SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Stevens County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction; 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration; U.S. Department of the Treasury Federal Award/Contract Number: BRS-F334 (002), STRP-E331 (005), BHS-Z933 (003), BHOS-10BA (001), HSIP-000S (577), STRP-G333 (004), STRP-C331 (002), BROS-33GC (001), BROS-2033 (027), HSIP0000S (646) Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background Highway Planning and Construction Cluster The objectives of the Highway Planning and Construction Cluster are to: (1) assist states in the planning and development of an integrated, interconnected transportation system important to interstate commerce and travel by constructing and rehabilitating the National Highway System, including interstate highways and most other public roads; (2) provide aid for the repair of federal-aid highways following disasters; (3) foster safe highway design and replace or rehabilitate structurally deficient or functionally obsolete bridges; and (4) to provide for other special purposes. In 2022, the County spent $879,956 in federal funding for road improvement projects. Coronavirus State and Local Fiscal Recovery Funds (SLFRF) The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent the COVID-19 pandemic caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $2,458,654 in program funds. 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. Procurement Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived in certain circumstances, including via a “sole source exemption” when purchasing used vehicles. Governments must document the process and ensure they comply with applicable laws for waiving competitive bidding. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from contractors who are suspended or debarred from doing business with the federal government. Whenever the County 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 have not been suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Although the County had a written procurement policy at the time of procurement for both federal programs, the policy did not conform to the most restrictive methods and thresholds for procuring public works projects, competitive proposals and small purchases. Additionally, the County’s policy did not include procedures for procuring transactions, such as micro-purchases, piggybacking, requesting proposals for architecture and engineering services, contract cost and price analysis, bonding requirements and more. Additionally, our audit of the SLFRF program found the County did not have effective internal controls for ensuring it complied with federal and state procurement requirements for sole source exemptions and small purchase procedures. The County did not properly declare a used ambulance purchase as a sole source exemption, but instead used a blanket emergency declaration for COVID-19, which was approved over two years prior to the procurement taking place. Also, the County does not have documentation that they declared this specific purchase as part of the COVID-19 emergency. The County also could not provide documentation demonstrating it obtained and retained more than one quote for an equipment purchase subject to small purchase procedures. Suspension and Debarment Our audit of the SLFRF program found the County’s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the County did not obtain a written certification, include a clause in the contract or search for exclusion records on sam.gov to verify that two contractors subject to this requirement were not suspended or debarred before entering into the contract with or purchasing from them. The County paid these contractors $269,160 in fiscal year 2022. We consider the deficiencies in internal controls for procurement for the Highway Planning and Construction Cluster to be a significant deficiency. We consider the deficiencies in internal controls for procurement and suspension and debarment for the SLFRF program to be material weaknesses that led to material noncompliance. Cause of Condition Procurement County employees and officials misunderstood the federal procurement standards. They thought that the County’s current procurement policy met the standards required under Uniform Guidance, as the policy states that “all employees shall follow the most restrictive, local, state or federal procurement policy when using Federal Grant Funds to be in compliance with the Code of Federal Requirements (2 CFR part 200).” For the Highway Planning and Construction Cluster program, County employees thought that following the Washington State Department of Transportation’s Local Agency Guidelines Manual and guidance from the Municipal Research and Services Center were sufficient for complying with federal procurement standards. Additionally, County staff responsible for procurement procedures for the SLFRF program misunderstood exemption requirements and did not specifically declare the ambulance purchase as either sole source or an emergency purchase. Additionally, staff were unaware that they should obtain and retain more than one quote to comply with small purchase procedures. Suspension and Debarment County staff responsible for reviewing purchases under SLFRF were aware of suspension and debarment verification requirements. However, they did not recognize the need to document and retain evidence of the sam.gov checks before the purchases. Effect of Condition Procurement Although the County’s policy did not conform to Uniform Guidance, our testing of the Highway Planning and Construction program found the County complied with federal requirements for competitive solicitation of public works contractors and purchases of goods and services. However, without updated written procurement procedures, the County is at greater risk of noncompliance with the most restrictive procedures when using federal funds to procure contractors and goods and services. Additionally, our audit of the SLFRF program found the County did not have documentation to support compliance with exemption requirements for a used ambulance purchase of $241,820 and small purchase requirements for an equipment purchase of $27,340. Without effective internal controls, the County cannot ensure it allowed for full and open competition, received the best price and complied with federal procurement requirements. Suspension and Debarment Our audit of the SLFRF program found the County paid two contractors more than $25,000 and did not verify their suspension and debarment statuses using one of the three allowable methods. Without this verification, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable and the granting federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County: • Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR § 200.318-327) for all procurement activities • Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County’s own procurement policies and procedures • Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance County’s Response The County will respond to each Audit Recommendation separately. SAO Recommendations: 1) Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR 200.318-327) for all procurement activities. 2) Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County's own procurement policies and procedures. 3) Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance. Response to 1) - On April 22, 2019, the County adopted Resolution #39-2019 to include language requiring that all of 2 CFR 200 be followed when using federal funds for procurement in response to the State Auditor's recommendations. The County has a single source audit every year and no further recommendations from the State Auditor were given and the corrective action was noted. The Audits for 2019 and 2020 found no further action on this subject. The 2021 federal audit was performed, and the exit interview resulted in a finding the same as in number 1 above. The exit interview was given on September 23, 2022. This is the start of budget season and a high and busy time of activity. The County lacks the resources to have dedicated staff to draft specific policies and relies of current staffing levels to address these issues. In drafting this policy, considerable research was conducted, a draft for review by all affected staff was circulated for comment, legal review was conducted and a new policy emphasizing subparts 318-327 was adopted on July 17, 2023. Further, an update of the County's Capital Asset and Inventory Policy adopted November 21, 2022, to include federal procurement rules was adopted as policy 2-2023 on July 25, 2023. Therefore, the County has taken corrective action to address this issue but lacked the resources to do so between the end of September and the end of the calendar year to cover 2022. Response to 2) - The State Auditor states the County did not follow the most restrictive applicable federal, state, or local laws and the federal procurement standards found in 2 CFR 200.318-327. The State Auditor further states that "the County did not properly declare a used ambulance purchase as a sole source exemption, but instead used an emergency declaration for COVID-19." While it is true that the County did rely on the emergency declaration and not note in the purchase authorization that the ambulance purchase was a sole source purchase, the County maintains this is supported by all applicable laws. The COVID-19 emergency was still in effect and the purchase was made solely to respond to a communicable disease that was thought to further spread. Ambulances that lacked proper equipment for transporting communicable disease patients put healthcare workers and first responders at high risk of human health issues. Resolution 30 2020 Declaring an emergency and Governor Proclamation 20-05 declaring a COVID-19 emergency was still in effect, as was a Presidential emergency declaration at the time of the purchase. RCW 38.52.070(2) specifically allows waiving oftime consuming procedures for purchases directly related to the emergency. Also, federal procurement standards as quoted below 2 CFR 320(c)(3) allow for noncompetitive procurement. People were dying and time was of the essence in obtaining proper transport equipment. We will also note that all Coronavirus State and Local Fiscal Recovery Fund purchases were reviewed and approved by County legal counsel. The County notes that more than one standard was met in 2 CFR 200.320(c) as this purchase meets both subparts 2 and 3 below, the County feels that this purchase did not require more internal controls. That being said, the County has trained personnel to document all conditions that apply in the future and has updated its federal procurement procedures per the September 23, 2022, recommendations. § 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(l) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Response to 3) - The State Auditor noted that the County had failed to verify two contractors for suspension and disbarment using one of the three allowable methods. The County refutes this and an affidavit from the employee who verified this was submitted. However, despite having this legal document the State Auditor finds the county did not retain a screenshot of this process for its records. The County is unable to find anywhere in federal law having reviewed 2 CFR 200 including sections 318- 327 as well as 2 CFR 180, as quoted below, where documentation of this is required. Further, several staff members have been trained in federal procurement standards and this documentation requirement was not mentioned as a requirement. This being said, the County has trained all staff members dealing with federal dollars to take screen shots of the suspension and disbarment check on potential contractors. § 180.320 Must I verify that principals of my covered transactions are eligible to participate? Yes, you as a participant are responsible for determining whether any of your principals of your covered transactions is excluded or disqualified from participating in the transaction. You may decide the method and frequency by which you do so. You may, but you are not required to, check SAM Exclusions. In summary, the County has corrected all the State Auditor recommendations made in this audit findings as of this written response. Auditor’s Remarks As the County did not maintain documentation and declare a specific exemption for the ambulance purchase we could not verify that it complied with procurement requirements. In order to determine whether the County verified the contractors were not suspended or debarred, our office is required to review evidence that shows this verification was completed by the County prior to entering into a contract. An after-the-fact representation is not sufficient to meet this standard. We reaffirm our finding and will review the corrective action taken during our 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR 200, Uniform Guidance, section 320, Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Stevens County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction; 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration; U.S. Department of the Treasury Federal Award/Contract Number: BRS-F334 (002), STRP-E331 (005), BHS-Z933 (003), BHOS-10BA (001), HSIP-000S (577), STRP-G333 (004), STRP-C331 (002), BROS-33GC (001), BROS-2033 (027), HSIP0000S (646) Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background Highway Planning and Construction Cluster The objectives of the Highway Planning and Construction Cluster are to: (1) assist states in the planning and development of an integrated, interconnected transportation system important to interstate commerce and travel by constructing and rehabilitating the National Highway System, including interstate highways and most other public roads; (2) provide aid for the repair of federal-aid highways following disasters; (3) foster safe highway design and replace or rehabilitate structurally deficient or functionally obsolete bridges; and (4) to provide for other special purposes. In 2022, the County spent $879,956 in federal funding for road improvement projects. Coronavirus State and Local Fiscal Recovery Funds (SLFRF) The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent the COVID-19 pandemic caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $2,458,654 in program funds. 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. Procurement Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived in certain circumstances, including via a “sole source exemption” when purchasing used vehicles. Governments must document the process and ensure they comply with applicable laws for waiving competitive bidding. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from contractors who are suspended or debarred from doing business with the federal government. Whenever the County 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 have not been suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Although the County had a written procurement policy at the time of procurement for both federal programs, the policy did not conform to the most restrictive methods and thresholds for procuring public works projects, competitive proposals and small purchases. Additionally, the County’s policy did not include procedures for procuring transactions, such as micro-purchases, piggybacking, requesting proposals for architecture and engineering services, contract cost and price analysis, bonding requirements and more. Additionally, our audit of the SLFRF program found the County did not have effective internal controls for ensuring it complied with federal and state procurement requirements for sole source exemptions and small purchase procedures. The County did not properly declare a used ambulance purchase as a sole source exemption, but instead used a blanket emergency declaration for COVID-19, which was approved over two years prior to the procurement taking place. Also, the County does not have documentation that they declared this specific purchase as part of the COVID-19 emergency. The County also could not provide documentation demonstrating it obtained and retained more than one quote for an equipment purchase subject to small purchase procedures. Suspension and Debarment Our audit of the SLFRF program found the County’s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the County did not obtain a written certification, include a clause in the contract or search for exclusion records on sam.gov to verify that two contractors subject to this requirement were not suspended or debarred before entering into the contract with or purchasing from them. The County paid these contractors $269,160 in fiscal year 2022. We consider the deficiencies in internal controls for procurement for the Highway Planning and Construction Cluster to be a significant deficiency. We consider the deficiencies in internal controls for procurement and suspension and debarment for the SLFRF program to be material weaknesses that led to material noncompliance. Cause of Condition Procurement County employees and officials misunderstood the federal procurement standards. They thought that the County’s current procurement policy met the standards required under Uniform Guidance, as the policy states that “all employees shall follow the most restrictive, local, state or federal procurement policy when using Federal Grant Funds to be in compliance with the Code of Federal Requirements (2 CFR part 200).” For the Highway Planning and Construction Cluster program, County employees thought that following the Washington State Department of Transportation’s Local Agency Guidelines Manual and guidance from the Municipal Research and Services Center were sufficient for complying with federal procurement standards. Additionally, County staff responsible for procurement procedures for the SLFRF program misunderstood exemption requirements and did not specifically declare the ambulance purchase as either sole source or an emergency purchase. Additionally, staff were unaware that they should obtain and retain more than one quote to comply with small purchase procedures. Suspension and Debarment County staff responsible for reviewing purchases under SLFRF were aware of suspension and debarment verification requirements. However, they did not recognize the need to document and retain evidence of the sam.gov checks before the purchases. Effect of Condition Procurement Although the County’s policy did not conform to Uniform Guidance, our testing of the Highway Planning and Construction program found the County complied with federal requirements for competitive solicitation of public works contractors and purchases of goods and services. However, without updated written procurement procedures, the County is at greater risk of noncompliance with the most restrictive procedures when using federal funds to procure contractors and goods and services. Additionally, our audit of the SLFRF program found the County did not have documentation to support compliance with exemption requirements for a used ambulance purchase of $241,820 and small purchase requirements for an equipment purchase of $27,340. Without effective internal controls, the County cannot ensure it allowed for full and open competition, received the best price and complied with federal procurement requirements. Suspension and Debarment Our audit of the SLFRF program found the County paid two contractors more than $25,000 and did not verify their suspension and debarment statuses using one of the three allowable methods. Without this verification, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable and the granting federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County: • Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR § 200.318-327) for all procurement activities • Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County’s own procurement policies and procedures • Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance County’s Response The County will respond to each Audit Recommendation separately. SAO Recommendations: 1) Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR 200.318-327) for all procurement activities. 2) Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County's own procurement policies and procedures. 3) Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance. Response to 1) - On April 22, 2019, the County adopted Resolution #39-2019 to include language requiring that all of 2 CFR 200 be followed when using federal funds for procurement in response to the State Auditor's recommendations. The County has a single source audit every year and no further recommendations from the State Auditor were given and the corrective action was noted. The Audits for 2019 and 2020 found no further action on this subject. The 2021 federal audit was performed, and the exit interview resulted in a finding the same as in number 1 above. The exit interview was given on September 23, 2022. This is the start of budget season and a high and busy time of activity. The County lacks the resources to have dedicated staff to draft specific policies and relies of current staffing levels to address these issues. In drafting this policy, considerable research was conducted, a draft for review by all affected staff was circulated for comment, legal review was conducted and a new policy emphasizing subparts 318-327 was adopted on July 17, 2023. Further, an update of the County's Capital Asset and Inventory Policy adopted November 21, 2022, to include federal procurement rules was adopted as policy 2-2023 on July 25, 2023. Therefore, the County has taken corrective action to address this issue but lacked the resources to do so between the end of September and the end of the calendar year to cover 2022. Response to 2) - The State Auditor states the County did not follow the most restrictive applicable federal, state, or local laws and the federal procurement standards found in 2 CFR 200.318-327. The State Auditor further states that "the County did not properly declare a used ambulance purchase as a sole source exemption, but instead used an emergency declaration for COVID-19." While it is true that the County did rely on the emergency declaration and not note in the purchase authorization that the ambulance purchase was a sole source purchase, the County maintains this is supported by all applicable laws. The COVID-19 emergency was still in effect and the purchase was made solely to respond to a communicable disease that was thought to further spread. Ambulances that lacked proper equipment for transporting communicable disease patients put healthcare workers and first responders at high risk of human health issues. Resolution 30 2020 Declaring an emergency and Governor Proclamation 20-05 declaring a COVID-19 emergency was still in effect, as was a Presidential emergency declaration at the time of the purchase. RCW 38.52.070(2) specifically allows waiving oftime consuming procedures for purchases directly related to the emergency. Also, federal procurement standards as quoted below 2 CFR 320(c)(3) allow for noncompetitive procurement. People were dying and time was of the essence in obtaining proper transport equipment. We will also note that all Coronavirus State and Local Fiscal Recovery Fund purchases were reviewed and approved by County legal counsel. The County notes that more than one standard was met in 2 CFR 200.320(c) as this purchase meets both subparts 2 and 3 below, the County feels that this purchase did not require more internal controls. That being said, the County has trained personnel to document all conditions that apply in the future and has updated its federal procurement procedures per the September 23, 2022, recommendations. § 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(l) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Response to 3) - The State Auditor noted that the County had failed to verify two contractors for suspension and disbarment using one of the three allowable methods. The County refutes this and an affidavit from the employee who verified this was submitted. However, despite having this legal document the State Auditor finds the county did not retain a screenshot of this process for its records. The County is unable to find anywhere in federal law having reviewed 2 CFR 200 including sections 318- 327 as well as 2 CFR 180, as quoted below, where documentation of this is required. Further, several staff members have been trained in federal procurement standards and this documentation requirement was not mentioned as a requirement. This being said, the County has trained all staff members dealing with federal dollars to take screen shots of the suspension and disbarment check on potential contractors. § 180.320 Must I verify that principals of my covered transactions are eligible to participate? Yes, you as a participant are responsible for determining whether any of your principals of your covered transactions is excluded or disqualified from participating in the transaction. You may decide the method and frequency by which you do so. You may, but you are not required to, check SAM Exclusions. In summary, the County has corrected all the State Auditor recommendations made in this audit findings as of this written response. Auditor’s Remarks As the County did not maintain documentation and declare a specific exemption for the ambulance purchase we could not verify that it complied with procurement requirements. In order to determine whether the County verified the contractors were not suspended or debarred, our office is required to review evidence that shows this verification was completed by the County prior to entering into a contract. An after-the-fact representation is not sufficient to meet this standard. We reaffirm our finding and will review the corrective action taken during our 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR 200, Uniform Guidance, section 320, Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Stevens County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction; 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration; U.S. Department of the Treasury Federal Award/Contract Number: BRS-F334 (002), STRP-E331 (005), BHS-Z933 (003), BHOS-10BA (001), HSIP-000S (577), STRP-G333 (004), STRP-C331 (002), BROS-33GC (001), BROS-2033 (027), HSIP0000S (646) Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background Highway Planning and Construction Cluster The objectives of the Highway Planning and Construction Cluster are to: (1) assist states in the planning and development of an integrated, interconnected transportation system important to interstate commerce and travel by constructing and rehabilitating the National Highway System, including interstate highways and most other public roads; (2) provide aid for the repair of federal-aid highways following disasters; (3) foster safe highway design and replace or rehabilitate structurally deficient or functionally obsolete bridges; and (4) to provide for other special purposes. In 2022, the County spent $879,956 in federal funding for road improvement projects. Coronavirus State and Local Fiscal Recovery Funds (SLFRF) The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent the COVID-19 pandemic caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $2,458,654 in program funds. 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. Procurement Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived in certain circumstances, including via a “sole source exemption” when purchasing used vehicles. Governments must document the process and ensure they comply with applicable laws for waiving competitive bidding. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from contractors who are suspended or debarred from doing business with the federal government. Whenever the County 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 have not been suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Although the County had a written procurement policy at the time of procurement for both federal programs, the policy did not conform to the most restrictive methods and thresholds for procuring public works projects, competitive proposals and small purchases. Additionally, the County’s policy did not include procedures for procuring transactions, such as micro-purchases, piggybacking, requesting proposals for architecture and engineering services, contract cost and price analysis, bonding requirements and more. Additionally, our audit of the SLFRF program found the County did not have effective internal controls for ensuring it complied with federal and state procurement requirements for sole source exemptions and small purchase procedures. The County did not properly declare a used ambulance purchase as a sole source exemption, but instead used a blanket emergency declaration for COVID-19, which was approved over two years prior to the procurement taking place. Also, the County does not have documentation that they declared this specific purchase as part of the COVID-19 emergency. The County also could not provide documentation demonstrating it obtained and retained more than one quote for an equipment purchase subject to small purchase procedures. Suspension and Debarment Our audit of the SLFRF program found the County’s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the County did not obtain a written certification, include a clause in the contract or search for exclusion records on sam.gov to verify that two contractors subject to this requirement were not suspended or debarred before entering into the contract with or purchasing from them. The County paid these contractors $269,160 in fiscal year 2022. We consider the deficiencies in internal controls for procurement for the Highway Planning and Construction Cluster to be a significant deficiency. We consider the deficiencies in internal controls for procurement and suspension and debarment for the SLFRF program to be material weaknesses that led to material noncompliance. Cause of Condition Procurement County employees and officials misunderstood the federal procurement standards. They thought that the County’s current procurement policy met the standards required under Uniform Guidance, as the policy states that “all employees shall follow the most restrictive, local, state or federal procurement policy when using Federal Grant Funds to be in compliance with the Code of Federal Requirements (2 CFR part 200).” For the Highway Planning and Construction Cluster program, County employees thought that following the Washington State Department of Transportation’s Local Agency Guidelines Manual and guidance from the Municipal Research and Services Center were sufficient for complying with federal procurement standards. Additionally, County staff responsible for procurement procedures for the SLFRF program misunderstood exemption requirements and did not specifically declare the ambulance purchase as either sole source or an emergency purchase. Additionally, staff were unaware that they should obtain and retain more than one quote to comply with small purchase procedures. Suspension and Debarment County staff responsible for reviewing purchases under SLFRF were aware of suspension and debarment verification requirements. However, they did not recognize the need to document and retain evidence of the sam.gov checks before the purchases. Effect of Condition Procurement Although the County’s policy did not conform to Uniform Guidance, our testing of the Highway Planning and Construction program found the County complied with federal requirements for competitive solicitation of public works contractors and purchases of goods and services. However, without updated written procurement procedures, the County is at greater risk of noncompliance with the most restrictive procedures when using federal funds to procure contractors and goods and services. Additionally, our audit of the SLFRF program found the County did not have documentation to support compliance with exemption requirements for a used ambulance purchase of $241,820 and small purchase requirements for an equipment purchase of $27,340. Without effective internal controls, the County cannot ensure it allowed for full and open competition, received the best price and complied with federal procurement requirements. Suspension and Debarment Our audit of the SLFRF program found the County paid two contractors more than $25,000 and did not verify their suspension and debarment statuses using one of the three allowable methods. Without this verification, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable and the granting federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County: • Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR § 200.318-327) for all procurement activities • Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County’s own procurement policies and procedures • Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance County’s Response The County will respond to each Audit Recommendation separately. SAO Recommendations: 1) Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR 200.318-327) for all procurement activities. 2) Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County's own procurement policies and procedures. 3) Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance. Response to 1) - On April 22, 2019, the County adopted Resolution #39-2019 to include language requiring that all of 2 CFR 200 be followed when using federal funds for procurement in response to the State Auditor's recommendations. The County has a single source audit every year and no further recommendations from the State Auditor were given and the corrective action was noted. The Audits for 2019 and 2020 found no further action on this subject. The 2021 federal audit was performed, and the exit interview resulted in a finding the same as in number 1 above. The exit interview was given on September 23, 2022. This is the start of budget season and a high and busy time of activity. The County lacks the resources to have dedicated staff to draft specific policies and relies of current staffing levels to address these issues. In drafting this policy, considerable research was conducted, a draft for review by all affected staff was circulated for comment, legal review was conducted and a new policy emphasizing subparts 318-327 was adopted on July 17, 2023. Further, an update of the County's Capital Asset and Inventory Policy adopted November 21, 2022, to include federal procurement rules was adopted as policy 2-2023 on July 25, 2023. Therefore, the County has taken corrective action to address this issue but lacked the resources to do so between the end of September and the end of the calendar year to cover 2022. Response to 2) - The State Auditor states the County did not follow the most restrictive applicable federal, state, or local laws and the federal procurement standards found in 2 CFR 200.318-327. The State Auditor further states that "the County did not properly declare a used ambulance purchase as a sole source exemption, but instead used an emergency declaration for COVID-19." While it is true that the County did rely on the emergency declaration and not note in the purchase authorization that the ambulance purchase was a sole source purchase, the County maintains this is supported by all applicable laws. The COVID-19 emergency was still in effect and the purchase was made solely to respond to a communicable disease that was thought to further spread. Ambulances that lacked proper equipment for transporting communicable disease patients put healthcare workers and first responders at high risk of human health issues. Resolution 30 2020 Declaring an emergency and Governor Proclamation 20-05 declaring a COVID-19 emergency was still in effect, as was a Presidential emergency declaration at the time of the purchase. RCW 38.52.070(2) specifically allows waiving oftime consuming procedures for purchases directly related to the emergency. Also, federal procurement standards as quoted below 2 CFR 320(c)(3) allow for noncompetitive procurement. People were dying and time was of the essence in obtaining proper transport equipment. We will also note that all Coronavirus State and Local Fiscal Recovery Fund purchases were reviewed and approved by County legal counsel. The County notes that more than one standard was met in 2 CFR 200.320(c) as this purchase meets both subparts 2 and 3 below, the County feels that this purchase did not require more internal controls. That being said, the County has trained personnel to document all conditions that apply in the future and has updated its federal procurement procedures per the September 23, 2022, recommendations. § 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(l) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Response to 3) - The State Auditor noted that the County had failed to verify two contractors for suspension and disbarment using one of the three allowable methods. The County refutes this and an affidavit from the employee who verified this was submitted. However, despite having this legal document the State Auditor finds the county did not retain a screenshot of this process for its records. The County is unable to find anywhere in federal law having reviewed 2 CFR 200 including sections 318- 327 as well as 2 CFR 180, as quoted below, where documentation of this is required. Further, several staff members have been trained in federal procurement standards and this documentation requirement was not mentioned as a requirement. This being said, the County has trained all staff members dealing with federal dollars to take screen shots of the suspension and disbarment check on potential contractors. § 180.320 Must I verify that principals of my covered transactions are eligible to participate? Yes, you as a participant are responsible for determining whether any of your principals of your covered transactions is excluded or disqualified from participating in the transaction. You may decide the method and frequency by which you do so. You may, but you are not required to, check SAM Exclusions. In summary, the County has corrected all the State Auditor recommendations made in this audit findings as of this written response. Auditor’s Remarks As the County did not maintain documentation and declare a specific exemption for the ambulance purchase we could not verify that it complied with procurement requirements. In order to determine whether the County verified the contractors were not suspended or debarred, our office is required to review evidence that shows this verification was completed by the County prior to entering into a contract. An after-the-fact representation is not sufficient to meet this standard. We reaffirm our finding and will review the corrective action taken during our 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR 200, Uniform Guidance, section 320, Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Stevens County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction; 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration; U.S. Department of the Treasury Federal Award/Contract Number: BRS-F334 (002), STRP-E331 (005), BHS-Z933 (003), BHOS-10BA (001), HSIP-000S (577), STRP-G333 (004), STRP-C331 (002), BROS-33GC (001), BROS-2033 (027), HSIP0000S (646) Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background Highway Planning and Construction Cluster The objectives of the Highway Planning and Construction Cluster are to: (1) assist states in the planning and development of an integrated, interconnected transportation system important to interstate commerce and travel by constructing and rehabilitating the National Highway System, including interstate highways and most other public roads; (2) provide aid for the repair of federal-aid highways following disasters; (3) foster safe highway design and replace or rehabilitate structurally deficient or functionally obsolete bridges; and (4) to provide for other special purposes. In 2022, the County spent $879,956 in federal funding for road improvement projects. Coronavirus State and Local Fiscal Recovery Funds (SLFRF) The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent the COVID-19 pandemic caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $2,458,654 in program funds. 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. Procurement Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived in certain circumstances, including via a “sole source exemption” when purchasing used vehicles. Governments must document the process and ensure they comply with applicable laws for waiving competitive bidding. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from contractors who are suspended or debarred from doing business with the federal government. Whenever the County 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 have not been suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Although the County had a written procurement policy at the time of procurement for both federal programs, the policy did not conform to the most restrictive methods and thresholds for procuring public works projects, competitive proposals and small purchases. Additionally, the County’s policy did not include procedures for procuring transactions, such as micro-purchases, piggybacking, requesting proposals for architecture and engineering services, contract cost and price analysis, bonding requirements and more. Additionally, our audit of the SLFRF program found the County did not have effective internal controls for ensuring it complied with federal and state procurement requirements for sole source exemptions and small purchase procedures. The County did not properly declare a used ambulance purchase as a sole source exemption, but instead used a blanket emergency declaration for COVID-19, which was approved over two years prior to the procurement taking place. Also, the County does not have documentation that they declared this specific purchase as part of the COVID-19 emergency. The County also could not provide documentation demonstrating it obtained and retained more than one quote for an equipment purchase subject to small purchase procedures. Suspension and Debarment Our audit of the SLFRF program found the County’s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the County did not obtain a written certification, include a clause in the contract or search for exclusion records on sam.gov to verify that two contractors subject to this requirement were not suspended or debarred before entering into the contract with or purchasing from them. The County paid these contractors $269,160 in fiscal year 2022. We consider the deficiencies in internal controls for procurement for the Highway Planning and Construction Cluster to be a significant deficiency. We consider the deficiencies in internal controls for procurement and suspension and debarment for the SLFRF program to be material weaknesses that led to material noncompliance. Cause of Condition Procurement County employees and officials misunderstood the federal procurement standards. They thought that the County’s current procurement policy met the standards required under Uniform Guidance, as the policy states that “all employees shall follow the most restrictive, local, state or federal procurement policy when using Federal Grant Funds to be in compliance with the Code of Federal Requirements (2 CFR part 200).” For the Highway Planning and Construction Cluster program, County employees thought that following the Washington State Department of Transportation’s Local Agency Guidelines Manual and guidance from the Municipal Research and Services Center were sufficient for complying with federal procurement standards. Additionally, County staff responsible for procurement procedures for the SLFRF program misunderstood exemption requirements and did not specifically declare the ambulance purchase as either sole source or an emergency purchase. Additionally, staff were unaware that they should obtain and retain more than one quote to comply with small purchase procedures. Suspension and Debarment County staff responsible for reviewing purchases under SLFRF were aware of suspension and debarment verification requirements. However, they did not recognize the need to document and retain evidence of the sam.gov checks before the purchases. Effect of Condition Procurement Although the County’s policy did not conform to Uniform Guidance, our testing of the Highway Planning and Construction program found the County complied with federal requirements for competitive solicitation of public works contractors and purchases of goods and services. However, without updated written procurement procedures, the County is at greater risk of noncompliance with the most restrictive procedures when using federal funds to procure contractors and goods and services. Additionally, our audit of the SLFRF program found the County did not have documentation to support compliance with exemption requirements for a used ambulance purchase of $241,820 and small purchase requirements for an equipment purchase of $27,340. Without effective internal controls, the County cannot ensure it allowed for full and open competition, received the best price and complied with federal procurement requirements. Suspension and Debarment Our audit of the SLFRF program found the County paid two contractors more than $25,000 and did not verify their suspension and debarment statuses using one of the three allowable methods. Without this verification, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable and the granting federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County: • Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR § 200.318-327) for all procurement activities • Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County’s own procurement policies and procedures • Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance County’s Response The County will respond to each Audit Recommendation separately. SAO Recommendations: 1) Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR 200.318-327) for all procurement activities. 2) Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County's own procurement policies and procedures. 3) Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance. Response to 1) - On April 22, 2019, the County adopted Resolution #39-2019 to include language requiring that all of 2 CFR 200 be followed when using federal funds for procurement in response to the State Auditor's recommendations. The County has a single source audit every year and no further recommendations from the State Auditor were given and the corrective action was noted. The Audits for 2019 and 2020 found no further action on this subject. The 2021 federal audit was performed, and the exit interview resulted in a finding the same as in number 1 above. The exit interview was given on September 23, 2022. This is the start of budget season and a high and busy time of activity. The County lacks the resources to have dedicated staff to draft specific policies and relies of current staffing levels to address these issues. In drafting this policy, considerable research was conducted, a draft for review by all affected staff was circulated for comment, legal review was conducted and a new policy emphasizing subparts 318-327 was adopted on July 17, 2023. Further, an update of the County's Capital Asset and Inventory Policy adopted November 21, 2022, to include federal procurement rules was adopted as policy 2-2023 on July 25, 2023. Therefore, the County has taken corrective action to address this issue but lacked the resources to do so between the end of September and the end of the calendar year to cover 2022. Response to 2) - The State Auditor states the County did not follow the most restrictive applicable federal, state, or local laws and the federal procurement standards found in 2 CFR 200.318-327. The State Auditor further states that "the County did not properly declare a used ambulance purchase as a sole source exemption, but instead used an emergency declaration for COVID-19." While it is true that the County did rely on the emergency declaration and not note in the purchase authorization that the ambulance purchase was a sole source purchase, the County maintains this is supported by all applicable laws. The COVID-19 emergency was still in effect and the purchase was made solely to respond to a communicable disease that was thought to further spread. Ambulances that lacked proper equipment for transporting communicable disease patients put healthcare workers and first responders at high risk of human health issues. Resolution 30 2020 Declaring an emergency and Governor Proclamation 20-05 declaring a COVID-19 emergency was still in effect, as was a Presidential emergency declaration at the time of the purchase. RCW 38.52.070(2) specifically allows waiving oftime consuming procedures for purchases directly related to the emergency. Also, federal procurement standards as quoted below 2 CFR 320(c)(3) allow for noncompetitive procurement. People were dying and time was of the essence in obtaining proper transport equipment. We will also note that all Coronavirus State and Local Fiscal Recovery Fund purchases were reviewed and approved by County legal counsel. The County notes that more than one standard was met in 2 CFR 200.320(c) as this purchase meets both subparts 2 and 3 below, the County feels that this purchase did not require more internal controls. That being said, the County has trained personnel to document all conditions that apply in the future and has updated its federal procurement procedures per the September 23, 2022, recommendations. § 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(l) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Response to 3) - The State Auditor noted that the County had failed to verify two contractors for suspension and disbarment using one of the three allowable methods. The County refutes this and an affidavit from the employee who verified this was submitted. However, despite having this legal document the State Auditor finds the county did not retain a screenshot of this process for its records. The County is unable to find anywhere in federal law having reviewed 2 CFR 200 including sections 318- 327 as well as 2 CFR 180, as quoted below, where documentation of this is required. Further, several staff members have been trained in federal procurement standards and this documentation requirement was not mentioned as a requirement. This being said, the County has trained all staff members dealing with federal dollars to take screen shots of the suspension and disbarment check on potential contractors. § 180.320 Must I verify that principals of my covered transactions are eligible to participate? Yes, you as a participant are responsible for determining whether any of your principals of your covered transactions is excluded or disqualified from participating in the transaction. You may decide the method and frequency by which you do so. You may, but you are not required to, check SAM Exclusions. In summary, the County has corrected all the State Auditor recommendations made in this audit findings as of this written response. Auditor’s Remarks As the County did not maintain documentation and declare a specific exemption for the ambulance purchase we could not verify that it complied with procurement requirements. In order to determine whether the County verified the contractors were not suspended or debarred, our office is required to review evidence that shows this verification was completed by the County prior to entering into a contract. An after-the-fact representation is not sufficient to meet this standard. We reaffirm our finding and will review the corrective action taken during our 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR 200, Uniform Guidance, section 320, Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Stevens County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction; 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration; U.S. Department of the Treasury Federal Award/Contract Number: BRS-F334 (002), STRP-E331 (005), BHS-Z933 (003), BHOS-10BA (001), HSIP-000S (577), STRP-G333 (004), STRP-C331 (002), BROS-33GC (001), BROS-2033 (027), HSIP0000S (646) Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background Highway Planning and Construction Cluster The objectives of the Highway Planning and Construction Cluster are to: (1) assist states in the planning and development of an integrated, interconnected transportation system important to interstate commerce and travel by constructing and rehabilitating the National Highway System, including interstate highways and most other public roads; (2) provide aid for the repair of federal-aid highways following disasters; (3) foster safe highway design and replace or rehabilitate structurally deficient or functionally obsolete bridges; and (4) to provide for other special purposes. In 2022, the County spent $879,956 in federal funding for road improvement projects. Coronavirus State and Local Fiscal Recovery Funds (SLFRF) The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent the COVID-19 pandemic caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $2,458,654 in program funds. 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. Procurement Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived in certain circumstances, including via a “sole source exemption” when purchasing used vehicles. Governments must document the process and ensure they comply with applicable laws for waiving competitive bidding. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from contractors who are suspended or debarred from doing business with the federal government. Whenever the County 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 have not been suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Although the County had a written procurement policy at the time of procurement for both federal programs, the policy did not conform to the most restrictive methods and thresholds for procuring public works projects, competitive proposals and small purchases. Additionally, the County’s policy did not include procedures for procuring transactions, such as micro-purchases, piggybacking, requesting proposals for architecture and engineering services, contract cost and price analysis, bonding requirements and more. Additionally, our audit of the SLFRF program found the County did not have effective internal controls for ensuring it complied with federal and state procurement requirements for sole source exemptions and small purchase procedures. The County did not properly declare a used ambulance purchase as a sole source exemption, but instead used a blanket emergency declaration for COVID-19, which was approved over two years prior to the procurement taking place. Also, the County does not have documentation that they declared this specific purchase as part of the COVID-19 emergency. The County also could not provide documentation demonstrating it obtained and retained more than one quote for an equipment purchase subject to small purchase procedures. Suspension and Debarment Our audit of the SLFRF program found the County’s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the County did not obtain a written certification, include a clause in the contract or search for exclusion records on sam.gov to verify that two contractors subject to this requirement were not suspended or debarred before entering into the contract with or purchasing from them. The County paid these contractors $269,160 in fiscal year 2022. We consider the deficiencies in internal controls for procurement for the Highway Planning and Construction Cluster to be a significant deficiency. We consider the deficiencies in internal controls for procurement and suspension and debarment for the SLFRF program to be material weaknesses that led to material noncompliance. Cause of Condition Procurement County employees and officials misunderstood the federal procurement standards. They thought that the County’s current procurement policy met the standards required under Uniform Guidance, as the policy states that “all employees shall follow the most restrictive, local, state or federal procurement policy when using Federal Grant Funds to be in compliance with the Code of Federal Requirements (2 CFR part 200).” For the Highway Planning and Construction Cluster program, County employees thought that following the Washington State Department of Transportation’s Local Agency Guidelines Manual and guidance from the Municipal Research and Services Center were sufficient for complying with federal procurement standards. Additionally, County staff responsible for procurement procedures for the SLFRF program misunderstood exemption requirements and did not specifically declare the ambulance purchase as either sole source or an emergency purchase. Additionally, staff were unaware that they should obtain and retain more than one quote to comply with small purchase procedures. Suspension and Debarment County staff responsible for reviewing purchases under SLFRF were aware of suspension and debarment verification requirements. However, they did not recognize the need to document and retain evidence of the sam.gov checks before the purchases. Effect of Condition Procurement Although the County’s policy did not conform to Uniform Guidance, our testing of the Highway Planning and Construction program found the County complied with federal requirements for competitive solicitation of public works contractors and purchases of goods and services. However, without updated written procurement procedures, the County is at greater risk of noncompliance with the most restrictive procedures when using federal funds to procure contractors and goods and services. Additionally, our audit of the SLFRF program found the County did not have documentation to support compliance with exemption requirements for a used ambulance purchase of $241,820 and small purchase requirements for an equipment purchase of $27,340. Without effective internal controls, the County cannot ensure it allowed for full and open competition, received the best price and complied with federal procurement requirements. Suspension and Debarment Our audit of the SLFRF program found the County paid two contractors more than $25,000 and did not verify their suspension and debarment statuses using one of the three allowable methods. Without this verification, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable and the granting federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County: • Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR § 200.318-327) for all procurement activities • Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County’s own procurement policies and procedures • Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance County’s Response The County will respond to each Audit Recommendation separately. SAO Recommendations: 1) Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR 200.318-327) for all procurement activities. 2) Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County's own procurement policies and procedures. 3) Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance. Response to 1) - On April 22, 2019, the County adopted Resolution #39-2019 to include language requiring that all of 2 CFR 200 be followed when using federal funds for procurement in response to the State Auditor's recommendations. The County has a single source audit every year and no further recommendations from the State Auditor were given and the corrective action was noted. The Audits for 2019 and 2020 found no further action on this subject. The 2021 federal audit was performed, and the exit interview resulted in a finding the same as in number 1 above. The exit interview was given on September 23, 2022. This is the start of budget season and a high and busy time of activity. The County lacks the resources to have dedicated staff to draft specific policies and relies of current staffing levels to address these issues. In drafting this policy, considerable research was conducted, a draft for review by all affected staff was circulated for comment, legal review was conducted and a new policy emphasizing subparts 318-327 was adopted on July 17, 2023. Further, an update of the County's Capital Asset and Inventory Policy adopted November 21, 2022, to include federal procurement rules was adopted as policy 2-2023 on July 25, 2023. Therefore, the County has taken corrective action to address this issue but lacked the resources to do so between the end of September and the end of the calendar year to cover 2022. Response to 2) - The State Auditor states the County did not follow the most restrictive applicable federal, state, or local laws and the federal procurement standards found in 2 CFR 200.318-327. The State Auditor further states that "the County did not properly declare a used ambulance purchase as a sole source exemption, but instead used an emergency declaration for COVID-19." While it is true that the County did rely on the emergency declaration and not note in the purchase authorization that the ambulance purchase was a sole source purchase, the County maintains this is supported by all applicable laws. The COVID-19 emergency was still in effect and the purchase was made solely to respond to a communicable disease that was thought to further spread. Ambulances that lacked proper equipment for transporting communicable disease patients put healthcare workers and first responders at high risk of human health issues. Resolution 30 2020 Declaring an emergency and Governor Proclamation 20-05 declaring a COVID-19 emergency was still in effect, as was a Presidential emergency declaration at the time of the purchase. RCW 38.52.070(2) specifically allows waiving oftime consuming procedures for purchases directly related to the emergency. Also, federal procurement standards as quoted below 2 CFR 320(c)(3) allow for noncompetitive procurement. People were dying and time was of the essence in obtaining proper transport equipment. We will also note that all Coronavirus State and Local Fiscal Recovery Fund purchases were reviewed and approved by County legal counsel. The County notes that more than one standard was met in 2 CFR 200.320(c) as this purchase meets both subparts 2 and 3 below, the County feels that this purchase did not require more internal controls. That being said, the County has trained personnel to document all conditions that apply in the future and has updated its federal procurement procedures per the September 23, 2022, recommendations. § 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(l) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Response to 3) - The State Auditor noted that the County had failed to verify two contractors for suspension and disbarment using one of the three allowable methods. The County refutes this and an affidavit from the employee who verified this was submitted. However, despite having this legal document the State Auditor finds the county did not retain a screenshot of this process for its records. The County is unable to find anywhere in federal law having reviewed 2 CFR 200 including sections 318- 327 as well as 2 CFR 180, as quoted below, where documentation of this is required. Further, several staff members have been trained in federal procurement standards and this documentation requirement was not mentioned as a requirement. This being said, the County has trained all staff members dealing with federal dollars to take screen shots of the suspension and disbarment check on potential contractors. § 180.320 Must I verify that principals of my covered transactions are eligible to participate? Yes, you as a participant are responsible for determining whether any of your principals of your covered transactions is excluded or disqualified from participating in the transaction. You may decide the method and frequency by which you do so. You may, but you are not required to, check SAM Exclusions. In summary, the County has corrected all the State Auditor recommendations made in this audit findings as of this written response. Auditor’s Remarks As the County did not maintain documentation and declare a specific exemption for the ambulance purchase we could not verify that it complied with procurement requirements. In order to determine whether the County verified the contractors were not suspended or debarred, our office is required to review evidence that shows this verification was completed by the County prior to entering into a contract. An after-the-fact representation is not sufficient to meet this standard. We reaffirm our finding and will review the corrective action taken during our 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR 200, Uniform Guidance, section 320, Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Stevens County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction; 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration; U.S. Department of the Treasury Federal Award/Contract Number: BRS-F334 (002), STRP-E331 (005), BHS-Z933 (003), BHOS-10BA (001), HSIP-000S (577), STRP-G333 (004), STRP-C331 (002), BROS-33GC (001), BROS-2033 (027), HSIP0000S (646) Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background Highway Planning and Construction Cluster The objectives of the Highway Planning and Construction Cluster are to: (1) assist states in the planning and development of an integrated, interconnected transportation system important to interstate commerce and travel by constructing and rehabilitating the National Highway System, including interstate highways and most other public roads; (2) provide aid for the repair of federal-aid highways following disasters; (3) foster safe highway design and replace or rehabilitate structurally deficient or functionally obsolete bridges; and (4) to provide for other special purposes. In 2022, the County spent $879,956 in federal funding for road improvement projects. Coronavirus State and Local Fiscal Recovery Funds (SLFRF) The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent the COVID-19 pandemic caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $2,458,654 in program funds. 