Finding 2022-007 – Procurement US Department of the Treasury – COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (ARPA) (ALN 21.027) Condition: The City could not provide evidence that the stormwater project totaling $1,783,033 for the year ended December 31, 2022 followed formal procurement procedures. The stormwater contract exceeds the Uniform Guidance formal procurement methods. In addition, in accordance with the Uniform Guidance, a purchase price from the Commonwealth of Pennsylvania COSTARS cooperative purchasing program is considered to be only one competitive price proposal and it cannot replace a full procurement process. Criteria: In accordance with Uniform Guidance procurement requirements found in 2 CFR Part 200.318 through 200.327, the City is required to ensure that procurement methods used for purchases are appropriate based on the dollar amount of the purchase. Cause: Procedures in place to ensure that the proper procurement process is followed were not adequate. Effect: The City was not in compliance with the procurement requirements of the Uniform Guidance. Repeat Finding: Yes Questioned costs: Unknown Recommendation: We recommend that the City establish procedures to ensure that their purchasing policy follows Uniform Guidance procurement standards. View of Responsible Official: The City agrees. See the corrective action plan.
Finding 2022-007 – Procurement US Department of the Treasury – COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (ARPA) (ALN 21.027) Condition: The City could not provide evidence that the stormwater project totaling $1,783,033 for the year ended December 31, 2022 followed formal procurement procedures. The stormwater contract exceeds the Uniform Guidance formal procurement methods. In addition, in accordance with the Uniform Guidance, a purchase price from the Commonwealth of Pennsylvania COSTARS cooperative purchasing program is considered to be only one competitive price proposal and it cannot replace a full procurement process. Criteria: In accordance with Uniform Guidance procurement requirements found in 2 CFR Part 200.318 through 200.327, the City is required to ensure that procurement methods used for purchases are appropriate based on the dollar amount of the purchase. Cause: Procedures in place to ensure that the proper procurement process is followed were not adequate. Effect: The City was not in compliance with the procurement requirements of the Uniform Guidance. Repeat Finding: Yes Questioned costs: Unknown Recommendation: We recommend that the City establish procedures to ensure that their purchasing policy follows Uniform Guidance procurement standards. View of Responsible Official: The City agrees. See the corrective action plan.
2022-001 – Procurement and Suspension and Debarment Finding Type: Material Noncompliance; Material Weakness in Internal Control over Compliance Program: Rural Communities Opioid Response – Planning/Rural Health Outreach and Rural Network Development Program (AL# 93.912); U.S. Department of Health and Human Services; Direct award; all grant numbers. Criteria: Non-federal entities 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. Condition: The Organization's procurement policies were not complete and the Organization did not follow the federal procurement standards which provides specific guidance including process and documentation requirements necessary to be in compliance as required by the 2 CFR sections 200.318 through 200.326. Cause: The Organization’s procurement policies do not include the federal procurement requirements noted at 2 CFR section 200.318 through 200.326. Additionally, the Organization did not maintain the required procurement documentation, provide for full and open competition, or provide support for limitation of such competition. Effect: Future procurement arrangements may not meet the federal guidelines necessary for projects funded by federal sources. The Organization may have to pay back funds received for a project where federal funds were used for the procurement of products or services, but the required federal process was not met. Questioned Costs: No costs were questioned as a result of this finding. Recommendation: The Organization should update their procurement policy to include all requirements as noted in 2 CFR sections 200.318-200.326 and ensure that all future agreements follow the required processes. View of Responsible Officials: Management agrees with the finding and plans to update their procurement policy.
2022-001 – Procurement and Suspension and Debarment Finding Type: Material Noncompliance; Material Weakness in Internal Control over Compliance Program: Rural Communities Opioid Response – Planning/Rural Health Outreach and Rural Network Development Program (AL# 93.912); U.S. Department of Health and Human Services; Direct award; all grant numbers. Criteria: Non-federal entities 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. Condition: The Organization's procurement policies were not complete and the Organization did not follow the federal procurement standards which provides specific guidance including process and documentation requirements necessary to be in compliance as required by the 2 CFR sections 200.318 through 200.326. Cause: The Organization’s procurement policies do not include the federal procurement requirements noted at 2 CFR section 200.318 through 200.326. Additionally, the Organization did not maintain the required procurement documentation, provide for full and open competition, or provide support for limitation of such competition. Effect: Future procurement arrangements may not meet the federal guidelines necessary for projects funded by federal sources. The Organization may have to pay back funds received for a project where federal funds were used for the procurement of products or services, but the required federal process was not met. Questioned Costs: No costs were questioned as a result of this finding. Recommendation: The Organization should update their procurement policy to include all requirements as noted in 2 CFR sections 200.318-200.326 and ensure that all future agreements follow the required processes. View of Responsible Officials: Management agrees with the finding and plans to update their procurement policy.
