consistently applied and maintained for all applicable federal award transactions. Views of Responsible Officials: Management’s views and corrective action plan are included at the end of this report.