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. Procurement Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived in certain circumstances, including via a “sole source exemption” when purchasing used vehicles. Governments must document the process and ensure they comply with applicable laws for waiving competitive bidding. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from contractors who are suspended or debarred from doing business with the federal government. Whenever the County 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 have not been suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Although the County had a written procurement policy at the time of procurement for both federal programs, the policy did not conform to the most restrictive methods and thresholds for procuring public works projects, competitive proposals and small purchases. Additionally, the County’s policy did not include procedures for procuring transactions, such as micro-purchases, piggybacking, requesting proposals for architecture and engineering services, contract cost and price analysis, bonding requirements and more. Additionally, our audit of the SLFRF program found the County did not have effective internal controls for ensuring it complied with federal and state procurement requirements for sole source exemptions and small purchase procedures. The County did not properly declare a used ambulance purchase as a sole source exemption, but instead used a blanket emergency declaration for COVID-19, which was approved over two years prior to the procurement taking place. Also, the County does not have documentation that they declared this specific purchase as part of the COVID-19 emergency. The County also could not provide documentation demonstrating it obtained and retained more than one quote for an equipment purchase subject to small purchase procedures. Suspension and Debarment Our audit of the SLFRF program found the County’s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the County did not obtain a written certification, include a clause in the contract or search for exclusion records on sam.gov to verify that two contractors subject to this requirement were not suspended or debarred before entering into the contract with or purchasing from them. The County paid these contractors $269,160 in fiscal year 2022. We consider the deficiencies in internal controls for procurement for the Highway Planning and Construction Cluster to be a significant deficiency. We consider the deficiencies in internal controls for procurement and suspension and debarment for the SLFRF program to be material weaknesses that led to material noncompliance. Cause of Condition Procurement County employees and officials misunderstood the federal procurement standards. They thought that the County’s current procurement policy met the standards required under Uniform Guidance, as the policy states that “all employees shall follow the most restrictive, local, state or federal procurement policy when using Federal Grant Funds to be in compliance with the Code of Federal Requirements (2 CFR part 200).” For the Highway Planning and Construction Cluster program, County employees thought that following the Washington State Department of Transportation’s Local Agency Guidelines Manual and guidance from the Municipal Research and Services Center were sufficient for complying with federal procurement standards. Additionally, County staff responsible for procurement procedures for the SLFRF program misunderstood exemption requirements and did not specifically declare the ambulance purchase as either sole source or an emergency purchase. Additionally, staff were unaware that they should obtain and retain more than one quote to comply with small purchase procedures. Suspension and Debarment County staff responsible for reviewing purchases under SLFRF were aware of suspension and debarment verification requirements. However, they did not recognize the need to document and retain evidence of the sam.gov checks before the purchases. Effect of Condition Procurement Although the County’s policy did not conform to Uniform Guidance, our testing of the Highway Planning and Construction program found the County complied with federal requirements for competitive solicitation of public works contractors and purchases of goods and services. However, without updated written procurement procedures, the County is at greater risk of noncompliance with the most restrictive procedures when using federal funds to procure contractors and goods and services. Additionally, our audit of the SLFRF program found the County did not have documentation to support compliance with exemption requirements for a used ambulance purchase of $241,820 and small purchase requirements for an equipment purchase of $27,340. Without effective internal controls, the County cannot ensure it allowed for full and open competition, received the best price and complied with federal procurement requirements. Suspension and Debarment Our audit of the SLFRF program found the County paid two contractors more than $25,000 and did not verify their suspension and debarment statuses using one of the three allowable methods. Without this verification, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable and the granting federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County: • Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR § 200.318-327) for all procurement activities • Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County’s own procurement policies and procedures • Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance County’s Response The County will respond to each Audit Recommendation separately. SAO Recommendations: 1) Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR 200.318-327) for all procurement activities. 2) Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County's own procurement policies and procedures. 3) Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance. Response to 1) - On April 22, 2019, the County adopted Resolution #39-2019 to include language requiring that all of 2 CFR 200 be followed when using federal funds for procurement in response to the State Auditor's recommendations. The County has a single source audit every year and no further recommendations from the State Auditor were given and the corrective action was noted. The Audits for 2019 and 2020 found no further action on this subject. The 2021 federal audit was performed, and the exit interview resulted in a finding the same as in number 1 above. The exit interview was given on September 23, 2022. This is the start of budget season and a high and busy time of activity. The County lacks the resources to have dedicated staff to draft specific policies and relies of current staffing levels to address these issues. In drafting this policy, considerable research was conducted, a draft for review by all affected staff was circulated for comment, legal review was conducted and a new policy emphasizing subparts 318-327 was adopted on July 17, 2023. Further, an update of the County's Capital Asset and Inventory Policy adopted November 21, 2022, to include federal procurement rules was adopted as policy 2-2023 on July 25, 2023. Therefore, the County has taken corrective action to address this issue but lacked the resources to do so between the end of September and the end of the calendar year to cover 2022. Response to 2) - The State Auditor states the County did not follow the most restrictive applicable federal, state, or local laws and the federal procurement standards found in 2 CFR 200.318-327. The State Auditor further states that "the County did not properly declare a used ambulance purchase as a sole source exemption, but instead used an emergency declaration for COVID-19." While it is true that the County did rely on the emergency declaration and not note in the purchase authorization that the ambulance purchase was a sole source purchase, the County maintains this is supported by all applicable laws. The COVID-19 emergency was still in effect and the purchase was made solely to respond to a communicable disease that was thought to further spread. Ambulances that lacked proper equipment for transporting communicable disease patients put healthcare workers and first responders at high risk of human health issues. Resolution 30 2020 Declaring an emergency and Governor Proclamation 20-05 declaring a COVID-19 emergency was still in effect, as was a Presidential emergency declaration at the time of the purchase. RCW 38.52.070(2) specifically allows waiving oftime consuming procedures for purchases directly related to the emergency. Also, federal procurement standards as quoted below 2 CFR 320(c)(3) allow for noncompetitive procurement. People were dying and time was of the essence in obtaining proper transport equipment. We will also note that all Coronavirus State and Local Fiscal Recovery Fund purchases were reviewed and approved by County legal counsel. The County notes that more than one standard was met in 2 CFR 200.320(c) as this purchase meets both subparts 2 and 3 below, the County feels that this purchase did not require more internal controls. That being said, the County has trained personnel to document all conditions that apply in the future and has updated its federal procurement procedures per the September 23, 2022, recommendations. § 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(l) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Response to 3) - The State Auditor noted that the County had failed to verify two contractors for suspension and disbarment using one of the three allowable methods. The County refutes this and an affidavit from the employee who verified this was submitted. However, despite having this legal document the State Auditor finds the county did not retain a screenshot of this process for its records. The County is unable to find anywhere in federal law having reviewed 2 CFR 200 including sections 318- 327 as well as 2 CFR 180, as quoted below, where documentation of this is required. Further, several staff members have been trained in federal procurement standards and this documentation requirement was not mentioned as a requirement. This being said, the County has trained all staff members dealing with federal dollars to take screen shots of the suspension and disbarment check on potential contractors. § 180.320 Must I verify that principals of my covered transactions are eligible to participate? Yes, you as a participant are responsible for determining whether any of your principals of your covered transactions is excluded or disqualified from participating in the transaction. You may decide the method and frequency by which you do so. You may, but you are not required to, check SAM Exclusions. In summary, the County has corrected all the State Auditor recommendations made in this audit findings as of this written response. Auditor’s Remarks As the County did not maintain documentation and declare a specific exemption for the ambulance purchase we could not verify that it complied with procurement requirements. In order to determine whether the County verified the contractors were not suspended or debarred, our office is required to review evidence that shows this verification was completed by the County prior to entering into a contract. An after-the-fact representation is not sufficient to meet this standard. We reaffirm our finding and will review the corrective action taken during our 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR 200, Uniform Guidance, section 320, Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Stevens County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction; 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration; U.S. Department of the Treasury Federal Award/Contract Number: BRS-F334 (002), STRP-E331 (005), BHS-Z933 (003), BHOS-10BA (001), HSIP-000S (577), STRP-G333 (004), STRP-C331 (002), BROS-33GC (001), BROS-2033 (027), HSIP0000S (646) Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background Highway Planning and Construction Cluster The objectives of the Highway Planning and Construction Cluster are to: (1) assist states in the planning and development of an integrated, interconnected transportation system important to interstate commerce and travel by constructing and rehabilitating the National Highway System, including interstate highways and most other public roads; (2) provide aid for the repair of federal-aid highways following disasters; (3) foster safe highway design and replace or rehabilitate structurally deficient or functionally obsolete bridges; and (4) to provide for other special purposes. In 2022, the County spent $879,956 in federal funding for road improvement projects. Coronavirus State and Local Fiscal Recovery Funds (SLFRF) The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent the COVID-19 pandemic caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $2,458,654 in program funds. 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. Procurement Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived in certain circumstances, including via a “sole source exemption” when purchasing used vehicles. Governments must document the process and ensure they comply with applicable laws for waiving competitive bidding. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from contractors who are suspended or debarred from doing business with the federal government. Whenever the County 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 have not been suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Although the County had a written procurement policy at the time of procurement for both federal programs, the policy did not conform to the most restrictive methods and thresholds for procuring public works projects, competitive proposals and small purchases. Additionally, the County’s policy did not include procedures for procuring transactions, such as micro-purchases, piggybacking, requesting proposals for architecture and engineering services, contract cost and price analysis, bonding requirements and more. Additionally, our audit of the SLFRF program found the County did not have effective internal controls for ensuring it complied with federal and state procurement requirements for sole source exemptions and small purchase procedures. The County did not properly declare a used ambulance purchase as a sole source exemption, but instead used a blanket emergency declaration for COVID-19, which was approved over two years prior to the procurement taking place. Also, the County does not have documentation that they declared this specific purchase as part of the COVID-19 emergency. The County also could not provide documentation demonstrating it obtained and retained more than one quote for an equipment purchase subject to small purchase procedures. Suspension and Debarment Our audit of the SLFRF program found the County’s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the County did not obtain a written certification, include a clause in the contract or search for exclusion records on sam.gov to verify that two contractors subject to this requirement were not suspended or debarred before entering into the contract with or purchasing from them. The County paid these contractors $269,160 in fiscal year 2022. We consider the deficiencies in internal controls for procurement for the Highway Planning and Construction Cluster to be a significant deficiency. We consider the deficiencies in internal controls for procurement and suspension and debarment for the SLFRF program to be material weaknesses that led to material noncompliance. Cause of Condition Procurement County employees and officials misunderstood the federal procurement standards. They thought that the County’s current procurement policy met the standards required under Uniform Guidance, as the policy states that “all employees shall follow the most restrictive, local, state or federal procurement policy when using Federal Grant Funds to be in compliance with the Code of Federal Requirements (2 CFR part 200).” For the Highway Planning and Construction Cluster program, County employees thought that following the Washington State Department of Transportation’s Local Agency Guidelines Manual and guidance from the Municipal Research and Services Center were sufficient for complying with federal procurement standards. Additionally, County staff responsible for procurement procedures for the SLFRF program misunderstood exemption requirements and did not specifically declare the ambulance purchase as either sole source or an emergency purchase. Additionally, staff were unaware that they should obtain and retain more than one quote to comply with small purchase procedures. Suspension and Debarment County staff responsible for reviewing purchases under SLFRF were aware of suspension and debarment verification requirements. However, they did not recognize the need to document and retain evidence of the sam.gov checks before the purchases. Effect of Condition Procurement Although the County’s policy did not conform to Uniform Guidance, our testing of the Highway Planning and Construction program found the County complied with federal requirements for competitive solicitation of public works contractors and purchases of goods and services. However, without updated written procurement procedures, the County is at greater risk of noncompliance with the most restrictive procedures when using federal funds to procure contractors and goods and services. Additionally, our audit of the SLFRF program found the County did not have documentation to support compliance with exemption requirements for a used ambulance purchase of $241,820 and small purchase requirements for an equipment purchase of $27,340. Without effective internal controls, the County cannot ensure it allowed for full and open competition, received the best price and complied with federal procurement requirements. Suspension and Debarment Our audit of the SLFRF program found the County paid two contractors more than $25,000 and did not verify their suspension and debarment statuses using one of the three allowable methods. Without this verification, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable and the granting federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County: • Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR § 200.318-327) for all procurement activities • Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County’s own procurement policies and procedures • Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance County’s Response The County will respond to each Audit Recommendation separately. SAO Recommendations: 1) Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR 200.318-327) for all procurement activities. 2) Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County's own procurement policies and procedures. 3) Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance. Response to 1) - On April 22, 2019, the County adopted Resolution #39-2019 to include language requiring that all of 2 CFR 200 be followed when using federal funds for procurement in response to the State Auditor's recommendations. The County has a single source audit every year and no further recommendations from the State Auditor were given and the corrective action was noted. The Audits for 2019 and 2020 found no further action on this subject. The 2021 federal audit was performed, and the exit interview resulted in a finding the same as in number 1 above. The exit interview was given on September 23, 2022. This is the start of budget season and a high and busy time of activity. The County lacks the resources to have dedicated staff to draft specific policies and relies of current staffing levels to address these issues. In drafting this policy, considerable research was conducted, a draft for review by all affected staff was circulated for comment, legal review was conducted and a new policy emphasizing subparts 318-327 was adopted on July 17, 2023. Further, an update of the County's Capital Asset and Inventory Policy adopted November 21, 2022, to include federal procurement rules was adopted as policy 2-2023 on July 25, 2023. Therefore, the County has taken corrective action to address this issue but lacked the resources to do so between the end of September and the end of the calendar year to cover 2022. Response to 2) - The State Auditor states the County did not follow the most restrictive applicable federal, state, or local laws and the federal procurement standards found in 2 CFR 200.318-327. The State Auditor further states that "the County did not properly declare a used ambulance purchase as a sole source exemption, but instead used an emergency declaration for COVID-19." While it is true that the County did rely on the emergency declaration and not note in the purchase authorization that the ambulance purchase was a sole source purchase, the County maintains this is supported by all applicable laws. The COVID-19 emergency was still in effect and the purchase was made solely to respond to a communicable disease that was thought to further spread. Ambulances that lacked proper equipment for transporting communicable disease patients put healthcare workers and first responders at high risk of human health issues. Resolution 30 2020 Declaring an emergency and Governor Proclamation 20-05 declaring a COVID-19 emergency was still in effect, as was a Presidential emergency declaration at the time of the purchase. RCW 38.52.070(2) specifically allows waiving oftime consuming procedures for purchases directly related to the emergency. Also, federal procurement standards as quoted below 2 CFR 320(c)(3) allow for noncompetitive procurement. People were dying and time was of the essence in obtaining proper transport equipment. We will also note that all Coronavirus State and Local Fiscal Recovery Fund purchases were reviewed and approved by County legal counsel. The County notes that more than one standard was met in 2 CFR 200.320(c) as this purchase meets both subparts 2 and 3 below, the County feels that this purchase did not require more internal controls. That being said, the County has trained personnel to document all conditions that apply in the future and has updated its federal procurement procedures per the September 23, 2022, recommendations. § 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(l) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Response to 3) - The State Auditor noted that the County had failed to verify two contractors for suspension and disbarment using one of the three allowable methods. The County refutes this and an affidavit from the employee who verified this was submitted. However, despite having this legal document the State Auditor finds the county did not retain a screenshot of this process for its records. The County is unable to find anywhere in federal law having reviewed 2 CFR 200 including sections 318- 327 as well as 2 CFR 180, as quoted below, where documentation of this is required. Further, several staff members have been trained in federal procurement standards and this documentation requirement was not mentioned as a requirement. This being said, the County has trained all staff members dealing with federal dollars to take screen shots of the suspension and disbarment check on potential contractors. § 180.320 Must I verify that principals of my covered transactions are eligible to participate? Yes, you as a participant are responsible for determining whether any of your principals of your covered transactions is excluded or disqualified from participating in the transaction. You may decide the method and frequency by which you do so. You may, but you are not required to, check SAM Exclusions. In summary, the County has corrected all the State Auditor recommendations made in this audit findings as of this written response. Auditor’s Remarks As the County did not maintain documentation and declare a specific exemption for the ambulance purchase we could not verify that it complied with procurement requirements. In order to determine whether the County verified the contractors were not suspended or debarred, our office is required to review evidence that shows this verification was completed by the County prior to entering into a contract. An after-the-fact representation is not sufficient to meet this standard. We reaffirm our finding and will review the corrective action taken during our 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR 200, Uniform Guidance, section 320, Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Stevens County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction; 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration; U.S. Department of the Treasury Federal Award/Contract Number: BRS-F334 (002), STRP-E331 (005), BHS-Z933 (003), BHOS-10BA (001), HSIP-000S (577), STRP-G333 (004), STRP-C331 (002), BROS-33GC (001), BROS-2033 (027), HSIP0000S (646) Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background Highway Planning and Construction Cluster The objectives of the Highway Planning and Construction Cluster are to: (1) assist states in the planning and development of an integrated, interconnected transportation system important to interstate commerce and travel by constructing and rehabilitating the National Highway System, including interstate highways and most other public roads; (2) provide aid for the repair of federal-aid highways following disasters; (3) foster safe highway design and replace or rehabilitate structurally deficient or functionally obsolete bridges; and (4) to provide for other special purposes. In 2022, the County spent $879,956 in federal funding for road improvement projects. Coronavirus State and Local Fiscal Recovery Funds (SLFRF) The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent the COVID-19 pandemic caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $2,458,654 in program funds. 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. Procurement Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived in certain circumstances, including via a “sole source exemption” when purchasing used vehicles. Governments must document the process and ensure they comply with applicable laws for waiving competitive bidding. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from contractors who are suspended or debarred from doing business with the federal government. Whenever the County 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 have not been suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Although the County had a written procurement policy at the time of procurement for both federal programs, the policy did not conform to the most restrictive methods and thresholds for procuring public works projects, competitive proposals and small purchases. Additionally, the County’s policy did not include procedures for procuring transactions, such as micro-purchases, piggybacking, requesting proposals for architecture and engineering services, contract cost and price analysis, bonding requirements and more. Additionally, our audit of the SLFRF program found the County did not have effective internal controls for ensuring it complied with federal and state procurement requirements for sole source exemptions and small purchase procedures. The County did not properly declare a used ambulance purchase as a sole source exemption, but instead used a blanket emergency declaration for COVID-19, which was approved over two years prior to the procurement taking place. Also, the County does not have documentation that they declared this specific purchase as part of the COVID-19 emergency. The County also could not provide documentation demonstrating it obtained and retained more than one quote for an equipment purchase subject to small purchase procedures. Suspension and Debarment Our audit of the SLFRF program found the County’s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the County did not obtain a written certification, include a clause in the contract or search for exclusion records on sam.gov to verify that two contractors subject to this requirement were not suspended or debarred before entering into the contract with or purchasing from them. The County paid these contractors $269,160 in fiscal year 2022. We consider the deficiencies in internal controls for procurement for the Highway Planning and Construction Cluster to be a significant deficiency. We consider the deficiencies in internal controls for procurement and suspension and debarment for the SLFRF program to be material weaknesses that led to material noncompliance. Cause of Condition Procurement County employees and officials misunderstood the federal procurement standards. They thought that the County’s current procurement policy met the standards required under Uniform Guidance, as the policy states that “all employees shall follow the most restrictive, local, state or federal procurement policy when using Federal Grant Funds to be in compliance with the Code of Federal Requirements (2 CFR part 200).” For the Highway Planning and Construction Cluster program, County employees thought that following the Washington State Department of Transportation’s Local Agency Guidelines Manual and guidance from the Municipal Research and Services Center were sufficient for complying with federal procurement standards. Additionally, County staff responsible for procurement procedures for the SLFRF program misunderstood exemption requirements and did not specifically declare the ambulance purchase as either sole source or an emergency purchase. Additionally, staff were unaware that they should obtain and retain more than one quote to comply with small purchase procedures. Suspension and Debarment County staff responsible for reviewing purchases under SLFRF were aware of suspension and debarment verification requirements. However, they did not recognize the need to document and retain evidence of the sam.gov checks before the purchases. Effect of Condition Procurement Although the County’s policy did not conform to Uniform Guidance, our testing of the Highway Planning and Construction program found the County complied with federal requirements for competitive solicitation of public works contractors and purchases of goods and services. However, without updated written procurement procedures, the County is at greater risk of noncompliance with the most restrictive procedures when using federal funds to procure contractors and goods and services. Additionally, our audit of the SLFRF program found the County did not have documentation to support compliance with exemption requirements for a used ambulance purchase of $241,820 and small purchase requirements for an equipment purchase of $27,340. Without effective internal controls, the County cannot ensure it allowed for full and open competition, received the best price and complied with federal procurement requirements. Suspension and Debarment Our audit of the SLFRF program found the County paid two contractors more than $25,000 and did not verify their suspension and debarment statuses using one of the three allowable methods. Without this verification, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable and the granting federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County: • Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR § 200.318-327) for all procurement activities • Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County’s own procurement policies and procedures • Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance County’s Response The County will respond to each Audit Recommendation separately. SAO Recommendations: 1) Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR 200.318-327) for all procurement activities. 2) Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County's own procurement policies and procedures. 3) Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance. Response to 1) - On April 22, 2019, the County adopted Resolution #39-2019 to include language requiring that all of 2 CFR 200 be followed when using federal funds for procurement in response to the State Auditor's recommendations. The County has a single source audit every year and no further recommendations from the State Auditor were given and the corrective action was noted. The Audits for 2019 and 2020 found no further action on this subject. The 2021 federal audit was performed, and the exit interview resulted in a finding the same as in number 1 above. The exit interview was given on September 23, 2022. This is the start of budget season and a high and busy time of activity. The County lacks the resources to have dedicated staff to draft specific policies and relies of current staffing levels to address these issues. In drafting this policy, considerable research was conducted, a draft for review by all affected staff was circulated for comment, legal review was conducted and a new policy emphasizing subparts 318-327 was adopted on July 17, 2023. Further, an update of the County's Capital Asset and Inventory Policy adopted November 21, 2022, to include federal procurement rules was adopted as policy 2-2023 on July 25, 2023. Therefore, the County has taken corrective action to address this issue but lacked the resources to do so between the end of September and the end of the calendar year to cover 2022. Response to 2) - The State Auditor states the County did not follow the most restrictive applicable federal, state, or local laws and the federal procurement standards found in 2 CFR 200.318-327. The State Auditor further states that "the County did not properly declare a used ambulance purchase as a sole source exemption, but instead used an emergency declaration for COVID-19." While it is true that the County did rely on the emergency declaration and not note in the purchase authorization that the ambulance purchase was a sole source purchase, the County maintains this is supported by all applicable laws. The COVID-19 emergency was still in effect and the purchase was made solely to respond to a communicable disease that was thought to further spread. Ambulances that lacked proper equipment for transporting communicable disease patients put healthcare workers and first responders at high risk of human health issues. Resolution 30 2020 Declaring an emergency and Governor Proclamation 20-05 declaring a COVID-19 emergency was still in effect, as was a Presidential emergency declaration at the time of the purchase. RCW 38.52.070(2) specifically allows waiving oftime consuming procedures for purchases directly related to the emergency. Also, federal procurement standards as quoted below 2 CFR 320(c)(3) allow for noncompetitive procurement. People were dying and time was of the essence in obtaining proper transport equipment. We will also note that all Coronavirus State and Local Fiscal Recovery Fund purchases were reviewed and approved by County legal counsel. The County notes that more than one standard was met in 2 CFR 200.320(c) as this purchase meets both subparts 2 and 3 below, the County feels that this purchase did not require more internal controls. That being said, the County has trained personnel to document all conditions that apply in the future and has updated its federal procurement procedures per the September 23, 2022, recommendations. § 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(l) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Response to 3) - The State Auditor noted that the County had failed to verify two contractors for suspension and disbarment using one of the three allowable methods. The County refutes this and an affidavit from the employee who verified this was submitted. However, despite having this legal document the State Auditor finds the county did not retain a screenshot of this process for its records. The County is unable to find anywhere in federal law having reviewed 2 CFR 200 including sections 318- 327 as well as 2 CFR 180, as quoted below, where documentation of this is required. Further, several staff members have been trained in federal procurement standards and this documentation requirement was not mentioned as a requirement. This being said, the County has trained all staff members dealing with federal dollars to take screen shots of the suspension and disbarment check on potential contractors. § 180.320 Must I verify that principals of my covered transactions are eligible to participate? Yes, you as a participant are responsible for determining whether any of your principals of your covered transactions is excluded or disqualified from participating in the transaction. You may decide the method and frequency by which you do so. You may, but you are not required to, check SAM Exclusions. In summary, the County has corrected all the State Auditor recommendations made in this audit findings as of this written response. Auditor’s Remarks As the County did not maintain documentation and declare a specific exemption for the ambulance purchase we could not verify that it complied with procurement requirements. In order to determine whether the County verified the contractors were not suspended or debarred, our office is required to review evidence that shows this verification was completed by the County prior to entering into a contract. An after-the-fact representation is not sufficient to meet this standard. We reaffirm our finding and will review the corrective action taken during our 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR 200, Uniform Guidance, section 320, Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Stevens County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction; 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration; U.S. Department of the Treasury Federal Award/Contract Number: BRS-F334 (002), STRP-E331 (005), BHS-Z933 (003), BHOS-10BA (001), HSIP-000S (577), STRP-G333 (004), STRP-C331 (002), BROS-33GC (001), BROS-2033 (027), HSIP0000S (646) Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background Highway Planning and Construction Cluster The objectives of the Highway Planning and Construction Cluster are to: (1) assist states in the planning and development of an integrated, interconnected transportation system important to interstate commerce and travel by constructing and rehabilitating the National Highway System, including interstate highways and most other public roads; (2) provide aid for the repair of federal-aid highways following disasters; (3) foster safe highway design and replace or rehabilitate structurally deficient or functionally obsolete bridges; and (4) to provide for other special purposes. In 2022, the County spent $879,956 in federal funding for road improvement projects. Coronavirus State and Local Fiscal Recovery Funds (SLFRF) The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent the COVID-19 pandemic caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $2,458,654 in program funds. 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. Procurement Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived in certain circumstances, including via a “sole source exemption” when purchasing used vehicles. Governments must document the process and ensure they comply with applicable laws for waiving competitive bidding. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from contractors who are suspended or debarred from doing business with the federal government. Whenever the County 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 have not been suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Although the County had a written procurement policy at the time of procurement for both federal programs, the policy did not conform to the most restrictive methods and thresholds for procuring public works projects, competitive proposals and small purchases. Additionally, the County’s policy did not include procedures for procuring transactions, such as micro-purchases, piggybacking, requesting proposals for architecture and engineering services, contract cost and price analysis, bonding requirements and more. Additionally, our audit of the SLFRF program found the County did not have effective internal controls for ensuring it complied with federal and state procurement requirements for sole source exemptions and small purchase procedures. The County did not properly declare a used ambulance purchase as a sole source exemption, but instead used a blanket emergency declaration for COVID-19, which was approved over two years prior to the procurement taking place. Also, the County does not have documentation that they declared this specific purchase as part of the COVID-19 emergency. The County also could not provide documentation demonstrating it obtained and retained more than one quote for an equipment purchase subject to small purchase procedures. Suspension and Debarment Our audit of the SLFRF program found the County’s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the County did not obtain a written certification, include a clause in the contract or search for exclusion records on sam.gov to verify that two contractors subject to this requirement were not suspended or debarred before entering into the contract with or purchasing from them. The County paid these contractors $269,160 in fiscal year 2022. We consider the deficiencies in internal controls for procurement for the Highway Planning and Construction Cluster to be a significant deficiency. We consider the deficiencies in internal controls for procurement and suspension and debarment for the SLFRF program to be material weaknesses that led to material noncompliance. Cause of Condition Procurement County employees and officials misunderstood the federal procurement standards. They thought that the County’s current procurement policy met the standards required under Uniform Guidance, as the policy states that “all employees shall follow the most restrictive, local, state or federal procurement policy when using Federal Grant Funds to be in compliance with the Code of Federal Requirements (2 CFR part 200).” For the Highway Planning and Construction Cluster program, County employees thought that following the Washington State Department of Transportation’s Local Agency Guidelines Manual and guidance from the Municipal Research and Services Center were sufficient for complying with federal procurement standards. Additionally, County staff responsible for procurement procedures for the SLFRF program misunderstood exemption requirements and did not specifically declare the ambulance purchase as either sole source or an emergency purchase. Additionally, staff were unaware that they should obtain and retain more than one quote to comply with small purchase procedures. Suspension and Debarment County staff responsible for reviewing purchases under SLFRF were aware of suspension and debarment verification requirements. However, they did not recognize the need to document and retain evidence of the sam.gov checks before the purchases. Effect of Condition Procurement Although the County’s policy did not conform to Uniform Guidance, our testing of the Highway Planning and Construction program found the County complied with federal requirements for competitive solicitation of public works contractors and purchases of goods and services. However, without updated written procurement procedures, the County is at greater risk of noncompliance with the most restrictive procedures when using federal funds to procure contractors and goods and services. Additionally, our audit of the SLFRF program found the County did not have documentation to support compliance with exemption requirements for a used ambulance purchase of $241,820 and small purchase requirements for an equipment purchase of $27,340. Without effective internal controls, the County cannot ensure it allowed for full and open competition, received the best price and complied with federal procurement requirements. Suspension and Debarment Our audit of the SLFRF program found the County paid two contractors more than $25,000 and did not verify their suspension and debarment statuses using one of the three allowable methods. Without this verification, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable and the granting federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County: • Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR § 200.318-327) for all procurement activities • Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County’s own procurement policies and procedures • Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance County’s Response The County will respond to each Audit Recommendation separately. SAO Recommendations: 1) Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR 200.318-327) for all procurement activities. 2) Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County's own procurement policies and procedures. 3) Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance. Response to 1) - On April 22, 2019, the County adopted Resolution #39-2019 to include language requiring that all of 2 CFR 200 be followed when using federal funds for procurement in response to the State Auditor's recommendations. The County has a single source audit every year and no further recommendations from the State Auditor were given and the corrective action was noted. The Audits for 2019 and 2020 found no further action on this subject. The 2021 federal audit was performed, and the exit interview resulted in a finding the same as in number 1 above. The exit interview was given on September 23, 2022. This is the start of budget season and a high and busy time of activity. The County lacks the resources to have dedicated staff to draft specific policies and relies of current staffing levels to address these issues. In drafting this policy, considerable research was conducted, a draft for review by all affected staff was circulated for comment, legal review was conducted and a new policy emphasizing subparts 318-327 was adopted on July 17, 2023. Further, an update of the County's Capital Asset and Inventory Policy adopted November 21, 2022, to include federal procurement rules was adopted as policy 2-2023 on July 25, 2023. Therefore, the County has taken corrective action to address this issue but lacked the resources to do so between the end of September and the end of the calendar year to cover 2022. Response to 2) - The State Auditor states the County did not follow the most restrictive applicable federal, state, or local laws and the federal procurement standards found in 2 CFR 200.318-327. The State Auditor further states that "the County did not properly declare a used ambulance purchase as a sole source exemption, but instead used an emergency declaration for COVID-19." While it is true that the County did rely on the emergency declaration and not note in the purchase authorization that the ambulance purchase was a sole source purchase, the County maintains this is supported by all applicable laws. The COVID-19 emergency was still in effect and the purchase was made solely to respond to a communicable disease that was thought to further spread. Ambulances that lacked proper equipment for transporting communicable disease patients put healthcare workers and first responders at high risk of human health issues. Resolution 30 2020 Declaring an emergency and Governor Proclamation 20-05 declaring a COVID-19 emergency was still in effect, as was a Presidential emergency declaration at the time of the purchase. RCW 38.52.070(2) specifically allows waiving oftime consuming procedures for purchases directly related to the emergency. Also, federal procurement standards as quoted below 2 CFR 320(c)(3) allow for noncompetitive procurement. People were dying and time was of the essence in obtaining proper transport equipment. We will also note that all Coronavirus State and Local Fiscal Recovery Fund purchases were reviewed and approved by County legal counsel. The County notes that more than one standard was met in 2 CFR 200.320(c) as this purchase meets both subparts 2 and 3 below, the County feels that this purchase did not require more internal controls. That being said, the County has trained personnel to document all conditions that apply in the future and has updated its federal procurement procedures per the September 23, 2022, recommendations. § 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(l) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Response to 3) - The State Auditor noted that the County had failed to verify two contractors for suspension and disbarment using one of the three allowable methods. The County refutes this and an affidavit from the employee who verified this was submitted. However, despite having this legal document the State Auditor finds the county did not retain a screenshot of this process for its records. The County is unable to find anywhere in federal law having reviewed 2 CFR 200 including sections 318- 327 as well as 2 CFR 180, as quoted below, where documentation of this is required. Further, several staff members have been trained in federal procurement standards and this documentation requirement was not mentioned as a requirement. This being said, the County has trained all staff members dealing with federal dollars to take screen shots of the suspension and disbarment check on potential contractors. § 180.320 Must I verify that principals of my covered transactions are eligible to participate? Yes, you as a participant are responsible for determining whether any of your principals of your covered transactions is excluded or disqualified from participating in the transaction. You may decide the method and frequency by which you do so. You may, but you are not required to, check SAM Exclusions. In summary, the County has corrected all the State Auditor recommendations made in this audit findings as of this written response. Auditor’s Remarks As the County did not maintain documentation and declare a specific exemption for the ambulance purchase we could not verify that it complied with procurement requirements. In order to determine whether the County verified the contractors were not suspended or debarred, our office is required to review evidence that shows this verification was completed by the County prior to entering into a contract. An after-the-fact representation is not sufficient to meet this standard. We reaffirm our finding and will review the corrective action taken during our 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR 200, Uniform Guidance, section 320, Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Stevens County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction; 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration; U.S. Department of the Treasury Federal Award/Contract Number: BRS-F334 (002), STRP-E331 (005), BHS-Z933 (003), BHOS-10BA (001), HSIP-000S (577), STRP-G333 (004), STRP-C331 (002), BROS-33GC (001), BROS-2033 (027), HSIP0000S (646) Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Background Highway Planning and Construction Cluster The objectives of the Highway Planning and Construction Cluster are to: (1) assist states in the planning and development of an integrated, interconnected transportation system important to interstate commerce and travel by constructing and rehabilitating the National Highway System, including interstate highways and most other public roads; (2) provide aid for the repair of federal-aid highways following disasters; (3) foster safe highway design and replace or rehabilitate structurally deficient or functionally obsolete bridges; and (4) to provide for other special purposes. In 2022, the County spent $879,956 in federal funding for road improvement projects. Coronavirus State and Local Fiscal Recovery Funds (SLFRF) The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent the COVID-19 pandemic caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $2,458,654 in program funds. 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. Procurement Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. These procedures must reflect the most restrictive of applicable federal, state or local laws. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by either obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding may be waived in certain circumstances, including via a “sole source exemption” when purchasing used vehicles. Governments must document the process and ensure they comply with applicable laws for waiving competitive bidding. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from contractors who are suspended or debarred from doing business with the federal government. Whenever the County 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 have not been suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Procurement Although the County had a written procurement policy at the time of procurement for both federal programs, the policy did not conform to the most restrictive methods and thresholds for procuring public works projects, competitive proposals and small purchases. Additionally, the County’s policy did not include procedures for procuring transactions, such as micro-purchases, piggybacking, requesting proposals for architecture and engineering services, contract cost and price analysis, bonding requirements and more. Additionally, our audit of the SLFRF program found the County did not have effective internal controls for ensuring it complied with federal and state procurement requirements for sole source exemptions and small purchase procedures. The County did not properly declare a used ambulance purchase as a sole source exemption, but instead used a blanket emergency declaration for COVID-19, which was approved over two years prior to the procurement taking place. Also, the County does not have documentation that they declared this specific purchase as part of the COVID-19 emergency. The County also could not provide documentation demonstrating it obtained and retained more than one quote for an equipment purchase subject to small purchase procedures. Suspension and Debarment Our audit of the SLFRF program found the County’s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the County did not obtain a written certification, include a clause in the contract or search for exclusion records on sam.gov to verify that two contractors subject to this requirement were not suspended or debarred before entering into the contract with or purchasing from them. The County paid these contractors $269,160 in fiscal year 2022. We consider the deficiencies in internal controls for procurement for the Highway Planning and Construction Cluster to be a significant deficiency. We consider the deficiencies in internal controls for procurement and suspension and debarment for the SLFRF program to be material weaknesses that led to material noncompliance. Cause of Condition Procurement County employees and officials misunderstood the federal procurement standards. They thought that the County’s current procurement policy met the standards required under Uniform Guidance, as the policy states that “all employees shall follow the most restrictive, local, state or federal procurement policy when using Federal Grant Funds to be in compliance with the Code of Federal Requirements (2 CFR part 200).” For the Highway Planning and Construction Cluster program, County employees thought that following the Washington State Department of Transportation’s Local Agency Guidelines Manual and guidance from the Municipal Research and Services Center were sufficient for complying with federal procurement standards. Additionally, County staff responsible for procurement procedures for the SLFRF program misunderstood exemption requirements and did not specifically declare the ambulance purchase as either sole source or an emergency purchase. Additionally, staff were unaware that they should obtain and retain more than one quote to comply with small purchase procedures. Suspension and Debarment County staff responsible for reviewing purchases under SLFRF were aware of suspension and debarment verification requirements. However, they did not recognize the need to document and retain evidence of the sam.gov checks before the purchases. Effect of Condition Procurement Although the County’s policy did not conform to Uniform Guidance, our testing of the Highway Planning and Construction program found the County complied with federal requirements for competitive solicitation of public works contractors and purchases of goods and services. However, without updated written procurement procedures, the County is at greater risk of noncompliance with the most restrictive procedures when using federal funds to procure contractors and goods and services. Additionally, our audit of the SLFRF program found the County did not have documentation to support compliance with exemption requirements for a used ambulance purchase of $241,820 and small purchase requirements for an equipment purchase of $27,340. Without effective internal controls, the County cannot ensure it allowed for full and open competition, received the best price and complied with federal procurement requirements. Suspension and Debarment Our audit of the SLFRF program found the County paid two contractors more than $25,000 and did not verify their suspension and debarment statuses using one of the three allowable methods. Without this verification, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable and the granting federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County: • Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR § 200.318-327) for all procurement activities • Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County’s own procurement policies and procedures • Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance County’s Response The County will respond to each Audit Recommendation separately. SAO Recommendations: 1) Review and update its written procurement policy to conform to Uniform Guidance requirements (2 CFR 200.318-327) for all procurement activities. 2) Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations, state law and the County's own procurement policies and procedures. 3) Establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and retain documentation demonstrating this compliance. Response to 1) - On April 22, 2019, the County adopted Resolution #39-2019 to include language requiring that all of 2 CFR 200 be followed when using federal funds for procurement in response to the State Auditor's recommendations. The County has a single source audit every year and no further recommendations from the State Auditor were given and the corrective action was noted. The Audits for 2019 and 2020 found no further action on this subject. The 2021 federal audit was performed, and the exit interview resulted in a finding the same as in number 1 above. The exit interview was given on September 23, 2022. This is the start of budget season and a high and busy time of activity. The County lacks the resources to have dedicated staff to draft specific policies and relies of current staffing levels to address these issues. In drafting this policy, considerable research was conducted, a draft for review by all affected staff was circulated for comment, legal review was conducted and a new policy emphasizing subparts 318-327 was adopted on July 17, 2023. Further, an update of the County's Capital Asset and Inventory Policy adopted November 21, 2022, to include federal procurement rules was adopted as policy 2-2023 on July 25, 2023. Therefore, the County has taken corrective action to address this issue but lacked the resources to do so between the end of September and the end of the calendar year to cover 2022. Response to 2) - The State Auditor states the County did not follow the most restrictive applicable federal, state, or local laws and the federal procurement standards found in 2 CFR 200.318-327. The State Auditor further states that "the County did not properly declare a used ambulance purchase as a sole source exemption, but instead used an emergency declaration for COVID-19." While it is true that the County did rely on the emergency declaration and not note in the purchase authorization that the ambulance purchase was a sole source purchase, the County maintains this is supported by all applicable laws. The COVID-19 emergency was still in effect and the purchase was made solely to respond to a communicable disease that was thought to further spread. Ambulances that lacked proper equipment for transporting communicable disease patients put healthcare workers and first responders at high risk of human health issues. Resolution 30 2020 Declaring an emergency and Governor Proclamation 20-05 declaring a COVID-19 emergency was still in effect, as was a Presidential emergency declaration at the time of the purchase. RCW 38.52.070(2) specifically allows waiving oftime consuming procedures for purchases directly related to the emergency. Also, federal procurement standards as quoted below 2 CFR 320(c)(3) allow for noncompetitive procurement. People were dying and time was of the essence in obtaining proper transport equipment. We will also note that all Coronavirus State and Local Fiscal Recovery Fund purchases were reviewed and approved by County legal counsel. The County notes that more than one standard was met in 2 CFR 200.320(c) as this purchase meets both subparts 2 and 3 below, the County feels that this purchase did not require more internal controls. That being said, the County has trained personnel to document all conditions that apply in the future and has updated its federal procurement procedures per the September 23, 2022, recommendations. § 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(l) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Response to 3) - The State Auditor noted that the County had failed to verify two contractors for suspension and disbarment using one of the three allowable methods. The County refutes this and an affidavit from the employee who verified this was submitted. However, despite having this legal document the State Auditor finds the county did not retain a screenshot of this process for its records. The County is unable to find anywhere in federal law having reviewed 2 CFR 200 including sections 318- 327 as well as 2 CFR 180, as quoted below, where documentation of this is required. Further, several staff members have been trained in federal procurement standards and this documentation requirement was not mentioned as a requirement. This being said, the County has trained all staff members dealing with federal dollars to take screen shots of the suspension and disbarment check on potential contractors. § 180.320 Must I verify that principals of my covered transactions are eligible to participate? Yes, you as a participant are responsible for determining whether any of your principals of your covered transactions is excluded or disqualified from participating in the transaction. You may decide the method and frequency by which you do so. You may, but you are not required to, check SAM Exclusions. In summary, the County has corrected all the State Auditor recommendations made in this audit findings as of this written response. Auditor’s Remarks As the County did not maintain documentation and declare a specific exemption for the ambulance purchase we could not verify that it complied with procurement requirements. In order to determine whether the County verified the contractors were not suspended or debarred, our office is required to review evidence that shows this verification was completed by the County prior to entering into a contract. An after-the-fact representation is not sufficient to meet this standard. We reaffirm our finding and will review the corrective action taken during our 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR 200, Uniform Guidance, section 320, Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
2022-003 U.S. Department of Treasury Federal Financial Assistance Listing # 21.027 Award Years: 2021, 2022 Grant Award Number: Unknown COVID–19 Coronavirus State and Local Fiscal Recovery Funds Procurement, Suspension and Debarment Significant Deficiency in Internal Control over Compliance Criteria: Uniform Guidance and 2 CFR sections 200.318 through 200.326 set forth the procurement standards non‐federal entities other than states must follow when operating federal programs and the procurement procedures and contract requirements required depending on the amount of the transaction. Condition: In our testing of procurement, suspension, and debarment, it was noted that the City of Groton’s (the City) procurement policy followed state law which is some cases is less restrictive than federal law. We also noted that the policy does not include the required contract provisions that are needed in contracts with federal grants. Cause: Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, and controls were not adequately designed to ensure compliance with all of these requirements. Effect: A lack of established controls increases the overall risk that employees are not aware of the specific requirements with contracting and awarding contracts when federal grants are involved. Questioned Costs: None reported Context/Sampling: All vendors, which totaled two, were selected for procurement testing. Repeat Finding from Prior Year(s): No Recommendation: We recommend that management review Uniform Guidance and 2 CFR sections 200.318 through 200.326 to ensure that all items identified are included in the procurement policy. Views of Responsible Officials: Management agrees with the finding.