2022-001 – Procurement and Suspension and Debarment Finding Type: Material Noncompliance; Material Weakness in Internal Control over Compliance Program: Rural Communities Opioid Response – Planning/Rural Health Outreach and Rural Network Development Program (AL# 93.912); U.S. Department of Health and Human Services; Direct award; all grant numbers. Criteria: Non-federal entities 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. Condition: The Organization's procurement policies were not complete and the Organization did not follow the federal procurement standards which provides specific guidance including process and documentation requirements necessary to be in compliance as required by the 2 CFR sections 200.318 through 200.326. Cause: The Organization’s procurement policies do not include the federal procurement requirements noted at 2 CFR section 200.318 through 200.326. Additionally, the Organization did not maintain the required procurement documentation, provide for full and open competition, or provide support for limitation of such competition. Effect: Future procurement arrangements may not meet the federal guidelines necessary for projects funded by federal sources. The Organization may have to pay back funds received for a project where federal funds were used for the procurement of products or services, but the required federal process was not met. Questioned Costs: No costs were questioned as a result of this finding. Recommendation: The Organization should update their procurement policy to include all requirements as noted in 2 CFR sections 200.318-200.326 and ensure that all future agreements follow the required processes. View of Responsible Officials: Management agrees with the finding and plans to update their procurement policy.
2022-001 – Procurement and Suspension and Debarment Finding Type: Material Noncompliance; Material Weakness in Internal Control over Compliance Program: Rural Communities Opioid Response – Planning/Rural Health Outreach and Rural Network Development Program (AL# 93.912); U.S. Department of Health and Human Services; Direct award; all grant numbers. Criteria: Non-federal entities 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. Condition: The Organization's procurement policies were not complete and the Organization did not follow the federal procurement standards which provides specific guidance including process and documentation requirements necessary to be in compliance as required by the 2 CFR sections 200.318 through 200.326. Cause: The Organization’s procurement policies do not include the federal procurement requirements noted at 2 CFR section 200.318 through 200.326. Additionally, the Organization did not maintain the required procurement documentation, provide for full and open competition, or provide support for limitation of such competition. Effect: Future procurement arrangements may not meet the federal guidelines necessary for projects funded by federal sources. The Organization may have to pay back funds received for a project where federal funds were used for the procurement of products or services, but the required federal process was not met. Questioned Costs: No costs were questioned as a result of this finding. Recommendation: The Organization should update their procurement policy to include all requirements as noted in 2 CFR sections 200.318-200.326 and ensure that all future agreements follow the required processes. View of Responsible Officials: Management agrees with the finding and plans to update their procurement policy.
U.S. Department of Treasury Program Name: Coronavirus State and Local Fiscal Recovery Fund Assistance Listing Number 21.027 Internal Control Over Procurement Criteria: 2 CFR Part 200.318, requires grant recipients to follow the procurement standards established by their state and their own policies as long as those standards meet federal requirements. The County’s procurement standards meet federal and state requirements. Condition: During our testing of the Coronavirus State and Local Fiscal Recovery Fund (“ARPA”), it was discovered that the County did not adhere to its established Procurement Policy as multiple contractors were engaged without any formal quote or a bid. Possible Effects: The County could unintentionally enter into a contract that the County’s governance would deem unsuitable were the proper policy followed. Questioned Costs: $633,457. Context/Effect: We tested four contractors paid with ARPA funds who were engaged without a formal approval, quote or competitive bid. Cause: The County did not adhere to its established Procurement Policy, and did not adhere to the Uniform Guidance requirements to ensure free and open competition. Recommendation: We recommend the County review its process for awarding all contracts paid with federal funding to ensure free and open competition in accordance with federal guidelines. Management's Response: We agree and have taken proactive measures within the Purchasing Department to enhance training and awareness among our staff. Additionally, the Grant division has been reinforcing the importance of adhering to Federal grant guidelines regarding procurement. We will continue to monitor and improve our processes to ensure compliance with established guidelines.
