Finding 2023-003 – COVID 19 – Coronavirus State and Local Fiscal Recovery Fund - AL No. 21.027
U.S. Department of Treasury
Noncompliance and Material Weakness Related to Internal Control over Compliance of the Major Program
Criteria: Non‐federal entities other than states, including those operatin...
Finding 2023-003 – COVID 19 – Coronavirus State and Local Fiscal Recovery Fund - AL No. 21.027
U.S. Department of Treasury
Noncompliance and Material Weakness Related to Internal Control over Compliance of the Major Program
Criteria: Non‐federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. As governmental subrecipients of states they are also required to use the same state procurement policies and procedures for federal funds as for non‐federal funds, the Town is required to follow Massachusetts General Laws, Chapter (MGL) 30(b). MGL 30(b) requires the solicitation of three written or oral quotes for procurements of supplies between $10,000 and $49,999 and sealed bids or proposals for procurements of supplies $50,000 and over. Management of the Town is also responsible for establishing and maintaining effective internal control over compliance with federal requirements that have a direct and material effect on a federal program. However, A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis.
Condition and Context: During fiscal year 2023, the Town did not comply with the required procurement policies and procedures in place as it related to one of the expenses charged to the major program. As the expense tested was for engineering services that would have been exempt under Massachusetts General Laws, Chapter (MGL) 30(b) (State Procurement Requirement), under federal statutes and procurement requirements for engineering services identified in 2 CFR Part 200, the Town would have been required to go out to bid for the services.
Questioned Costs: $413,477.78.
Cause: The noncompliance occurred because the organization mistakenly relied on Massachusetts Chapter 30B exemptions, which govern state and local procurements, and did not recognize the need to comply with the more stringent federal procurement requirements for federal fund usage. Staff members were not sufficiently aware of the specific requirements under 2 CFR Part 200 and the precedence of federal procurement regulations over state law in this context.
Effect or Potential Effect: There is a risk that amounts charged to federal awards may not be in accordance with procurement, suspension, and debarment principles.
Identification as a Repeat Finding: N/A
Recommendation: The Town of Bellingham should address noncompliance and material weaknesses in internal controls noted above in order to ensure that procurements are conducted in accordance with federal and state requirements.
Responsible for Corrective Plan: CFO
Estimated Completion Date: January 2025
Action Taken: We acknowledge the audit finding regarding our reliance on Massachusetts Chapter 30B exemptions for procurement involving federal funds. We understand that federal procurement regulations under 2 CFR Part 200 take precedence over state law and that we failed fully to comply with federal requirements for competitive bidding, sole-source justification, and documentation. We are committed to addressing this issue by reviewing our procurement policies to clearly differentiate between state and federal requirements, ensuring that federal standards govern all procurement involving federal funds. We will provide additional training to staff, implement stronger documentation procedures, and review past procurement to ensure full compliance moving forward.