2022-003 U.S. Department of Treasury Federal Financial Assistance Listing # 21.027 Award Years: 2021, 2022 Grant Award Number: Unknown COVID–19 Coronavirus State and Local Fiscal Recovery Funds Procurement, Suspension and Debarment Significant Deficiency in Internal Control over Compliance Criteria: Uniform Guidance and 2 CFR sections 200.318 through 200.326 set forth the procurement standards non‐federal entities other than states must follow when operating federal programs and the procurement procedures and contract requirements required depending on the amount of the transaction. Condition: In our testing of procurement, suspension, and debarment, it was noted that the City of Groton’s (the City) procurement policy followed state law which is some cases is less restrictive than federal law. We also noted that the policy does not include the required contract provisions that are needed in contracts with federal grants. Cause: Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, and controls were not adequately designed to ensure compliance with all of these requirements. Effect: A lack of established controls increases the overall risk that employees are not aware of the specific requirements with contracting and awarding contracts when federal grants are involved. Questioned Costs: None reported Context/Sampling: All vendors, which totaled two, were selected for procurement testing. Repeat Finding from Prior Year(s): No Recommendation: We recommend that management review Uniform Guidance and 2 CFR sections 200.318 through 200.326 to ensure that all items identified are included in the procurement policy. Views of Responsible Officials: Management agrees with the finding.
The District did not have adequate internal controls to ensure compliance with federal procurement requirements. Assistance Listing Number and Title: 93.224 – Health Center Program 93.527 – Grants for New and Expanded Services under the Health Center Program Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: No Description of Condition The purpose of the Health Center Program is to improve the health of underserved communities and vulnerable populations in the United States by ensuring continued access to comprehensive, culturally competent and quality primary health care services. The District spent $1,468,524 through this program to provide primary and preventive health care services to underserved communities. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations also require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive of applicable federal requirements, state laws or local policies. When using federal funds to purchase goods or services, governments must apply the most restrictive of federal requirements, state law or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase or project. The District’s adopted policy includes procedures for the purchase of supplies, materials, equipment and services. However, the thresholds do not conform to the most restrictive of $75,000 for public works contracts, and the policy does not include required elements to conform with Uniform Guidance requirements. In addition, the District entered into two contracts for public work projects during the audit period. One contract was for the installation of a modular building for $745,172, and the other was for a clinic renovation for $247,250. Both projects were partially paid with federal funds, and they required competitive bidding. Our audit found the District did not follow proper procurement procedures for these projects to ensure compliance with Uniform Guidance requirements. We consider these deficiencies in internal controls to be a material weakness. Cause of Condition District employees did not know about the policy requirements. Additionally, District officials said that obtaining quotes for these projects was the most economical process because the District has previously experienced difficulties with obtaining contractors within its remote location. Effect of Condition Without written procedures in place, the District is at greater risk of noncompliance with the most restrictive of federal, state, or local procurement methods when procuring contractors paid all or in part with federal funds. Since the District did not comply with federal procurement requirements to formally bid two public work projects, it cannot demonstrate it received the best price for the services provided. Recommendation We recommend the District ensure its written procurement procedures comply with the most restrictive of federal, state or local requirements, as required by Uniform Guidance. We also recommend the District strengthen its internal controls over procuring public work projects to ensure compliance with federal procurement requirements. District’s Response During the planning phase of each project, the District, working closely with its architectural firm, conducted extensive research on available contractors within the region with specific experience in construction for health care practice. It was determined that while there are an adequate number of contractors in the area; there is a robust housing construction trend occurring at present. As a result, contractors with specific experience health care construction conveyed they were not interested in the size of the District project to consider submitting a bid. The project then became a single source with only one vendor interested in submitting a bid for the work proposed. It was not feasible or economical to publicize the solicitation through appropriate periodicals of general circulation and trade press to solicit bids to maximize competition. The procurement for the pre-fabricated modular building was a unique circumstance where there are a limited number of vendors that can supply the product needed by the District within a reasonable geographic vicinity. The product needed by the District within a reasonable geographic vicinity. The District obtained written proposals from three known supplies of the specialty item for procurement. The request included specifications that defines the item of service needed that allowed for the vendor to properly respond. A cost and price analysis was conducted based on the response from the bids solicited. The final award was based on price as well as the lack of competition due to limited specialty suppliers. For this project, competition was determined inadequate due to the limited number of specialty vendors with the ability to fulfill the District requirements of a pre- fabricated structure. Therefore, it was not deemed feasible or economical to publicize the solicitation through appropriate periodicals of general circulation and trade presses. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and will review the status of this issue 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 200, Uniform Guidance, section 318, describes general procurement standard requirements for auditees to follow. All procurement transactions for the acquisition of property or services required under a federal award must be conducted in a manner providing full and open competition consistent with the standards of this section.
The District did not have adequate internal controls to ensure compliance with federal procurement requirements. Assistance Listing Number and Title: 93.224 – Health Center Program 93.527 – Grants for New and Expanded Services under the Health Center Program Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: No Description of Condition The purpose of the Health Center Program is to improve the health of underserved communities and vulnerable populations in the United States by ensuring continued access to comprehensive, culturally competent and quality primary health care services. The District spent $1,468,524 through this program to provide primary and preventive health care services to underserved communities. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations also require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive of applicable federal requirements, state laws or local policies. When using federal funds to purchase goods or services, governments must apply the most restrictive of federal requirements, state law or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase or project. The District’s adopted policy includes procedures for the purchase of supplies, materials, equipment and services. However, the thresholds do not conform to the most restrictive of $75,000 for public works contracts, and the policy does not include required elements to conform with Uniform Guidance requirements. In addition, the District entered into two contracts for public work projects during the audit period. One contract was for the installation of a modular building for $745,172, and the other was for a clinic renovation for $247,250. Both projects were partially paid with federal funds, and they required competitive bidding. Our audit found the District did not follow proper procurement procedures for these projects to ensure compliance with Uniform Guidance requirements. We consider these deficiencies in internal controls to be a material weakness. Cause of Condition District employees did not know about the policy requirements. Additionally, District officials said that obtaining quotes for these projects was the most economical process because the District has previously experienced difficulties with obtaining contractors within its remote location. Effect of Condition Without written procedures in place, the District is at greater risk of noncompliance with the most restrictive of federal, state, or local procurement methods when procuring contractors paid all or in part with federal funds. Since the District did not comply with federal procurement requirements to formally bid two public work projects, it cannot demonstrate it received the best price for the services provided. Recommendation We recommend the District ensure its written procurement procedures comply with the most restrictive of federal, state or local requirements, as required by Uniform Guidance. We also recommend the District strengthen its internal controls over procuring public work projects to ensure compliance with federal procurement requirements. District’s Response During the planning phase of each project, the District, working closely with its architectural firm, conducted extensive research on available contractors within the region with specific experience in construction for health care practice. It was determined that while there are an adequate number of contractors in the area; there is a robust housing construction trend occurring at present. As a result, contractors with specific experience health care construction conveyed they were not interested in the size of the District project to consider submitting a bid. The project then became a single source with only one vendor interested in submitting a bid for the work proposed. It was not feasible or economical to publicize the solicitation through appropriate periodicals of general circulation and trade press to solicit bids to maximize competition. The procurement for the pre-fabricated modular building was a unique circumstance where there are a limited number of vendors that can supply the product needed by the District within a reasonable geographic vicinity. The product needed by the District within a reasonable geographic vicinity. The District obtained written proposals from three known supplies of the specialty item for procurement. The request included specifications that defines the item of service needed that allowed for the vendor to properly respond. A cost and price analysis was conducted based on the response from the bids solicited. The final award was based on price as well as the lack of competition due to limited specialty suppliers. For this project, competition was determined inadequate due to the limited number of specialty vendors with the ability to fulfill the District requirements of a pre- fabricated structure. Therefore, it was not deemed feasible or economical to publicize the solicitation through appropriate periodicals of general circulation and trade presses. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and will review the status of this issue 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 200, Uniform Guidance, section 318, describes general procurement standard requirements for auditees to follow. All procurement transactions for the acquisition of property or services required under a federal award must be conducted in a manner providing full and open competition consistent with the standards of this section.
The District did not have adequate internal controls to ensure compliance with federal procurement requirements. Assistance Listing Number and Title: 93.224 – Health Center Program 93.527 – Grants for New and Expanded Services under the Health Center Program Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: No Description of Condition The purpose of the Health Center Program is to improve the health of underserved communities and vulnerable populations in the United States by ensuring continued access to comprehensive, culturally competent and quality primary health care services. The District spent $1,468,524 through this program to provide primary and preventive health care services to underserved communities. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations also require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive of applicable federal requirements, state laws or local policies. When using federal funds to purchase goods or services, governments must apply the most restrictive of federal requirements, state law or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase or project. The District’s adopted policy includes procedures for the purchase of supplies, materials, equipment and services. However, the thresholds do not conform to the most restrictive of $75,000 for public works contracts, and the policy does not include required elements to conform with Uniform Guidance requirements. In addition, the District entered into two contracts for public work projects during the audit period. One contract was for the installation of a modular building for $745,172, and the other was for a clinic renovation for $247,250. Both projects were partially paid with federal funds, and they required competitive bidding. Our audit found the District did not follow proper procurement procedures for these projects to ensure compliance with Uniform Guidance requirements. We consider these deficiencies in internal controls to be a material weakness. Cause of Condition District employees did not know about the policy requirements. Additionally, District officials said that obtaining quotes for these projects was the most economical process because the District has previously experienced difficulties with obtaining contractors within its remote location. Effect of Condition Without written procedures in place, the District is at greater risk of noncompliance with the most restrictive of federal, state, or local procurement methods when procuring contractors paid all or in part with federal funds. Since the District did not comply with federal procurement requirements to formally bid two public work projects, it cannot demonstrate it received the best price for the services provided. Recommendation We recommend the District ensure its written procurement procedures comply with the most restrictive of federal, state or local requirements, as required by Uniform Guidance. We also recommend the District strengthen its internal controls over procuring public work projects to ensure compliance with federal procurement requirements. District’s Response During the planning phase of each project, the District, working closely with its architectural firm, conducted extensive research on available contractors within the region with specific experience in construction for health care practice. It was determined that while there are an adequate number of contractors in the area; there is a robust housing construction trend occurring at present. As a result, contractors with specific experience health care construction conveyed they were not interested in the size of the District project to consider submitting a bid. The project then became a single source with only one vendor interested in submitting a bid for the work proposed. It was not feasible or economical to publicize the solicitation through appropriate periodicals of general circulation and trade press to solicit bids to maximize competition. The procurement for the pre-fabricated modular building was a unique circumstance where there are a limited number of vendors that can supply the product needed by the District within a reasonable geographic vicinity. The product needed by the District within a reasonable geographic vicinity. The District obtained written proposals from three known supplies of the specialty item for procurement. The request included specifications that defines the item of service needed that allowed for the vendor to properly respond. A cost and price analysis was conducted based on the response from the bids solicited. The final award was based on price as well as the lack of competition due to limited specialty suppliers. For this project, competition was determined inadequate due to the limited number of specialty vendors with the ability to fulfill the District requirements of a pre- fabricated structure. Therefore, it was not deemed feasible or economical to publicize the solicitation through appropriate periodicals of general circulation and trade presses. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and will review the status of this issue 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 200, Uniform Guidance, section 318, describes general procurement standard requirements for auditees to follow. All procurement transactions for the acquisition of property or services required under a federal award must be conducted in a manner providing full and open competition consistent with the standards of this section.
The District did not have adequate internal controls to ensure compliance with federal procurement requirements. Assistance Listing Number and Title: 93.224 – Health Center Program 93.527 – Grants for New and Expanded Services under the Health Center Program Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: No Description of Condition The purpose of the Health Center Program is to improve the health of underserved communities and vulnerable populations in the United States by ensuring continued access to comprehensive, culturally competent and quality primary health care services. The District spent $1,468,524 through this program to provide primary and preventive health care services to underserved communities. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations also require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive of applicable federal requirements, state laws or local policies. When using federal funds to purchase goods or services, governments must apply the most restrictive of federal requirements, state law or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase or project. The District’s adopted policy includes procedures for the purchase of supplies, materials, equipment and services. However, the thresholds do not conform to the most restrictive of $75,000 for public works contracts, and the policy does not include required elements to conform with Uniform Guidance requirements. In addition, the District entered into two contracts for public work projects during the audit period. One contract was for the installation of a modular building for $745,172, and the other was for a clinic renovation for $247,250. Both projects were partially paid with federal funds, and they required competitive bidding. Our audit found the District did not follow proper procurement procedures for these projects to ensure compliance with Uniform Guidance requirements. We consider these deficiencies in internal controls to be a material weakness. Cause of Condition District employees did not know about the policy requirements. Additionally, District officials said that obtaining quotes for these projects was the most economical process because the District has previously experienced difficulties with obtaining contractors within its remote location. Effect of Condition Without written procedures in place, the District is at greater risk of noncompliance with the most restrictive of federal, state, or local procurement methods when procuring contractors paid all or in part with federal funds. Since the District did not comply with federal procurement requirements to formally bid two public work projects, it cannot demonstrate it received the best price for the services provided. Recommendation We recommend the District ensure its written procurement procedures comply with the most restrictive of federal, state or local requirements, as required by Uniform Guidance. We also recommend the District strengthen its internal controls over procuring public work projects to ensure compliance with federal procurement requirements. District’s Response During the planning phase of each project, the District, working closely with its architectural firm, conducted extensive research on available contractors within the region with specific experience in construction for health care practice. It was determined that while there are an adequate number of contractors in the area; there is a robust housing construction trend occurring at present. As a result, contractors with specific experience health care construction conveyed they were not interested in the size of the District project to consider submitting a bid. The project then became a single source with only one vendor interested in submitting a bid for the work proposed. It was not feasible or economical to publicize the solicitation through appropriate periodicals of general circulation and trade press to solicit bids to maximize competition. The procurement for the pre-fabricated modular building was a unique circumstance where there are a limited number of vendors that can supply the product needed by the District within a reasonable geographic vicinity. The product needed by the District within a reasonable geographic vicinity. The District obtained written proposals from three known supplies of the specialty item for procurement. The request included specifications that defines the item of service needed that allowed for the vendor to properly respond. A cost and price analysis was conducted based on the response from the bids solicited. The final award was based on price as well as the lack of competition due to limited specialty suppliers. For this project, competition was determined inadequate due to the limited number of specialty vendors with the ability to fulfill the District requirements of a pre- fabricated structure. Therefore, it was not deemed feasible or economical to publicize the solicitation through appropriate periodicals of general circulation and trade presses. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and will review the status of this issue 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 200, Uniform Guidance, section 318, describes general procurement standard requirements for auditees to follow. All procurement transactions for the acquisition of property or services required under a federal award must be conducted in a manner providing full and open competition consistent with the standards of this section.