Criteria: Uniform Guidance [(CFR 2, §200.318(c)(1)] requires a non-federal entity must maintain written standards of conduct covering conflicts of interest and governing the action of its employees engaged in the selection, award and administration of contracts. Condition: The District does not have a written conflict of interest policy. Context: During our consideration of compliance requirements of Uniform Guidance, we noted the District had not adopted a conflict of interest policy. Effect: The District is not in compliance with requirements of Uniform Guidance. Cause of Condition: The District has not finalized its evaluation of existing policies for compliance with Uniform Guidance requirements. Recommendation: We recommend the District finalize its evaluation of existing policies and formally adopt a written conflict of interest policy. Views of Responsible Officials and Planned Corrective Actions: The District concurs with the recommendation to adopt a written conflict of interest policy and the District has implemented a written conflict of interest policy for the next fiscal year.
Criteria: Uniform Guidance [(CFR 2, §200.318] requires that any entity expending over $750,000 in federal funds to adopt a procurement policy that aligns with the requirements of Uniform Guidance. Condition: The District does not have a procurement policy. Context: During our consideration of compliance requirements, we noted that the District does not have a written procurement policy. Effect: The District is not in compliance with the requirements of Uniform Guidance. Cause of Condition: The District has not finalized its evaluation of existing policies and formally adopt a written procurement policy. Recommendation: The District should finalize its evaluation of existing policies and formally adopt a written procurement policy that is in compliance with the Uniform Guidance. Views of Responsible Officials and Planned Corrective Actions: The District concurs with the recommendation to adopt a written procurement policy and will adopt one for the next fiscal year.
2022-006 Procurement and Suspension and Debarment Prior Year Finding Number: 2021-006 Repeat Finding Since: 2020 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Transportation and U.S. Department of the Treasury Program: 20.205 Highway Planning and Construction, 21.027 COVID-19 — Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: Assistance Listing Number Award Number Year 20.205 1052136 2022 21.027 Federal Direct 2022 Pass-Through Agency: Assistance Listing Number Pass-Through Agency 20.205 Minnesota Department of Transportation 21.027 Not applicable Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. In addition, Title 2 U.S. Code of Federal Regulations § 200.318 states that the non-federal entity must use its own documented procurement procedures which reflect applicable state, local, and tribal laws and regulations, provided that the procurements conform with applicable federal law and the standards identified in this regulation. Lastly, 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 Title 2 U.S. Code of Federal Regulations § 180.220. Condition: The County has written procurement policies; however, these policies do not include the required components in accordance with Title 2 U.S. Code of Federal Regulations § 200.318. In addition, in the sample of two covered transactions tested, the verification for suspension and debarment was not performed before entering into the covered transactions. Questioned Costs: None. Context: This issue was discovered during the audit of the major federal programs; however, it impacts federal programs county-wide. Written policies that reflect the specific components of federal regulations improve controls to help ensure compliance with federal award requirements. The vendors were determined in the audit to not be suspended or debarred for the two covered transactions sampled. The County has drafted updated procurement policies to include components of the federal procurement requirements; these are pending review and approval by the Board of County Commissioners. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Written policies and procedures that are not updated to reflect the federal procurement requirements increase the risk of noncompliance with federal program requirements. Failure to verify vendors are not suspended or debarred may result in the County entering into a transaction with a vendor that is not authorized to provide goods and services. Cause: The County has not prioritized updating its Procurement Policy for changes arising from federal procurement requirements due to the County not entering into many procurement contracts in its federal programs outside of highway contracts. In addition, Coronavirus State and Local Fiscal Recovery Funds were spent prior to the County determining they would be funded with federal funds and subject to suspension and debarment requirements. Recommendation: We recommend the County include the specific components of the federal procurement requirements in its written procurement policies and procedures. We also recommend the County establish policies and procedures to ensure it does not enter into covered transactions with parties that are suspended or debarred. View of Responsible Official: Acknowledge
