Finding 1073696 (2023-002)

Benton-Franklin Health District January 1, 2023 through December 31, 2023 2023-002 The District did not have controls for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S Department of Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: WA State Department of Health Pass-through Award/Contract Number: CLH31003 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Description of Condition The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) 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 COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In fiscal year 2023, the District spent $305,653 to ensure culturally and linguistically responsive testing, investigation and contract tracing resources to limit the spread of COVID-19. 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. When using federal funds to purchase services, governments must follow their own documented procurement procedures that reflect the most restrictive of federal, state or local requirements, and apply them by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. A local government may use noncompetitive procurement procedures when certain circumstances apply, such as if an item is only available from a single source, a public emergency or when the awarding agency expressly authorizes a noncompetitive procurement in response to a written request. In those circumstances, the local government must evaluate each procurement action individually and document its rationale for waiving competition. Our audit found the District’s internal controls were ineffective for ensuring it complied with federal procurement requirements. Specifically, the District did not follow its policy to obtain quotes or have documentation to support noncompetitive procurement for these purchased services. We consider this deficiency in internal control to be a material weakness that led to material noncompliance. Cause of Condition Management and staff were unaware they needed to follow the District’s policy to procure purchased services. Instead, the District relied on the governor’s emergency declarations due to the COVID-19 pandemic to waive competitive procedures. Effect of Condition The District paid one vendor $69,448 in federal program funds without competitively procuring or documenting its evaluation and rationale for using a noncompetitive process. Without effective internal controls, the District cannot ensure it allowed for full and open competition, received the best price or most qualified vendor and complied with federal procurement requirements and its own policy. Recommendation We recommend the District strengthen internal controls to ensure it procures goods and services in accordance with federal procurement requirements and its own procurement policies and procedures. District’s Response The District agrees with the recommendation from the State Auditor’s Office to strengthen internal controls to ensure the procurement policy is followed. The District will update its current procurement policy to include emergency procurement procedures, including the requirement for documentation of rationale if waiving competition during an emergency. The revised policy will conform with Uniform Guidance (2 CFR 200.318-327) and follows state/federal laws. The District will train staff to ensure the policy is followed for future goods and services. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring goods and services, including noncompetitive procurement.