Department of the Treasury, Passed through North Dakota State Water Commission Federal Financial Assistance Listing 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Procurement, Suspension, and Debarment Material Weakness in Internal Control Over Compliance Criteria - Uniform Guidance and 2 CFR sections 200.318 through 200.326 set forth the procurement standards non-federal entities other than states must follow when operating federal programs and the procurement procedures required. Condition - During the course of our engagement, it was identified that the District did not have a written policy on procurement that satisfied the requirements of 2 CFR sections 200.318 through 200.326. Cause - Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, and controls were not adequately designed to ensure compliance with all of these requirements. Effect - A lack of documented policies increase the overall risk that employees are not aware of the specific requirements with of procurement, suspension, and debarment. Questioned Costs - None reported Context/Sampling - Overall procurement policy. Repeat Finding from Prior Year(s) – No Recommendation - We recommend that management establish a written policy that addresses all of the procurement requirements for federal programs as identified in 2 CFR sections 200.318 through 200.326 and maintain adequate supporting documentation and records to document history and methods of procurement and the procedures performed to comply with these CFR sections. Views of Responsible Officials - There is no disagreement with the audit finding.
Material weakness in internal control over compliance with procurement procedures meeting the requirements of 2 CFR Part 200. Federal Agency: United States Department of Treasury Program Titles: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Entity: King County Award Numbers: 6200091 Award Periods: January 1, 2021 through December 31, 2024 Criteria Procurement Standards contained in Title 2 U.S. Code of Federal Regulations Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (the Uniform Guidance) , Subpart D ‐ Post Federal Award Requirements, Section 200.318 through 200.326 Procurement Standards, require that a non‐Federal entity 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. The procurement procedures must include the following: - Using the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) (1) and (2). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold ($250,000). Micro-purchases may be awarded without soliciting competitive quotations if the non-Federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)). - For acquisitions exceeding the simplified acquisition threshold, using one of the following procurement methods: the sealed bid method if the acquisition meets the criteria in 2 CFR section 200.320(b); the competitive proposals method under the conditions specified in 2 CFR section 200.320((b) (2); or the noncompetitive proposals method (i.e., solicit a proposal from only one source) but only when one or more of the circumstances are met, in accordance with 2 CFR section 200.320(c)). - Using Noncompetitive procurement only if one or more of the following circumstances apply: · The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; · The item is available only from a single source; · The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; · The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or · After solicitation of a number of sources, competition is determined inadequate PDA’s procurement policy also requires a verification that vendors and sub-recipient are not suspended or debarred by checking the website of the System for Award Management and documentation of such verification maintained by the Finance Office. Condition/Context While PDA has established a procurement policy, it does not fully conform to the Uniform Guidance for the following reasons: - Micro purchase threshold is not explicitly defined, although it is mentioned that cost and price analysis shall be made and documented in connection with every procurement action above $5,000. - The policy did not have clear provisions for maintaining detailed procurement records. Such records should include the rationale for the procurement method, the selection of contract type, the contractor selection or rejection process, and the basis for the contract price. - The simplified acquisition threshold is not defined and does not incorporate all relevant elements including sealed bids method. During our testing of 3 procurement transactions from a total of 15, we observed that, despite management's detailed historical background on each of the selected transactions, the necessary documentation evidencing compliance with PDA’s procurement policy was not retained. All the transactions tested were noncompetitive. The total misstatement is the entire population amount $205,921 as PDA did not maintain sufficient documentation to evidence history of procurement for all procurement transactions. Furthermore, for three vendors, which represented a 100% sample, we found no evidence of documentation for suspension and debarment verification. Although discussions with management suggested that all these transactions were properly conceived and evaluated at the time, there was no contemporaneous documentation to support this. Cause PDA’s procurement policy does not seem to have been reviewed against the Uniform Guidance for compliance. Internal controls over maintaining sufficient records to detail the history of procurement including noncompetitive justification and suspension and debarment verification were found to be insufficient. Effect The absence of a policy that fully conformed to the Uniform Guidance resulted in noncompliance issues such as records sufficient to detail the history of procurement transactions not maintained. Questioned Costs $205,921 Repeat Finding Yes. Recommendation We recommend PDA implement measures to ensure that its procurement policy reflect applicable state and local laws and regulations conforming to applicable federal statutes and requirement in 2 CFR part 200. Management should ensure procurement transactions are documented in such detail to evidence the method of procurement use and vendor verification for suspension and debarment.
Finding 2022-002: Material Weakness – Lack of Documentation on Sole Source Contracts and Verification of Vendors Federal grantor: Department of Commerce Condition: The Chamber contract with a vendor on a sole-source basis and did not document justification for the use of a sole source vendor. In addition, the Chamber did not verify that the vendor was not on the list of vendors suspended or debarred from federal contracting before contracting with the vendor. Criteria: Entities are required to follow the procurement standards in 2 CFR sections 200.318 through 200.327, including ensuring that the procurement method used for the contracts are appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320 and noncompetitive procurements. Entities also must comply with 2 CFR Part 1326 that prohibits entities that have been debarred, suspended or voluntarily excluded from participating in Federal procurement. Cause: The Chamber’s Procurement Policy allows for a sole source vendor but requires staff to document sole source procurements prior to initial purchase. It appears staff did not follow its policy. The Policy also contains a requirement to verify or receive vendor certification that they are not debarred, suspended, ineligible or voluntarily excluded from Federal procurements, but this procedure was not followed. Effect: The Department of Commerce may impose additional conditions on the receipt of a subsequent tranche of future award funds, if any, or take other available remedies as set forth in 2 C.F.C. section 200.339. Recommendation: We recommend the Chamber review policies with staff to ensure procurement requirements are followed, and that staff are familiar with federal procurement requirements. Views of Responsible Officials and Planned Corrective Actions: The Chamber agrees with this finding and is in the process of implementing changes to their procurement process.
Information on the Federal Program(s): 10.760 Water and Waste Disposal Systems for Rural Communities, Department of Agriculture 14.228 Community Development Block Grants/State’s Program, Department of Housing and Urban Development Compliance Requirements: Procurement. Type of Finding: Material Noncompliance. Criteria: 2 CFR § 200.318(c)(1) requires that the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Condition: We noted that the City did not have written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts in fiscal year 2022. Cause: The City was not aware of the requirement to have written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Effect: Failure to have written standards of conduct could result in noncompliance with Uniform Guidance requirements. Questioned Costs: There are no questioned costs. Recommendation: We recommend that the City develop written standards of conduct that include the requirements of 2 CFR § 200.318(c)(1). Views of Responsible Officials and Planned Corrective Action: The City will develop written standards of conduct in that satisfy the requirements of 2 CFR § 200.318(c)(1).
Information on the Federal Program(s): 10.760 Water and Waste Disposal Systems for Rural Communities, Department of Agriculture 14.228 Community Development Block Grants/State’s Program, Department of Housing and Urban Development Compliance Requirements: Procurement. Type of Finding: Material Noncompliance. Criteria: 2 CFR § 200.319(d) requires that the non-Federal entity must maintain written procedures for procurement transactions. Condition: We noted that the City did not have written procedures for procurement transactions that include the provisions required by the Procurement Standards 2 CFR § 200.318 through 2 CFR § 200.327 in fiscal year 2022. Cause: The City was not aware of the requirement to have written procedures for procurement transactions. Effect: Failure to have adequate written procedures for procurement transactions could result in the acquisition of goods or services in violation with administrative requirements, federal regulations, other procurement requirements, and Uniform Guidance requirements. Questioned Costs: There are no questioned costs. Recommendation: We recommend that the City identify grants that are subject to Uniform Guidance on a timely basis to ensure all compliance requirements are met and develop adequate written policies and procedures for procurement transactions. Views of Responsible Officials and Planned Corrective Action: The City has identified federal grants subject to the Uniform Guidance and will develop written policies and procedures which include the relevant provisions required by 2 CFR § 200.318 through 2 CFR § 200.326 Contract provisions.
Information on the Federal Program(s): 10.760 Water and Waste Disposal Systems for Rural Communities, Department of Agriculture 14.228 Community Development Block Grants/State’s Program, Department of Housing and Urban Development Compliance Requirements: Procurement. Type of Finding: Material Weakness in Internal Control Over Compliance. Criteria: Internal controls should be in place to provide reasonable assurance that procurement of goods and services are made in compliance with federal regulations and other procurement requirements, as applicable. Condition: The City lacks sufficient controls over procurement to ensure compliance with federal regulations and other procurement requirements, as applicable. Cause: The City did not design and implement controls over compliance with procurement. Effect or Potential Effect: Failure to have adequate internal controls over compliance with procurement could result in the acquisition of goods or services in violation with administrative requirements, federal regulations, and other procurement requirements. Questioned Costs: There are no questioned costs. Recommendation: We recommend that the City create and adopt an official written policy for procurement and contracts establishing contract files that document significant procurement history; methods of procurement authorized including selection of contract type, contractor selection or rejection, and the basis of contract price; verification that procurements provide full and open competition; requirements for cost or price analysis, including for contract modifications; obtaining and reacting to suspension and debarment certifications; and other applicable requirements for procurements under federal awards are followed. We also recommend that personnel with adequate knowledge and experience of responsibilities for procurements for federal awards review procurement and contracting decisions for compliance with federal procurement policies. Views of Responsible Officials and Planned Corrective Action: Management concurs with the audit finding. The City will develop written policies and procedures for procurement, including the relevant provisions required by 2 CFR § 200.318 through 2 CFR § 200.326 Contract provisions. Management will evaluate the need to contract with local government consultants to perform control procedures where City personnel are not available or qualified to perform.
Information on the Federal Program(s): 10.760 Water and Waste Disposal Systems for Rural Communities, Department of Agriculture 14.228 Community Development Block Grants/State’s Program, Department of Housing and Urban Development Compliance Requirements: Procurement. Type of Finding: Material Noncompliance. Criteria: 2 CFR § 200.318(c)(1) requires that the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Condition: We noted that the City did not have written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts in fiscal year 2022. Cause: The City was not aware of the requirement to have written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Effect: Failure to have written standards of conduct could result in noncompliance with Uniform Guidance requirements. Questioned Costs: There are no questioned costs. Recommendation: We recommend that the City develop written standards of conduct that include the requirements of 2 CFR § 200.318(c)(1). Views of Responsible Officials and Planned Corrective Action: The City will develop written standards of conduct in that satisfy the requirements of 2 CFR § 200.318(c)(1).
Information on the Federal Program(s): 10.760 Water and Waste Disposal Systems for Rural Communities, Department of Agriculture 14.228 Community Development Block Grants/State’s Program, Department of Housing and Urban Development Compliance Requirements: Procurement. Type of Finding: Material Noncompliance. Criteria: 2 CFR § 200.319(d) requires that the non-Federal entity must maintain written procedures for procurement transactions. Condition: We noted that the City did not have written procedures for procurement transactions that include the provisions required by the Procurement Standards 2 CFR § 200.318 through 2 CFR § 200.327 in fiscal year 2022. Cause: The City was not aware of the requirement to have written procedures for procurement transactions. Effect: Failure to have adequate written procedures for procurement transactions could result in the acquisition of goods or services in violation with administrative requirements, federal regulations, other procurement requirements, and Uniform Guidance requirements. Questioned Costs: There are no questioned costs. Recommendation: We recommend that the City identify grants that are subject to Uniform Guidance on a timely basis to ensure all compliance requirements are met and develop adequate written policies and procedures for procurement transactions. Views of Responsible Officials and Planned Corrective Action: The City has identified federal grants subject to the Uniform Guidance and will develop written policies and procedures which include the relevant provisions required by 2 CFR § 200.318 through 2 CFR § 200.326 Contract provisions.
Information on the Federal Program(s): 10.760 Water and Waste Disposal Systems for Rural Communities, Department of Agriculture 14.228 Community Development Block Grants/State’s Program, Department of Housing and Urban Development Compliance Requirements: Procurement. Type of Finding: Material Weakness in Internal Control Over Compliance. Criteria: Internal controls should be in place to provide reasonable assurance that procurement of goods and services are made in compliance with federal regulations and other procurement requirements, as applicable. Condition: The City lacks sufficient controls over procurement to ensure compliance with federal regulations and other procurement requirements, as applicable. Cause: The City did not design and implement controls over compliance with procurement. Effect or Potential Effect: Failure to have adequate internal controls over compliance with procurement could result in the acquisition of goods or services in violation with administrative requirements, federal regulations, and other procurement requirements. Questioned Costs: There are no questioned costs. Recommendation: We recommend that the City create and adopt an official written policy for procurement and contracts establishing contract files that document significant procurement history; methods of procurement authorized including selection of contract type, contractor selection or rejection, and the basis of contract price; verification that procurements provide full and open competition; requirements for cost or price analysis, including for contract modifications; obtaining and reacting to suspension and debarment certifications; and other applicable requirements for procurements under federal awards are followed. We also recommend that personnel with adequate knowledge and experience of responsibilities for procurements for federal awards review procurement and contracting decisions for compliance with federal procurement policies. Views of Responsible Officials and Planned Corrective Action: Management concurs with the audit finding. The City will develop written policies and procedures for procurement, including the relevant provisions required by 2 CFR § 200.318 through 2 CFR § 200.326 Contract provisions. Management will evaluate the need to contract with local government consultants to perform control procedures where City personnel are not available or qualified to perform.
Information on the Federal Program(s): 10.760 Water and Waste Disposal Systems for Rural Communities, Department of Agriculture 14.228 Community Development Block Grants/State’s Program, Department of Housing and Urban Development Compliance Requirements: Procurement. Type of Finding: Material Noncompliance. Criteria: 2 CFR § 200.318(c)(1) requires that the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Condition: We noted that the City did not have written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts in fiscal year 2022. Cause: The City was not aware of the requirement to have written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Effect: Failure to have written standards of conduct could result in noncompliance with Uniform Guidance requirements. Questioned Costs: There are no questioned costs. Recommendation: We recommend that the City develop written standards of conduct that include the requirements of 2 CFR § 200.318(c)(1). Views of Responsible Officials and Planned Corrective Action: The City will develop written standards of conduct in that satisfy the requirements of 2 CFR § 200.318(c)(1).
Information on the Federal Program(s): 10.760 Water and Waste Disposal Systems for Rural Communities, Department of Agriculture 14.228 Community Development Block Grants/State’s Program, Department of Housing and Urban Development Compliance Requirements: Procurement. Type of Finding: Material Noncompliance. Criteria: 2 CFR § 200.319(d) requires that the non-Federal entity must maintain written procedures for procurement transactions. Condition: We noted that the City did not have written procedures for procurement transactions that include the provisions required by the Procurement Standards 2 CFR § 200.318 through 2 CFR § 200.327 in fiscal year 2022. Cause: The City was not aware of the requirement to have written procedures for procurement transactions. Effect: Failure to have adequate written procedures for procurement transactions could result in the acquisition of goods or services in violation with administrative requirements, federal regulations, other procurement requirements, and Uniform Guidance requirements. Questioned Costs: There are no questioned costs. Recommendation: We recommend that the City identify grants that are subject to Uniform Guidance on a timely basis to ensure all compliance requirements are met and develop adequate written policies and procedures for procurement transactions. Views of Responsible Officials and Planned Corrective Action: The City has identified federal grants subject to the Uniform Guidance and will develop written policies and procedures which include the relevant provisions required by 2 CFR § 200.318 through 2 CFR § 200.326 Contract provisions.
Information on the Federal Program(s): 10.760 Water and Waste Disposal Systems for Rural Communities, Department of Agriculture 14.228 Community Development Block Grants/State’s Program, Department of Housing and Urban Development Compliance Requirements: Procurement. Type of Finding: Material Weakness in Internal Control Over Compliance. Criteria: Internal controls should be in place to provide reasonable assurance that procurement of goods and services are made in compliance with federal regulations and other procurement requirements, as applicable. Condition: The City lacks sufficient controls over procurement to ensure compliance with federal regulations and other procurement requirements, as applicable. Cause: The City did not design and implement controls over compliance with procurement. Effect or Potential Effect: Failure to have adequate internal controls over compliance with procurement could result in the acquisition of goods or services in violation with administrative requirements, federal regulations, and other procurement requirements. Questioned Costs: There are no questioned costs. Recommendation: We recommend that the City create and adopt an official written policy for procurement and contracts establishing contract files that document significant procurement history; methods of procurement authorized including selection of contract type, contractor selection or rejection, and the basis of contract price; verification that procurements provide full and open competition; requirements for cost or price analysis, including for contract modifications; obtaining and reacting to suspension and debarment certifications; and other applicable requirements for procurements under federal awards are followed. We also recommend that personnel with adequate knowledge and experience of responsibilities for procurements for federal awards review procurement and contracting decisions for compliance with federal procurement policies. Views of Responsible Officials and Planned Corrective Action: Management concurs with the audit finding. The City will develop written policies and procedures for procurement, including the relevant provisions required by 2 CFR § 200.318 through 2 CFR § 200.326 Contract provisions. Management will evaluate the need to contract with local government consultants to perform control procedures where City personnel are not available or qualified to perform.
Assistance Listing, Federal Agency, and Program Name 93.224, 93.527; COVID 19: Health Center Program Cluster Federal Award Identification Number and Year H80CS24134, H8ECS37956, H8FCS40356, and H8GCS48255 2022 Pass through Entity N/A Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria In accordance with 2 CFR sections 200.318 200.326, the Organization must maintain and use documented procedures for procurement transactions that are consistent with State, local, and tribal laws and regulations and the standards identified in CFR sections 200.317 through 200.327. The Organization must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. Additionally, in accorance with 2 CFR sections 200.212 and 200.318(h); 2 CFR section 180.300; 48 CFR section 52.209 6, the Organization must verify that the person with whom you intend to do business is not excluded or disqualified. Condition Policies and procedures in place over procurement, suspension, and debarment are not in conformance with Uniform Guidance. Additionally, the Organization did not procure in accordance with the regulations, including maintaining records sufficient to detail the history of each procurement transaction nor did they comply with suspension and debarement rules. Questioned Costs $1,121,985 Identification of How Questioned Costs Were Computed Questioned costs resulted from the Organization not maintaining or using the required procurement procedures over non payroll expenditures. Total non payroll expenditures included on the SEFA total $1,121,985. Context For all four contracts selected for testing, there were no records manintained to support procurement method, contract selection, or verification the entity was not suspended or disbared. Upon further procedures, we identified that the Organization did not follow any procurement guidelines in procuring all non payroll transactions. Cause and Effect There are no procurement, suspension, and debarement policies in place. As a result, no procedures are being completed over these compliance categories and thus the Organization did not comply with the related compliance requirements. Recommendation We recommend the Organization implement written policies and procedures over procurement, suspension, and debarement that conform with Uniform Guidance and follow those policies. Views of Responsible Officials and Planned Corrective Actions The Organization will implement written policies and procedures over procurement, suspension, and debarement that conform with Uniform Guidance.
Assistance Listing, Federal Agency, and Program Name 93.224, 93.527; COVID 19: Health Center Program Cluster Federal Award Identification Number and Year H80CS24134, H8ECS37956, H8FCS40356, and H8GCS48255 2022 Pass through Entity N/A Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria In accordance with 2 CFR sections 200.318 200.326, the Organization must maintain and use documented procedures for procurement transactions that are consistent with State, local, and tribal laws and regulations and the standards identified in CFR sections 200.317 through 200.327. The Organization must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. Additionally, in accorance with 2 CFR sections 200.212 and 200.318(h); 2 CFR section 180.300; 48 CFR section 52.209 6, the Organization must verify that the person with whom you intend to do business is not excluded or disqualified. Condition Policies and procedures in place over procurement, suspension, and debarment are not in conformance with Uniform Guidance. Additionally, the Organization did not procure in accordance with the regulations, including maintaining records sufficient to detail the history of each procurement transaction nor did they comply with suspension and debarement rules. Questioned Costs $1,121,985 Identification of How Questioned Costs Were Computed Questioned costs resulted from the Organization not maintaining or using the required procurement procedures over non payroll expenditures. Total non payroll expenditures included on the SEFA total $1,121,985. Context For all four contracts selected for testing, there were no records manintained to support procurement method, contract selection, or verification the entity was not suspended or disbared. Upon further procedures, we identified that the Organization did not follow any procurement guidelines in procuring all non payroll transactions. Cause and Effect There are no procurement, suspension, and debarement policies in place. As a result, no procedures are being completed over these compliance categories and thus the Organization did not comply with the related compliance requirements. Recommendation We recommend the Organization implement written policies and procedures over procurement, suspension, and debarement that conform with Uniform Guidance and follow those policies. Views of Responsible Officials and Planned Corrective Actions The Organization will implement written policies and procedures over procurement, suspension, and debarement that conform with Uniform Guidance.