2022-006 Procurement and Suspension and Debarment Prior Year Finding Number: 2021-006 Repeat Finding Since: 2020 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Transportation and U.S. Department of the Treasury Program: 20.205 Highway Planning and Construction, 21.027 COVID-19 — Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: Assistance Listing Number Award Number Year 20.205 1052136 2022 21.027 Federal Direct 2022 Pass-Through Agency: Assistance Listing Number Pass-Through Agency 20.205 Minnesota Department of Transportation 21.027 Not applicable Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. In addition, Title 2 U.S. Code of Federal Regulations § 200.318 states that the non-federal entity must use its own documented procurement procedures which reflect applicable state, local, and tribal laws and regulations, provided that the procurements conform with applicable federal law and the standards identified in this regulation. Lastly, 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 Title 2 U.S. Code of Federal Regulations § 180.220. Condition: The County has written procurement policies; however, these policies do not include the required components in accordance with Title 2 U.S. Code of Federal Regulations § 200.318. In addition, in the sample of two covered transactions tested, the verification for suspension and debarment was not performed before entering into the covered transactions. Questioned Costs: None. Context: This issue was discovered during the audit of the major federal programs; however, it impacts federal programs county-wide. Written policies that reflect the specific components of federal regulations improve controls to help ensure compliance with federal award requirements. The vendors were determined in the audit to not be suspended or debarred for the two covered transactions sampled. The County has drafted updated procurement policies to include components of the federal procurement requirements; these are pending review and approval by the Board of County Commissioners. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Written policies and procedures that are not updated to reflect the federal procurement requirements increase the risk of noncompliance with federal program requirements. Failure to verify vendors are not suspended or debarred may result in the County entering into a transaction with a vendor that is not authorized to provide goods and services. Cause: The County has not prioritized updating its Procurement Policy for changes arising from federal procurement requirements due to the County not entering into many procurement contracts in its federal programs outside of highway contracts. In addition, Coronavirus State and Local Fiscal Recovery Funds were spent prior to the County determining they would be funded with federal funds and subject to suspension and debarment requirements. Recommendation: We recommend the County include the specific components of the federal procurement requirements in its written procurement policies and procedures. We also recommend the County establish policies and procedures to ensure it does not enter into covered transactions with parties that are suspended or debarred. View of Responsible Official: Acknowledge
#2022-007 – Significant Deficiency – Special Tests Criteria Uniform Guidance (UG) requires non-Federal entities that receive grant funding to have written policies in the following areas: Internal Controls (2 CFR 200.303) Travel (2 CFR 200.474) Financial Management and Accounting which includes Cash Management and Allowability (2CFR 200.302) Personnel Compensation – Time and Effort Reporting (2CFR 200.430(i)) Conflict of Interest/Disclosures (2CFR 200.318) Procurement (2CFR 200.319) Condition During the audit we noted that the Organization does not have written policies in place over these areas in accordance with UG. Cause The Organization was not aware of the requirement to have these written policies in place. Effect The potential effect of not having these policies in place is that the Organization’s expenses are not in accordance with UG. Questioned Costs None Perspective Information No policies or procedures were noted that are in accordance with UG. As a response to the prior year finding, the Organization noted that they will add policies to the fiscal manual for future compliance. Identification as a repeat finding A similar issue was noted in prior year finding #2021-007. Recommendation We recommend that the Organization update the fiscal manual to include policies that are compliant with UG.
#2022-007 – Significant Deficiency – Special Tests Criteria Uniform Guidance (UG) requires non-Federal entities that receive grant funding to have written policies in the following areas: Internal Controls (2 CFR 200.303) Travel (2 CFR 200.474) Financial Management and Accounting which includes Cash Management and Allowability (2CFR 200.302) Personnel Compensation – Time and Effort Reporting (2CFR 200.430(i)) Conflict of Interest/Disclosures (2CFR 200.318) Procurement (2CFR 200.319) Condition During the audit we noted that the Organization does not have written policies in place over these areas in accordance with UG. Cause The Organization was not aware of the requirement to have these written policies in place. Effect The potential effect of not having these policies in place is that the Organization’s expenses are not in accordance with UG. Questioned Costs None Perspective Information No policies or procedures were noted that are in accordance with UG. As a response to the prior year finding, the Organization noted that they will add policies to the fiscal manual for future compliance. Identification as a repeat finding A similar issue was noted in prior year finding #2021-007. Recommendation We recommend that the Organization update the fiscal manual to include policies that are compliant with UG.
FINDING 2022-003Subject: COVID-19 - Coronavirus State and Local Fiscal RecoveryFunds - Procurement and Suspension and DebarmentFederal Agency: Department of the TreasuryFederal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery FundsAssistance Listings Number: 21.027Federal Award Numbers and Years (or Other Identifying Numbers): FY 2021, SWIF222533Pass-Through Entities: Direct, Indiana Finance AuthorityCompliance Requirement: Procurement and Suspension and DebarmentAudit Findings: Material Weakness, Modified OpinionCondition and ContextProcurementThe Indiana General Assembly allocated $100 million of federal State and Local FiscalRecovery Funds (SLFRF) to the Indiana Finance Authority (IFA) to provide grants for drinkingwater, stormwater, and wastewater projects that protect and improve public health throughoutthe State. As such, the IFA created the Water Infrastructure Grant Program which consists oftwo grants, the State Water Infrastructure Fund (SWIF) and Transportation and Stormwater(TRSW). The City applied for and was awarded a SWIF grant in the amount of $5,500,000.Federal regulations allow for informal procurement methods when the value of the procurementfor property or services does not exceed the simplified acquisition threshold, which is customarilyset at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of$150,000 or less for when small purchase procedures may be used. Indiana Code providesthat the proper purchasing method would be the bidding process, unless the purchase meetscertain other qualifications.Two vendors fell within the simplified acquisition threshold. The total dollar value of the twocovered transactions was $8,825,455. Of that amount, $1,880,565 was paid to the vendors in2022. For one vendor, paid $365,512, the City did not have contract files to document thehistory of the procurement, including the rationale for the method of procurement, nor selectionof the contract. In addition, there was no documentation that a cost or price analysis wasperformed.The lack of internal controls and noncompliance were systemic throughout the audit period.Suspension and DebarmentThe City elected to receive the standard revenue loss allowance, allowing them to claim theirtotal SLFRF allocation from the U.S. Department of the Treasury (Treasury) of $3,863,645 asrevenue loss to use for government services. As such, all SLFRF program funds wereexpended under the revenue loss eligible use category. The Treasury determined that thereare no subawards under this eligible use category, and that recipients' use of revenue lossfunds would not give rise to subrecipient relationships given that there is no federal program orpurpose to carry out in the case of the revenue loss portion of the award. In addition, the City'sSWIF award funded with SLFRF program funds, in the amount of $5,500,000, is subject tosuspension and debarment requirements.Prior to entering into subawards and covered transactions with SLFRF award funds, recipientsare required to verify that such contractors and subrecipients are not suspended, debarred, orotherwise excluded. "Covered transactions" include, but are not limited to, contracts for goodsand services awarded under a non-procurement transaction (i.e., grant agreement) that areexpected to equal or exceed $25,000. The verification is to be done by checking the ExcludedParties List System (EPLS), collecting a certification from that person, or adding a clause orcondition to the covered transaction with that person. Due to the Treasury's determination thatthe revenue loss eligible use category does not give rise to subawards and the fact the City didsubgrant any of its SWIF award, the City was only required to comply with suspension anddebarment requirements related to covered transactions.Upon inquiry of the City in order to review the procedures in place for verifying that an entitywith which it plans to enter into a covered transaction is not suspended, debarred, or otherwiseexcluded, the City divulged that they were unaware of the suspension and debarment requirementsrelated to the SLFRF awards. Nine covered transactions that equaled or exceeded$25,000 were identified. All nine transactions, totaling $2,339,050, were selected for testing.The City did not verify the vendors' suspension and debarment status prior to payment on anyof the covered transactions due to the City not having any policies or procedures in place toverify that contractors were neither suspended nor debarred, or otherwise excluded or disqualifiedfrom participating in federal assistance programs or activities.The lack of internal controls and noncompliance were systemic issues throughout the audit period.Criteria2 CFR 200.303 states in part:"The non-Federal entity must:(a) Establish and maintain effective internal control over the Federal award that providesreasonable assurance that the non-Federal entity is managing the Federal award incompliance with Federal statutes, regulations, and the terms and conditions of the Federalaward. These internal controls should be in compliance with guidance in 'Standards forInternal Control in the Federal Government' issued by the Comptroller General of theUnited States or the 'Internal Control Integrated Framework', issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO). . . ."2 CFR 200.318 states in part:"(a) The non-Federal entity must have and use documented procurement procedures,consistent with State, local, and tribal laws and regulations and the standards of this section,for the acquisition of property or services required under a Federal award or subaward. Thenon-Federal entity's documented procurement procedures must conform to the procurementstandards identified in this part. . . .(i) The non-Federal entity must maintain records sufficient to detail the history of procurement.These records will include, but are not necessarily limited to, the following: Rationalefor the method of procurement, selection of contract type, contractor selection or rejection, andthe basis for the contract price. . . ."CauseA proper system of internal controls was not designed by management of the City. Embeddedwithin a properly designed and implemented internal control system should be internal controls consistingof policies and procedures. Policies reflect the City's management statements of what should be done toeffect internal controls, and procedures should consist of actions that would implement these policies.EffectWithout the proper implementation of an effectively designed system of internal controls, theinternal control system cannot be capable of effectively preventing, or detecting and correcting, materialnoncompliance. As a result, proper procurement procedures were not adhered to for all vendors andvendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended,debarred, or otherwise excluded.Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions ofthe federal award could result in the loss of future federal funding to the City.Questioned CostsThere were no questioned costs identified.RecommendationWe recommended that management of the City establish a proper system of internal controls anddevelop policies and procedures to ensure proper procurement methods are adhered to for all purchasesof good and services and that contractors and subrecipients, as appropriate are not suspended, debarred,or otherwise excluded prior to entering into any contracts or subawards.Views of Responsible OfficialsFor the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003Subject: COVID-19 - Coronavirus State and Local Fiscal RecoveryFunds - Procurement and Suspension and DebarmentFederal Agency: Department of the TreasuryFederal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery FundsAssistance Listings Number: 21.027Federal Award Numbers and Years (or Other Identifying Numbers): FY 2021, SWIF222533Pass-Through Entities: Direct, Indiana Finance AuthorityCompliance Requirement: Procurement and Suspension and DebarmentAudit Findings: Material Weakness, Modified OpinionCondition and ContextProcurementThe Indiana General Assembly allocated $100 million of federal State and Local FiscalRecovery Funds (SLFRF) to the Indiana Finance Authority (IFA) to provide grants for drinkingwater, stormwater, and wastewater projects that protect and improve public health throughoutthe State. As such, the IFA created the Water Infrastructure Grant Program which consists oftwo grants, the State Water Infrastructure Fund (SWIF) and Transportation and Stormwater(TRSW). The City applied for and was awarded a SWIF grant in the amount of $5,500,000.Federal regulations allow for informal procurement methods when the value of the procurementfor property or services does not exceed the simplified acquisition threshold, which is customarilyset at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of$150,000 or less for when small purchase procedures may be used. Indiana Code providesthat the proper purchasing method would be the bidding process, unless the purchase meetscertain other qualifications.Two vendors fell within the simplified acquisition threshold. The total dollar value of the twocovered transactions was $8,825,455. Of that amount, $1,880,565 was paid to the vendors in2022. For one vendor, paid $365,512, the City did not have contract files to document thehistory of the procurement, including the rationale for the method of procurement, nor selectionof the contract. In addition, there was no documentation that a cost or price analysis wasperformed.The lack of internal controls and noncompliance were systemic throughout the audit period.Suspension and DebarmentThe City elected to receive the standard revenue loss allowance, allowing them to claim theirtotal SLFRF allocation from the U.S. Department of the Treasury (Treasury) of $3,863,645 asrevenue loss to use for government services. As such, all SLFRF program funds wereexpended under the revenue loss eligible use category. The Treasury determined that thereare no subawards under this eligible use category, and that recipients' use of revenue lossfunds would not give rise to subrecipient relationships given that there is no federal program orpurpose to carry out in the case of the revenue loss portion of the award. In addition, the City'sSWIF award funded with SLFRF program funds, in the amount of $5,500,000, is subject tosuspension and debarment requirements.Prior to entering into subawards and covered transactions with SLFRF award funds, recipientsare required to verify that such contractors and subrecipients are not suspended, debarred, orotherwise excluded. "Covered transactions" include, but are not limited to, contracts for goodsand services awarded under a non-procurement transaction (i.e., grant agreement) that areexpected to equal or exceed $25,000. The verification is to be done by checking the ExcludedParties List System (EPLS), collecting a certification from that person, or adding a clause orcondition to the covered transaction with that person. Due to the Treasury's determination thatthe revenue loss eligible use category does not give rise to subawards and the fact the City didsubgrant any of its SWIF award, the City was only required to comply with suspension anddebarment requirements related to covered transactions.Upon inquiry of the City in order to review the procedures in place for verifying that an entitywith which it plans to enter into a covered transaction is not suspended, debarred, or otherwiseexcluded, the City divulged that they were unaware of the suspension and debarment requirementsrelated to the SLFRF awards. Nine covered transactions that equaled or exceeded$25,000 were identified. All nine transactions, totaling $2,339,050, were selected for testing.The City did not verify the vendors' suspension and debarment status prior to payment on anyof the covered transactions due to the City not having any policies or procedures in place toverify that contractors were neither suspended nor debarred, or otherwise excluded or disqualifiedfrom participating in federal assistance programs or activities.The lack of internal controls and noncompliance were systemic issues throughout the audit period.Criteria2 CFR 200.303 states in part:"The non-Federal entity must:(a) Establish and maintain effective internal control over the Federal award that providesreasonable assurance that the non-Federal entity is managing the Federal award incompliance with Federal statutes, regulations, and the terms and conditions of the Federalaward. These internal controls should be in compliance with guidance in 'Standards forInternal Control in the Federal Government' issued by the Comptroller General of theUnited States or the 'Internal Control Integrated Framework', issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO). . . ."2 CFR 200.318 states in part:"(a) The non-Federal entity must have and use documented procurement procedures,consistent with State, local, and tribal laws and regulations and the standards of this section,for the acquisition of property or services required under a Federal award or subaward. Thenon-Federal entity's documented procurement procedures must conform to the procurementstandards identified in this part. . . .