Assistance Listing, Federal Agency, and Program Name 93.224, 93.527; COVID 19: Health Center Program Cluster Federal Award Identification Number and Year H80CS24134, H8ECS37956, H8FCS40356, and H8GCS48255 2022 Pass through Entity N/A Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria In accordance with 2 CFR sections 200.318 200.326, the Organization must maintain and use documented procedures for procurement transactions that are consistent with State, local, and tribal laws and regulations and the standards identified in CFR sections 200.317 through 200.327. The Organization must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. Additionally, in accorance with 2 CFR sections 200.212 and 200.318(h); 2 CFR section 180.300; 48 CFR section 52.209 6, the Organization must verify that the person with whom you intend to do business is not excluded or disqualified. Condition Policies and procedures in place over procurement, suspension, and debarment are not in conformance with Uniform Guidance. Additionally, the Organization did not procure in accordance with the regulations, including maintaining records sufficient to detail the history of each procurement transaction nor did they comply with suspension and debarement rules. Questioned Costs $1,121,985 Identification of How Questioned Costs Were Computed Questioned costs resulted from the Organization not maintaining or using the required procurement procedures over non payroll expenditures. Total non payroll expenditures included on the SEFA total $1,121,985. Context For all four contracts selected for testing, there were no records manintained to support procurement method, contract selection, or verification the entity was not suspended or disbared. Upon further procedures, we identified that the Organization did not follow any procurement guidelines in procuring all non payroll transactions. Cause and Effect There are no procurement, suspension, and debarement policies in place. As a result, no procedures are being completed over these compliance categories and thus the Organization did not comply with the related compliance requirements. Recommendation We recommend the Organization implement written policies and procedures over procurement, suspension, and debarement that conform with Uniform Guidance and follow those policies. Views of Responsible Officials and Planned Corrective Actions The Organization will implement written policies and procedures over procurement, suspension, and debarement that conform with Uniform Guidance.
Assistance Listing, Federal Agency, and Program Name 93.224, 93.527; COVID 19: Health Center Program Cluster Federal Award Identification Number and Year H80CS24134, H8ECS37956, H8FCS40356, and H8GCS48255 2022 Pass through Entity N/A Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria In accordance with 2 CFR sections 200.318 200.326, the Organization must maintain and use documented procedures for procurement transactions that are consistent with State, local, and tribal laws and regulations and the standards identified in CFR sections 200.317 through 200.327. The Organization must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. Additionally, in accorance with 2 CFR sections 200.212 and 200.318(h); 2 CFR section 180.300; 48 CFR section 52.209 6, the Organization must verify that the person with whom you intend to do business is not excluded or disqualified. Condition Policies and procedures in place over procurement, suspension, and debarment are not in conformance with Uniform Guidance. Additionally, the Organization did not procure in accordance with the regulations, including maintaining records sufficient to detail the history of each procurement transaction nor did they comply with suspension and debarement rules. Questioned Costs $1,121,985 Identification of How Questioned Costs Were Computed Questioned costs resulted from the Organization not maintaining or using the required procurement procedures over non payroll expenditures. Total non payroll expenditures included on the SEFA total $1,121,985. Context For all four contracts selected for testing, there were no records manintained to support procurement method, contract selection, or verification the entity was not suspended or disbared. Upon further procedures, we identified that the Organization did not follow any procurement guidelines in procuring all non payroll transactions. Cause and Effect There are no procurement, suspension, and debarement policies in place. As a result, no procedures are being completed over these compliance categories and thus the Organization did not comply with the related compliance requirements. Recommendation We recommend the Organization implement written policies and procedures over procurement, suspension, and debarement that conform with Uniform Guidance and follow those policies. Views of Responsible Officials and Planned Corrective Actions The Organization will implement written policies and procedures over procurement, suspension, and debarement that conform with Uniform Guidance.
CONDITION: The City of McKeesport contracted four (4) vendors for the purchase of seven separate purchases of equipment for the City. These contracts individually exceeded the Uniform Guidance micro purchase threshold of $10,000, but did not exceed the Simplified Acquisition Threshold of $250,000. All of these purchases were procured through a cooperative purchasing group (COSTARS). The City was unable to 1) provide records sufficient to detail the history of procurement for these contracts and 2) provide documentation to verify that price or rate quotations were obtained from an adequate number of qualified sources. This is a repeat finding (2021-005) for the prior year. CRITERIA: Section 2 CFR 200.320(a)(2)(i) of the Uniform Guidance prescribes the bidding requirements for equipment, supplies, and work of any nature made by a non-federal entity whereby the cost exceeds certain dollar thresholds as adjusted periodically. In instances where the cost incurred exceeds the Uniform Guidance micro purchase threshold of $10,000 but does not exceed the Simplified Acquisition Threshold of $250,000, price or rate quotations must be obtained from an adequate number of qualified sources. In addition, as specified in 2 CFR 200. 318(i) of the Uniform Guidance, the City must maintain sufficient records to detail the history of procurement. CAUSE: City personnel directly responsible for the oversight and execution of these procurements were not fully familiar with the procurement requirements as prescribed by Sections 2 CFR 200.320(a)(2)(i) and 2 CFR 200.318(i) of the Uniform Guidance. EFFECT: The City of McKeesport did not comply with the requirements of Sections 2 CFR 200.320(a)(2)(i) and 2 CFR 200.318(i) of the Uniform Guidance with regard to maintaining sufficient records to detail the history of procurement and conducting a cost or price analysis for a procurement in instances where the procurement cost incurred for goods and/or services exceeds the Uniform Guidance micro purchase threshold of $10,000 but does not exceed the Simplified Acquisition Threshold of $250,000. QUESTIONED COST: A&H Equipment (Park Truck) $166,869, Del-Val International (Dump Truck) $175,629, Stephenson Equipment (Asphalt Roller, Backhoe, Leeboy Paver)) $424,240, Laurel Ford (Police Vehicle) $38,625. Total - $805,363 RECOMMENDATION: I am recommending that City management implement, review and update annually as necessary, City federal financial policies and procedures, similar to those developed for use in the City’s Community Development Program to ensure In instances where the procurement cost incurred for goods and/or services exceeds the Uniform Guidance micro purchase threshold of $10,000 but does not exceed the Simplified Acquisition Threshold of $250,000, that 1) price or rate quotations are obtained from an adequate number of qualified sources, and 2) sufficient records are maintained to detail the history of procurement. These measures will enable the City to comply with the procurement requirements as prescribed Sections 2 CFR 200.320(a)(2)(i) and 2 CFR 200.318(i) of the Uniform Guidance. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: The City of McKeesport contracted with a third-party vendor (A&H Equipment for the purchase of a street sweeper. The contract with the third-party vendor, which was procured through a cooperative purchasing group (COSTARS), exceeded the threshold for competitive procurement. The City was unable to provide documentation to verify that the third-party procurement contract was competitively procured, such as a bid evaluation and public solicitation. In addition, the City did not conduct a cost or price analysis for this procurement, which was in excess of the Simplified Acquisition Threshold of $250,000. CRITERIA: Section 2 CFR 200.318(i) of the Uniform Guidance prescribes the bidding requirements for equipment, supplies, and work of any nature made by a non-federal entity whereby the cost exceeds the Simplified Acquisition Threshold. The cost of the street sweeper exceeded the simplified acquisition threshold of $250,000. As specified in 2 CFR 200. 318(i) of the Uniform Guidance, the City must maintain sufficient records to detail the history of procurement. These records will include, but are not necessarily limited to, the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, Section 2 CFR 200.324(a) of the Uniform Guidance requires the performance of a cost or price analysis in connection with every procurement in excess of the Simplified Acquisition Threshold. CAUSE: City personnel directly responsible for the oversight and execution of these procurements were not fully familiar with the procurement requirements as prescribed by Sections 2 CFR 200.318(i) and 2 CFR 200.324(a) of the Uniform Guidance. EFFECT: The City of McKeesport did not comply with the requirements of Sections 2 CFR 200.318(i) and 2 CFR 200.324(a) of the Uniform Guidance with regard to maintaining sufficient records to detail the history of procurement for the construction project and conducting a cost or price analysis for a procurement in excess of the Simplified Acquisition Threshold. QUESTIONED COST: $268,975 RECOMMENDATION: I am recommending that City management implement, review and update annually as necessary, City federal financial policies and procedures, similar to those developed for use in the City’s Community Development Program to ensure In instances where the procurement cost incurred for goods and/or services exceeds the Uniform Guidance Simplified Acquisition, including such instances whereby the City is using a contract vehicle from a cooperative purchase network, that the City is in compliance with all applicable sections of the Uniform Guidance, in specific, Section 2 CFR 200.318(i) of the Uniform Guidance. In addition, I recommend that the City conduct a cost or price analysis for all procurement in excess of the Simplified Acquisition Threshold of $250,000 before receiving bids or proposals in accordance with Section 2 CFR 200.324(a) of the Uniform Guidance. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
2022-004 Missing documentation for procurement, suspension and debarment 93.341 Analyses, Research and Studies to Address the Impact of CMS Programs on American Indian/Alaska Native (AI/AN) Beneficiaries and the Health Care System Serving these Beneficiaries Audit Results: Criteria: Per Uniform Guidance 2 CFR 200.318, any contracts procured with federal funds for over $10,000 should be obtained via a bidding process or documentation is required to show that the contractor is the sole source for the services. In addition, the Organization should keep documentation to show that they have verified that contractors are not suspended or debarred. Condition: Bid or sole source documentation was missing for all five contracts that we selected for testing and there was no documentation of the verification that the contractor was not suspended or debarred. Questioned Costs: None Context: It is important to determine that contractors used are eligible for work and that they have not been suspended or debarred from performing work on projects supported by federal funds It is also important to have full and open competition on contract work that is federally funded. Effect:As a result, the Organization was missing documentation relating to the requirements for procurement, suspension and debarment. Cause:This is due to ineffective controls over the procurement process resulting from staff turnover. Recommendation: Auditors recommend that the Organization maintain all federal award documentation in a location where all authorized personnel have access in order to ensure that it can always be located. We also recommend that management create a process for procurement, including how bids are obtained and maintained for proof of compliance with Uniform Guidance. Management should also establish procedures for verifying that contractors are not suspended or debarred and a system for maintaining this verification should be established. It is critical to maintain detailed documentation to ensure compliance with Uniform Guidance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with this Single Audit Finding and response is included in the Corrective Action Plan
2022-004 Improve Controls and Documentation Over Procurement Federal Program Information Federal Agency: Department of Health and Human Services, Centers for Disease Control and Prevention Award Name(s): Injury Prevention and Control Research and State and Community Based Programs; Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises Assistance Listing Number(s): 93.136, 93.391 Award Year: 2022 Compliance Requirement: Procurement Type of Finding Compliance Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (UG) requires that grant recipients follow procurement procedures for the acquisition of property or services under a federal award. Grantees are required to comply with certain procurement standards as defined in 2 CFR 200.318. These standards include the requirement that the grantee must use its own documented procurement procedures provided that they conform to applicable federal law. In addition, the grantee must maintain records sufficient to detail the history of procurement. Condition and Context During our audit, we tested a sample of two procurement transactions under assistance listing number 93.136 and one transaction under assistance listing number 93.391 for vendors with expenditures between $10,000 and $49,999 during fiscal year 2022. Of the transactions tested, all were missing supporting documentation to validate justification of why it was sole source as approvals were done verbally between the requestor and the Executive Director. In addition, one transaction under assistance listing number 93.136 did not qualify as meeting the requirements of sole source based on the Organization’s procurement policy. Cause The Organization did not have adequate controls or policies in place to maintain formal evidence of sole source justification and to ensure procurement policy was adhered to. Effect or Potential Effect Due to the weakness in internal controls and compliance finding noted above, there is a risk that contracts may be awarded to vendors in a manner that is not consistent with Federal procurement requirements and the Organization’s procurement policy. No questioned costs are reported as it is not quantifiable. Recommendation The Organization should address the weaknesses in internal controls noted above in order to ensure that federal procurements are conducted in accordance with federal requirements and supporting documentation is maintained to support such conclusion. The Organization should ensure that prior to entering into transactions, a review is performed over vendor selection and all required documentation is retained. Views of Responsible Official Management agrees with the finding. Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2022-004 Improve Controls and Documentation Over Procurement Federal Program Information Federal Agency: Department of Health and Human Services, Centers for Disease Control and Prevention Award Name(s): Injury Prevention and Control Research and State and Community Based Programs; Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises Assistance Listing Number(s): 93.136, 93.391 Award Year: 2022 Compliance Requirement: Procurement Type of Finding Compliance Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (UG) requires that grant recipients follow procurement procedures for the acquisition of property or services under a federal award. Grantees are required to comply with certain procurement standards as defined in 2 CFR 200.318. These standards include the requirement that the grantee must use its own documented procurement procedures provided that they conform to applicable federal law. In addition, the grantee must maintain records sufficient to detail the history of procurement. Condition and Context During our audit, we tested a sample of two procurement transactions under assistance listing number 93.136 and one transaction under assistance listing number 93.391 for vendors with expenditures between $10,000 and $49,999 during fiscal year 2022. Of the transactions tested, all were missing supporting documentation to validate justification of why it was sole source as approvals were done verbally between the requestor and the Executive Director. In addition, one transaction under assistance listing number 93.136 did not qualify as meeting the requirements of sole source based on the Organization’s procurement policy. Cause The Organization did not have adequate controls or policies in place to maintain formal evidence of sole source justification and to ensure procurement policy was adhered to. Effect or Potential Effect Due to the weakness in internal controls and compliance finding noted above, there is a risk that contracts may be awarded to vendors in a manner that is not consistent with Federal procurement requirements and the Organization’s procurement policy. No questioned costs are reported as it is not quantifiable. Recommendation The Organization should address the weaknesses in internal controls noted above in order to ensure that federal procurements are conducted in accordance with federal requirements and supporting documentation is maintained to support such conclusion. The Organization should ensure that prior to entering into transactions, a review is performed over vendor selection and all required documentation is retained. Views of Responsible Official Management agrees with the finding. Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2022-003 Implement Controls and Documentation Over Procurement Federal Program Information Federal Agency: U.S. Department of the Interior Award Name: Natural Resource Stewardship Assistance Listing Number(s): 15.944 Award Year: 2022 Compliance Requirement: Procurement Type of Finding Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (UG) requires that grant recipients follow procurement procedures for the acquisition of property or services under a federal award. Grantees are required to comply with certain procurement standards as defined in 2 CFR 200.318. These standards include the requirement that the grantee must use its own documented procurement procedures provided that they conform to applicable federal law. In addition, the grantee must maintain records sufficient to detail the history of procurement. Condition and Context During our audit, we tested a sample of one procurement transaction for a vendor with expenditures between $10,000 and $249,999 during 2022. Of the transaction tested, there was no supporting documentation to validate justification of why the vendor was selected, as approvals were not formally documented. In addition, no evidence was provided to prove a suspension and debarment check was performed. Cause The Organization did not have adequate policies or controls in place to maintain formal evidence of vendor approval. Effect or Potential Effect Due to the weakness in internal controls and compliance finding noted above, there is a risk that contracts may be awarded to vendors in a manner that is not consistent with Federal procurement requirements. Questioned Costs Due to the condition noted above, Federal procurement requirements were not followed and resulted in the following questioned costs. AL Number(s) Name of Federal Program Questioned Costs 15.944 Natural Resource Stewardship $50,672 Recommendation The Organization should address the weaknesses in internal controls noted above in order to ensure that federal procurements are conducted in accordance with federal requirements and supporting documentation is maintained to support such conclusion. The Organization should ensure that prior to entering into transactions, a review is performed over vendor selection and all required documentation is retained. Views of Responsible Official Management agrees with the finding. Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
Program Information: U.S. Department of Transportation AL Number Award Number Award Period Grant Name 20.205 A18AV01093/A17AV00612 1/1/2018-12/31/2022 Highway Planning and Construction Cluster AL Number Award Number Award Period Grant Name 20.509 A18AV01093/218AV00785 1/1/2018-9/30/2023 Road Maintenance Programs Criteria: Per 2 CFR § 200.303 Internal controls, the non-Federal entity must: (a) Establish 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 be in compliance with 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). 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. A non-federal entity must: 1. Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. 2. Conduct all procurement transactions in a manner providing full and open competition, in accordance with 2 CFR section 200.319. 3. Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) and (b). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)). Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). Condition/Context: 20.205 – Highway Planning and Construction Cluster • 1 of 8 Individually Important Items (IIIs) had bidding/solicitation documentation but did not have proper approval. • 2 of 8 IIIs had documentation of one quote obtained but no further documentation. • 5 of 8 IIIs and 2 of 2 procurement samples had no bidding/solicitation support provided. • 8 of 8 IIIs and 2 of 2 suspension and debarment samples did not have documentation of a suspension and debarment search prior to payment. 20.509 – Road Maintenance Programs • 3 of 3 IIIs and 7 of 7 procurement samples had no bidding/solicitation support provided. • 3 of 3 IIIs and 2 of 2 suspension and debarment samples did not have proper documentation provided. [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Cause: Due to turnover in key personnel, Joint Programs had a breakdown in internal controls during 2022. Effect: Without an effective internal control system an entity’s objective: operations, reporting, and compliance cannot be achieved. In addition, Joint Programs could be subject to questioned costs or other sanctions from funding agencies if they determine that Joint Programs did not assure full and open competition for the procurements and/or if vendors retained and paid from federal funds and are later found to be suspended or debarred. Questioned Costs: Known – $971,925 AL# 20.205 Known – $563,676 AL# 20.509 Repeat Finding: Yes – 2021-005. Recommendation: We recommend that Joint Programs use the Green Book to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. We also recommend that Joint Programs conduct training for staff to review procurement and suspension and debarment policies and procedures and maintain all records in a way that allows them to be located and reviewed at any point in time. View of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
Program Information: U.S. Department of Transportation AL Number Award Number Award Period Grant Name 20.205 A18AV01093/A17AV00612 1/1/2018-12/31/2022 Highway Planning and Construction Cluster AL Number Award Number Award Period Grant Name 20.509 A18AV01093/218AV00785 1/1/2018-9/30/2023 Road Maintenance Programs Criteria: Per 2 CFR § 200.303 Internal controls, the non-Federal entity must: (a) Establish 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 be in compliance with 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). 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. A non-federal entity must: 1. Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. 2. Conduct all procurement transactions in a manner providing full and open competition, in accordance with 2 CFR section 200.319. 3. Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) and (b). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)). Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). Condition/Context: 20.205 – Highway Planning and Construction Cluster • 1 of 8 Individually Important Items (IIIs) had bidding/solicitation documentation but did not have proper approval. • 2 of 8 IIIs had documentation of one quote obtained but no further documentation. • 5 of 8 IIIs and 2 of 2 procurement samples had no bidding/solicitation support provided. • 8 of 8 IIIs and 2 of 2 suspension and debarment samples did not have documentation of a suspension and debarment search prior to payment. 20.509 – Road Maintenance Programs • 3 of 3 IIIs and 7 of 7 procurement samples had no bidding/solicitation support provided. • 3 of 3 IIIs and 2 of 2 suspension and debarment samples did not have proper documentation provided. [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Cause: Due to turnover in key personnel, Joint Programs had a breakdown in internal controls during 2022. Effect: Without an effective internal control system an entity’s objective: operations, reporting, and compliance cannot be achieved. In addition, Joint Programs could be subject to questioned costs or other sanctions from funding agencies if they determine that Joint Programs did not assure full and open competition for the procurements and/or if vendors retained and paid from federal funds and are later found to be suspended or debarred. Questioned Costs: Known – $971,925 AL# 20.205 Known – $563,676 AL# 20.509 Repeat Finding: Yes – 2021-005. Recommendation: We recommend that Joint Programs use the Green Book to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. We also recommend that Joint Programs conduct training for staff to review procurement and suspension and debarment policies and procedures and maintain all records in a way that allows them to be located and reviewed at any point in time. View of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
Program Information: U.S. Department of Transportation AL Number Award Number Award Period Grant Name 20.205 A18AV01093/A17AV00612 1/1/2018-12/31/2022 Highway Planning and Construction Cluster AL Number Award Number Award Period Grant Name 20.509 A18AV01093/218AV00785 1/1/2018-9/30/2023 Road Maintenance Programs Criteria: Per 2 CFR § 200.303 Internal controls, the non-Federal entity must: (a) Establish 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 be in compliance with 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). 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. A non-federal entity must: 1. Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. 2. Conduct all procurement transactions in a manner providing full and open competition, in accordance with 2 CFR section 200.319. 3. Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) and (b). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)). Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). Condition/Context: 20.205 – Highway Planning and Construction Cluster • 1 of 8 Individually Important Items (IIIs) had bidding/solicitation documentation but did not have proper approval. • 2 of 8 IIIs had documentation of one quote obtained but no further documentation. • 5 of 8 IIIs and 2 of 2 procurement samples had no bidding/solicitation support provided. • 8 of 8 IIIs and 2 of 2 suspension and debarment samples did not have documentation of a suspension and debarment search prior to payment. 20.509 – Road Maintenance Programs • 3 of 3 IIIs and 7 of 7 procurement samples had no bidding/solicitation support provided. • 3 of 3 IIIs and 2 of 2 suspension and debarment samples did not have proper documentation provided. [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Cause: Due to turnover in key personnel, Joint Programs had a breakdown in internal controls during 2022. Effect: Without an effective internal control system an entity’s objective: operations, reporting, and compliance cannot be achieved. In addition, Joint Programs could be subject to questioned costs or other sanctions from funding agencies if they determine that Joint Programs did not assure full and open competition for the procurements and/or if vendors retained and paid from federal funds and are later found to be suspended or debarred. Questioned Costs: Known – $971,925 AL# 20.205 Known – $563,676 AL# 20.509 Repeat Finding: Yes – 2021-005. Recommendation: We recommend that Joint Programs use the Green Book to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. We also recommend that Joint Programs conduct training for staff to review procurement and suspension and debarment policies and procedures and maintain all records in a way that allows them to be located and reviewed at any point in time. View of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