(i) The non-Federal entity must maintain records sufficient to detail the history of procurement.These records will include, but are not necessarily limited to, the following: Rationalefor the method of procurement, selection of contract type, contractor selection or rejection, andthe basis for the contract price. . . ."CauseA proper system of internal controls was not designed by management of the City. Embeddedwithin a properly designed and implemented internal control system should be internal controls consistingof policies and procedures. Policies reflect the City's management statements of what should be done toeffect internal controls, and procedures should consist of actions that would implement these policies.EffectWithout the proper implementation of an effectively designed system of internal controls, theinternal control system cannot be capable of effectively preventing, or detecting and correcting, materialnoncompliance. As a result, proper procurement procedures were not adhered to for all vendors andvendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended,debarred, or otherwise excluded.Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions ofthe federal award could result in the loss of future federal funding to the City.Questioned CostsThere were no questioned costs identified.RecommendationWe recommended that management of the City establish a proper system of internal controls anddevelop policies and procedures to ensure proper procurement methods are adhered to for all purchasesof good and services and that contractors and subrecipients, as appropriate are not suspended, debarred,or otherwise excluded prior to entering into any contracts or subawards.Views of Responsible OfficialsFor the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-001 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Numbers and Years (or Other Identifying Numbers): IN0429, SWIF221472 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 13CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Procurement - Policy Non-federal entities must follow procurement standards set out in the Code of Federal Regulations (CFR) in addition to its 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 idented in 2 CFR Part 200. The City did not have its own documented procurement procedures or policies that reflected applicable state laws and regulations or federal statutes for procuring goods and services paid with federal funds. Procurement Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. Two vendors were identified with total purchases that fell within the small purchase threshold. Price or rate quotes were not obtained, nor was full and open competition provided for either vendor. Additionally, there was no documentation available to support the rationale to limit competition. Simplified Acquisition Threshold When the value of the procurement for property or services exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a non-federal entity, formal procurement methods are required. The SAT is typically set at $250,000; however, Indiana Code 5-22-8 has a more restrictive threshold, and, therefore, the SAT is set at $150,000. Formal procurement methods require adherence to documented procedures and formal methods such as sealed bids or proposals. Under the formal proposal method, the non-federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated, and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where prices are not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. INDIANA STATE BOARD OF ACCOUNTS 14CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Five vendors were identified with total purchases that fell within the SAT. One of the five vendors tested, which was for A/E professional services, did not have contract files, including sealed bids or proposals, to document the history of procurement, selection of contract type, or the basis for the contract. Additionally, there was no documentation available to support the rationale to limit competition nor was a cost or price analysis performed in connection with procurement. Conflict of Interest Policy Although conflicts of interest were addressed in the City's Employee Policy and Procedure Manual (manual), the manual did not include standards of conduct covering conflicts of interest nor govern the actions of its employees engaged in selection, award, and administration of contracts supported by federal awards. Suspension and Debarment Prior to entering into subawards and covered transactions with the State and Local Fiscal Recovery Funds (SLFRF) award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. The City did not have any policies or procedures in place related to the SLFRF suspension and debarment requirements. A population of four covered transactions, totaling $1,507,088, that equaled or exceeded $25,000 paid from the SLFRF funds were identified. All four covered transactions were selected for testing. For each of the four transactions, the City did not verify the vendors' suspension or debarment status prior to payment due to the City not having any policies or procedures in place to verify that contractors were neither suspended nor debarred, or otherwise excluded or disqualified, from participating in federal assistance programs or activities. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "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). . . ." INDIANA STATE BOARD OF ACCOUNTS 15CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in ?? 200.317 through 200.327. . . . (c) (1) 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. . . . (i) The non-Federal entity must maintain records sufficient 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. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and ?? 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in ? 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases ? (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the nonFederal entity determines to be appropriate: INDIANA STATE BOARD OF ACCOUNTS 16CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or costreimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; INDIANA STATE BOARD OF ACCOUNTS 17CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . ." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls over procurement and suspension and debarment was not implemented by the management of the City to ensure that goods and services were properly procured and that vendors to whom payment equaled or exceeded $25,000 were not suspended or debarred. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, property and services were not properly procured and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Questioned Costs There were no questioned cost identified. Recommendations We recommended that management of the City establish a proper system of internal controls and develop procedures to ensure that property and services are properly procured and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. INDIANA STATE BOARD OF ACCOUNTS 18CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the view of the responsible officials, refer to the Corrective Action plan that is part of this report.
FINDING 2022-001 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Numbers and Years (or Other Identifying Numbers): IN0429, SWIF221472 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 13CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Procurement - Policy Non-federal entities must follow procurement standards set out in the Code of Federal Regulations (CFR) in addition to its 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 idented in 2 CFR Part 200. The City did not have its own documented procurement procedures or policies that reflected applicable state laws and regulations or federal statutes for procuring goods and services paid with federal funds. Procurement Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. Two vendors were identified with total purchases that fell within the small purchase threshold. Price or rate quotes were not obtained, nor was full and open competition provided for either vendor. Additionally, there was no documentation available to support the rationale to limit competition. Simplified Acquisition Threshold When the value of the procurement for property or services exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a non-federal entity, formal procurement methods are required. The SAT is typically set at $250,000; however, Indiana Code 5-22-8 has a more restrictive threshold, and, therefore, the SAT is set at $150,000. Formal procurement methods require adherence to documented procedures and formal methods such as sealed bids or proposals. Under the formal proposal method, the non-federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated, and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where prices are not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. INDIANA STATE BOARD OF ACCOUNTS 14CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Five vendors were identified with total purchases that fell within the SAT. One of the five vendors tested, which was for A/E professional services, did not have contract files, including sealed bids or proposals, to document the history of procurement, selection of contract type, or the basis for the contract. Additionally, there was no documentation available to support the rationale to limit competition nor was a cost or price analysis performed in connection with procurement. Conflict of Interest Policy Although conflicts of interest were addressed in the City's Employee Policy and Procedure Manual (manual), the manual did not include standards of conduct covering conflicts of interest nor govern the actions of its employees engaged in selection, award, and administration of contracts supported by federal awards. Suspension and Debarment Prior to entering into subawards and covered transactions with the State and Local Fiscal Recovery Funds (SLFRF) award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. The City did not have any policies or procedures in place related to the SLFRF suspension and debarment requirements. A population of four covered transactions, totaling $1,507,088, that equaled or exceeded $25,000 paid from the SLFRF funds were identified. All four covered transactions were selected for testing. For each of the four transactions, the City did not verify the vendors' suspension or debarment status prior to payment due to the City not having any policies or procedures in place to verify that contractors were neither suspended nor debarred, or otherwise excluded or disqualified, from participating in federal assistance programs or activities. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "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). . . ." INDIANA STATE BOARD OF ACCOUNTS 15CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in ?? 200.317 through 200.327. . . . (c) (1) 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. . . . (i) The non-Federal entity must maintain records sufficient 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. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and ?? 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in ? 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases ? (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with ? 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the nonFederal entity determines to be appropriate: INDIANA STATE BOARD OF ACCOUNTS 16CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or costreimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; INDIANA STATE BOARD OF ACCOUNTS 17CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . ." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls over procurement and suspension and debarment was not implemented by the management of the City to ensure that goods and services were properly procured and that vendors to whom payment equaled or exceeded $25,000 were not suspended or debarred. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, property and services were not properly procured and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Questioned Costs There were no questioned cost identified. Recommendations We recommended that management of the City establish a proper system of internal controls and develop procedures to ensure that property and services are properly procured and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. INDIANA STATE BOARD OF ACCOUNTS 18CITY OF SCOTTSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the view of the responsible officials, refer to the Corrective Action plan that is part of this report.
Condition: The Land Bank has not adopted a written procurement policy. The Land Bank did not retain supporting documentation for procurements actions related to demolition contracts entered during the year ended December 31, 2022, with four demolition contractors totaling $196,698 that were selected for testing. Context: The Land Bank represented contractors were evaluated by analyzing City of Wilmington demolition permit information. The Land Bank did not retain documentation of this analysis to support its procurement actions. Criteria: CFR § 200.318, General Procurement Standards and § 200.320 Methods of Procurement to be Followed,of the Uniform Guidance apply to the State and Local Fiscal Recovery Funds Program and require the following: i. The Land Bank must adopt documented procurement procedures that are consistent with the applicable State, local and federal regulations. ii. The Land Bank’s documented procurement procedures must include the following elements at a minimum: a. Micro-purposes - purchases up to $50,000 may be made without soliciting competitive price or rate quotations if the price is considered reasonable. b. Small Purchases - purchases between $50,000 and $250,000 may be made with soliciting competitive price or rate quotations from an adequate number of qualified sources. c. Formal Procedures - purchases over $250,000 must be made by seal bid or competitive proposal. Cause: The Land Bank does not have a written procurement policy. Question Costs: None Effect: The Land Bank did comply with the Uniform Guidance requirement to adopt a procurement policy and did not fully document its procurements. Recommendation: We recommend Land Bank establish a procurement policy and prepare documentation for each procurement action.
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.
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.