Program Information: U.S. Department of Transportation AL Number Award Number Award Period Grant Name 20.205 A18AV01093/A17AV00612 1/1/2018-12/31/2022 Highway Planning and Construction Cluster AL Number Award Number Award Period Grant Name 20.509 A18AV01093/218AV00785 1/1/2018-9/30/2023 Road Maintenance Programs Criteria: Per 2 CFR § 200.303 Internal controls, the non-Federal entity must: (a) Establish 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 be in compliance with 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). 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. A non-federal entity must: 1. Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. 2. Conduct all procurement transactions in a manner providing full and open competition, in accordance with 2 CFR section 200.319. 3. Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) and (b). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)). Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). Condition/Context: 20.205 – Highway Planning and Construction Cluster • 1 of 8 Individually Important Items (IIIs) had bidding/solicitation documentation but did not have proper approval. • 2 of 8 IIIs had documentation of one quote obtained but no further documentation. • 5 of 8 IIIs and 2 of 2 procurement samples had no bidding/solicitation support provided. • 8 of 8 IIIs and 2 of 2 suspension and debarment samples did not have documentation of a suspension and debarment search prior to payment. 20.509 – Road Maintenance Programs • 3 of 3 IIIs and 7 of 7 procurement samples had no bidding/solicitation support provided. • 3 of 3 IIIs and 2 of 2 suspension and debarment samples did not have proper documentation provided. [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Cause: Due to turnover in key personnel, Joint Programs had a breakdown in internal controls during 2022. Effect: Without an effective internal control system an entity’s objective: operations, reporting, and compliance cannot be achieved. In addition, Joint Programs could be subject to questioned costs or other sanctions from funding agencies if they determine that Joint Programs did not assure full and open competition for the procurements and/or if vendors retained and paid from federal funds and are later found to be suspended or debarred. Questioned Costs: Known – $971,925 AL# 20.205 Known – $563,676 AL# 20.509 Repeat Finding: Yes – 2021-005. Recommendation: We recommend that Joint Programs use the Green Book to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. We also recommend that Joint Programs conduct training for staff to review procurement and suspension and debarment policies and procedures and maintain all records in a way that allows them to be located and reviewed at any point in time. View of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
Program Information: U.S. Department of Transportation AL Number Award Number Award Period Grant Name 20.205 A18AV01093/A17AV00612 1/1/2018-12/31/2022 Highway Planning and Construction Cluster AL Number Award Number Award Period Grant Name 20.509 A18AV01093/218AV00785 1/1/2018-9/30/2023 Road Maintenance Programs Criteria: Per 2 CFR § 200.303 Internal controls, the non-Federal entity must: (a) Establish 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 be in compliance with 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). 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. A non-federal entity must: 1. Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. 2. Conduct all procurement transactions in a manner providing full and open competition, in accordance with 2 CFR section 200.319. 3. Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) and (b). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)). Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). Condition/Context: 20.205 – Highway Planning and Construction Cluster • 1 of 8 Individually Important Items (IIIs) had bidding/solicitation documentation but did not have proper approval. • 2 of 8 IIIs had documentation of one quote obtained but no further documentation. • 5 of 8 IIIs and 2 of 2 procurement samples had no bidding/solicitation support provided. • 8 of 8 IIIs and 2 of 2 suspension and debarment samples did not have documentation of a suspension and debarment search prior to payment. 20.509 – Road Maintenance Programs • 3 of 3 IIIs and 7 of 7 procurement samples had no bidding/solicitation support provided. • 3 of 3 IIIs and 2 of 2 suspension and debarment samples did not have proper documentation provided. [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Cause: Due to turnover in key personnel, Joint Programs had a breakdown in internal controls during 2022. Effect: Without an effective internal control system an entity’s objective: operations, reporting, and compliance cannot be achieved. In addition, Joint Programs could be subject to questioned costs or other sanctions from funding agencies if they determine that Joint Programs did not assure full and open competition for the procurements and/or if vendors retained and paid from federal funds and are later found to be suspended or debarred. Questioned Costs: Known – $971,925 AL# 20.205 Known – $563,676 AL# 20.509 Repeat Finding: Yes – 2021-005. Recommendation: We recommend that Joint Programs use the Green Book to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. We also recommend that Joint Programs conduct training for staff to review procurement and suspension and debarment policies and procedures and maintain all records in a way that allows them to be located and reviewed at any point in time. View of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
Program Information: U.S. Department of Transportation AL Number Award Number Award Period Grant Name 20.205 A18AV01093/A17AV00612 1/1/2018-12/31/2022 Highway Planning and Construction Cluster AL Number Award Number Award Period Grant Name 20.509 A18AV01093/218AV00785 1/1/2018-9/30/2023 Road Maintenance Programs Criteria: Per 2 CFR § 200.303 Internal controls, the non-Federal entity must: (a) Establish 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 be in compliance with 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). 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. A non-federal entity must: 1. Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. 2. Conduct all procurement transactions in a manner providing full and open competition, in accordance with 2 CFR section 200.319. 3. Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) and (b). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)). Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). Condition/Context: 20.205 – Highway Planning and Construction Cluster • 1 of 8 Individually Important Items (IIIs) had bidding/solicitation documentation but did not have proper approval. • 2 of 8 IIIs had documentation of one quote obtained but no further documentation. • 5 of 8 IIIs and 2 of 2 procurement samples had no bidding/solicitation support provided. • 8 of 8 IIIs and 2 of 2 suspension and debarment samples did not have documentation of a suspension and debarment search prior to payment. 20.509 – Road Maintenance Programs • 3 of 3 IIIs and 7 of 7 procurement samples had no bidding/solicitation support provided. • 3 of 3 IIIs and 2 of 2 suspension and debarment samples did not have proper documentation provided. [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Cause: Due to turnover in key personnel, Joint Programs had a breakdown in internal controls during 2022. Effect: Without an effective internal control system an entity’s objective: operations, reporting, and compliance cannot be achieved. In addition, Joint Programs could be subject to questioned costs or other sanctions from funding agencies if they determine that Joint Programs did not assure full and open competition for the procurements and/or if vendors retained and paid from federal funds and are later found to be suspended or debarred. Questioned Costs: Known – $971,925 AL# 20.205 Known – $563,676 AL# 20.509 Repeat Finding: Yes – 2021-005. Recommendation: We recommend that Joint Programs use the Green Book to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. We also recommend that Joint Programs conduct training for staff to review procurement and suspension and debarment policies and procedures and maintain all records in a way that allows them to be located and reviewed at any point in time. View of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
Program Information: U.S. Department of Transportation AL Number Award Number Award Period Grant Name 20.205 A18AV01093/A17AV00612 1/1/2018-12/31/2022 Highway Planning and Construction Cluster AL Number Award Number Award Period Grant Name 20.509 A18AV01093/218AV00785 1/1/2018-9/30/2023 Road Maintenance Programs Criteria: Per 2 CFR § 200.303 Internal controls, the non-Federal entity must: (a) Establish 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 be in compliance with 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). 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. A non-federal entity must: 1. Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. 2. Conduct all procurement transactions in a manner providing full and open competition, in accordance with 2 CFR section 200.319. 3. Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) and (b). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)). Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). Condition/Context: 20.205 – Highway Planning and Construction Cluster • 1 of 8 Individually Important Items (IIIs) had bidding/solicitation documentation but did not have proper approval. • 2 of 8 IIIs had documentation of one quote obtained but no further documentation. • 5 of 8 IIIs and 2 of 2 procurement samples had no bidding/solicitation support provided. • 8 of 8 IIIs and 2 of 2 suspension and debarment samples did not have documentation of a suspension and debarment search prior to payment. 20.509 – Road Maintenance Programs • 3 of 3 IIIs and 7 of 7 procurement samples had no bidding/solicitation support provided. • 3 of 3 IIIs and 2 of 2 suspension and debarment samples did not have proper documentation provided. [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Cause: Due to turnover in key personnel, Joint Programs had a breakdown in internal controls during 2022. Effect: Without an effective internal control system an entity’s objective: operations, reporting, and compliance cannot be achieved. In addition, Joint Programs could be subject to questioned costs or other sanctions from funding agencies if they determine that Joint Programs did not assure full and open competition for the procurements and/or if vendors retained and paid from federal funds and are later found to be suspended or debarred. Questioned Costs: Known – $971,925 AL# 20.205 Known – $563,676 AL# 20.509 Repeat Finding: Yes – 2021-005. Recommendation: We recommend that Joint Programs use the Green Book to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. We also recommend that Joint Programs conduct training for staff to review procurement and suspension and debarment policies and procedures and maintain all records in a way that allows them to be located and reviewed at any point in time. View of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
Program Information: U.S. Department of Transportation AL Number Award Number Award Period Grant Name 20.205 A18AV01093/A17AV00612 1/1/2018-12/31/2022 Highway Planning and Construction Cluster AL Number Award Number Award Period Grant Name 20.509 A18AV01093/218AV00785 1/1/2018-9/30/2023 Road Maintenance Programs Criteria: Per 2 CFR § 200.303 Internal controls, the non-Federal entity must: (a) Establish 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 be in compliance with 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). 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. A non-federal entity must: 1. Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. 2. Conduct all procurement transactions in a manner providing full and open competition, in accordance with 2 CFR section 200.319. 3. Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) and (b). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)). Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). Condition/Context: 20.205 – Highway Planning and Construction Cluster • 1 of 8 Individually Important Items (IIIs) had bidding/solicitation documentation but did not have proper approval. • 2 of 8 IIIs had documentation of one quote obtained but no further documentation. • 5 of 8 IIIs and 2 of 2 procurement samples had no bidding/solicitation support provided. • 8 of 8 IIIs and 2 of 2 suspension and debarment samples did not have documentation of a suspension and debarment search prior to payment. 20.509 – Road Maintenance Programs • 3 of 3 IIIs and 7 of 7 procurement samples had no bidding/solicitation support provided. • 3 of 3 IIIs and 2 of 2 suspension and debarment samples did not have proper documentation provided. [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Cause: Due to turnover in key personnel, Joint Programs had a breakdown in internal controls during 2022. Effect: Without an effective internal control system an entity’s objective: operations, reporting, and compliance cannot be achieved. In addition, Joint Programs could be subject to questioned costs or other sanctions from funding agencies if they determine that Joint Programs did not assure full and open competition for the procurements and/or if vendors retained and paid from federal funds and are later found to be suspended or debarred. Questioned Costs: Known – $971,925 AL# 20.205 Known – $563,676 AL# 20.509 Repeat Finding: Yes – 2021-005. Recommendation: We recommend that Joint Programs use the Green Book to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. We also recommend that Joint Programs conduct training for staff to review procurement and suspension and debarment policies and procedures and maintain all records in a way that allows them to be located and reviewed at any point in time. View of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
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 200.317 - 200.327. 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. A non-Federal entity must: 1. Meet the general procurement standards in 2 CFR 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. 2. Conduct all procurement transactions in a manner providing full and open competition, in accordance with 2 CFR 200.319. 3. Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR 200.320(a)(1) and (2). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold ($250,000). Micro-purchases may be awarded without soliciting competitive quotations if the non-Federal entity considers the price to be reasonable (2 CFR 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR 200.320(b)). 4. For acquisitions exceeding the simplified acquisition threshold, the non-Federal entity must use one of the following procurement methods: the sealed bid method if the acquisition meets the criteria in 2 CFR 200.320(b); the competitive proposals method under the conditions specified in 2 CFR 200.320(b)(2); or the noncompetitive proposals method (i.e., solicit a proposal from only one source) but only when one or more of four circumstances are met, in accordance with 2 CFR 200.320(c). 5. Perform a cost or price analysis in connection with every procurement action in excess of the simplified acquisition threshold, including contract modifications (2 CFR 200.323(a)). The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used (2 CFR 200.323(b)). 6. Ensure that every purchase order or other contract includes applicable provisions required by 2 CFR 200.326. These provisions are described in Appendix II to 2 CFR Part 200, “Contract Provisions for Non-Federal Entity Contracts Under Federal Awards.” Although the Village contracted with a consultant to assist the Village with compliance with various procurement compliance requirements, the Village does not have any formal policies in place regarding procurement requirements. We recommend that the Village adopt formal policies and procedures that address procurement requirements.
Procurement – Suspension and Debarment Information on Federal Program: U.S. Department of Health COVID-19 Detection and Mitigation of COVID-19 in Confinement Facilities, federal assistance listing number 93.323. Criteria: 2 CFR Sections 200.212, 200.318(h), and 180.300 and 48 CFR Section 52.209-6 state that a non-Federal entity must review that an entity with which it plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded from participation in federal award programs. Statement of Condition: During our testing for procurement compliance, it was determined that the New York State Sheriffs’ Association, Inc. did not verify that vendors charged to the major program are not debarred, suspended, or otherwise excluded from participation in federal award programs. Questioned Cost: None Statement of Cause: Management was not aware of the requirement to review an entity’s status. Statement of Effect: The New York State Sheriffs’ Association, Inc. is not in compliance with 2 CFR Sections 200.212, 200.318(h), and 180.300 and 48 CFR Section 52.209-6. As a result, the Association could enter into covered transactions with entities that are debarred, suspended, or otherwise excluded from participation in federal award programs. Repeat Finding: No Recommendation: We recommend management review and document the verification that vendors are not debarred, suspended, or otherwise excluded from participation in federal award programs. Views of the Responsible Officials and Planned Corrective Actions: Vendors will be reviewed and documented that they are not debarred, suspended, or otherwise excluded from participation in federal award programs by use of the System for Award Management (SAM), the Official U.S. Government system. [New procedure implemented] Perspective Information: There was one vendor in excess of the $25,000 threshold which was reviewed to determine eligibility for participation noting they are not debarred, suspended, or otherwise excluded from participation in federal award programs.
City of Renton January 1, 2022 through December 31, 2022 2022-001 The City’s internal controls were inadequate for ensuring compliance with procurement and suspension and debarment requirements. Assistance Listing Number and Title: 20.205 Highway Planning andConstruction Grant Federal Grantor Name: Federal Highway Administration U.S. Department of Transportation Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation Pass-through Award/Contract Number: STPUL-1615(005) and HIPULSTP-9917(037) Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Description of Condition During fiscal year 2022, the City spent $3,658,423 in federal grant funds awarded by the Federal Highway Administration and passed through by the Washington State Department of Transportation. This program gives funding to help state and local government agencies plan and develop an integrated, interconnected transportation system. The City used program funding on seven projects during fiscal year 2022. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Our audit found the City’s internal controls were inadequate for ensuring compliance with the following federal requirements. Procurement Federal regulations require recipients to follow their own written procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must conform to federal procurement thresholds and procedures to ensure recipients follow the most restrictive of federal, state or local procurement methods when using federal funds. Although the City implemented a procurement policy, it does not conform to the most restrictive methods and thresholds for procuring personal services. Additionally, the City’s internal controls were ineffective for ensuring its compliance with federal procurement requirements for personal services. Suspension and debarment Federal regulations prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the City 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 contractors are not been suspended, debarred or otherwise excluded from participating in federal programs. The City may accomplish this verification by obtaining 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 City must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. The City’s internal controls were inadequate for ensuring staff verified the suspension and debarment status for all covered transactions. Specifically, the City was unable to provide documentation demonstrating one personal services contractor was not suspended or debarred from participating in federal programs before entering into the agreement. We consider these control deficiencies to be material weaknesses. Cause of Condition Procurement City staff did not know the federal requirement for procuring personal services was more restrictive than local and state requirements. Further, staff mistakenly thought that legal services were not subject to federal procurement requirements. Suspension and debarment City staff were aware of the requirement, but they could not locate documentation to show that one contractor’s suspension and debarment status was verified. Effect of Condition Procurement Without updated written procedures, the City is at greater risk of noncompliance with following the most restrictive procurement methods when procuring contractors paid all or in part with federal funds. In 2021, the City awarded two personal services contracts for legal services, totaling $365,000, without competitively procuring them. Without effective internal controls, the City cannot ensure it allowed for full and open competition, received the best price, and complied with federal procurement requirements. Suspension and debarment The City was unable to demonstrate it had obtained a written certification, inserted a clause into the agreement, or maintained support of checking SAM.gov to verify one contractor it paid $268,846 in 2022 was not suspended or debarred. Without verification, the City increases it risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any program funds the City made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. The City subsequently verified the contractor was not suspended or debarred, so we are not questioning costs. Recommendation We recommend the City establish internal controls to ensure it meets federal procurement and suspension and debarment requirements by: • Updating its written policies and procedures to conform to Uniform Guidance (2 CFR 200.318-327) • Procuring goods and services in accordance with federal regulations, state law, and its own procurement policies and procedures • Verifying that all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them or charging costs to a federal award, and maintain documentation demonstrating compliance with this requirement City’s Response Auditor’s Remarks We appreciate the City’s commitment to resolving the finding, and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during the next regular 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by non-federal entities. Title 2 CFR Part 180, OMB Guidelines to Agencies on Government wide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
City of Renton January 1, 2022 through December 31, 2022 2022-001 The City’s internal controls were inadequate for ensuring compliance with procurement and suspension and debarment requirements. Assistance Listing Number and Title: 20.205 Highway Planning andConstruction Grant Federal Grantor Name: Federal Highway Administration U.S. Department of Transportation Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation Pass-through Award/Contract Number: STPUL-1615(005) and HIPULSTP-9917(037) Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Description of Condition During fiscal year 2022, the City spent $3,658,423 in federal grant funds awarded by the Federal Highway Administration and passed through by the Washington State Department of Transportation. This program gives funding to help state and local government agencies plan and develop an integrated, interconnected transportation system. The City used program funding on seven projects during fiscal year 2022. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Our audit found the City’s internal controls were inadequate for ensuring compliance with the following federal requirements. Procurement Federal regulations require recipients to follow their own written procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must conform to federal procurement thresholds and procedures to ensure recipients follow the most restrictive of federal, state or local procurement methods when using federal funds. Although the City implemented a procurement policy, it does not conform to the most restrictive methods and thresholds for procuring personal services. Additionally, the City’s internal controls were ineffective for ensuring its compliance with federal procurement requirements for personal services. Suspension and debarment Federal regulations prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the City 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 contractors are not been suspended, debarred or otherwise excluded from participating in federal programs. The City may accomplish this verification by obtaining 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 City must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. The City’s internal controls were inadequate for ensuring staff verified the suspension and debarment status for all covered transactions. Specifically, the City was unable to provide documentation demonstrating one personal services contractor was not suspended or debarred from participating in federal programs before entering into the agreement. We consider these control deficiencies to be material weaknesses. Cause of Condition Procurement City staff did not know the federal requirement for procuring personal services was more restrictive than local and state requirements. Further, staff mistakenly thought that legal services were not subject to federal procurement requirements. Suspension and debarment City staff were aware of the requirement, but they could not locate documentation to show that one contractor’s suspension and debarment status was verified. Effect of Condition Procurement Without updated written procedures, the City is at greater risk of noncompliance with following the most restrictive procurement methods when procuring contractors paid all or in part with federal funds. In 2021, the City awarded two personal services contracts for legal services, totaling $365,000, without competitively procuring them. Without effective internal controls, the City cannot ensure it allowed for full and open competition, received the best price, and complied with federal procurement requirements. Suspension and debarment The City was unable to demonstrate it had obtained a written certification, inserted a clause into the agreement, or maintained support of checking SAM.gov to verify one contractor it paid $268,846 in 2022 was not suspended or debarred. Without verification, the City increases it risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any program funds the City made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. The City subsequently verified the contractor was not suspended or debarred, so we are not questioning costs. Recommendation We recommend the City establish internal controls to ensure it meets federal procurement and suspension and debarment requirements by: • Updating its written policies and procedures to conform to Uniform Guidance (2 CFR 200.318-327) • Procuring goods and services in accordance with federal regulations, state law, and its own procurement policies and procedures • Verifying that all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them or charging costs to a federal award, and maintain documentation demonstrating compliance with this requirement City’s Response Auditor’s Remarks We appreciate the City’s commitment to resolving the finding, and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during the next regular 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by non-federal entities. Title 2 CFR Part 180, OMB Guidelines to Agencies on Government wide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.