Finding Text
The District did not have adequate internal controls and did not comply with federal suspension and debarment requirements. Assistance Listing Number and Title: 15.517 – Fish and Wildlife Coordination Act; 15.574 – Water Storage Enhancement Federal Grantor Name: U.S. Department of the Interior 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: N/A Background Fish and Wildlife Coordination Act The objective of the Fish and Wildlife Coordination Act is to provide financial assistance, through grants or cooperative agreements, to public or private organizations for the improvement of fish and wildlife habitat associated with water systems or water supplies affected by Bureau of Reclamation projects. During fiscal year 2024, the District spent $8,909,323 in Fish and Wildlife Coordination Act program funds. Water Storage Enhancement The objective of the Water Storage Enhancement Program is to identify and assess storage projects within the Kittitas Reclamation service area that could utilize conserved water or water diverted for storage for tangible improvements in meeting instream flow objectives, tributary supplementation efforts, and others. During fiscal year 2024, the District spent $826,416 in federal funding for these purposes. Suspension and Debarment Federal regulations require recipients to establish and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District 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 District 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 District must verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Fish and Wildlife Coordination Act Our audit found the District did not have internal controls to verify four of five contractors we tested that it paid more than $25,000 in federal funds were not suspended or debarred from participating in federal programs before purchasing from them. Water Storage Enhancement Our audit found the District did not have internal controls to verify the one contractor tested that it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs before purchasing from them. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. Cause of Condition Although staff responsible for reviewing purchases under both programs were aware of suspension and debarment verification requirements, they were unable to locate support showing that they verified contractors were not suspended or debarred. Effect of Condition The District did not obtain a written certification from the contractors, insert a clause into the contracts or check for exclusion records at SAM.gov to verify contractors it paid $549,684 using federal funds for the Fish and Wildlife Coordination Act Program and $37,806 using federal funds for the Water Storage Enhancement Program were not suspended or debarred. Without adequate internal controls, the District increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable and the awarding agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the District strengthen its internal controls to verify all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them and maintain documentation demonstrating compliance with this requirement. District’s Response The District is adding additional controls to assist the Assistant Manager’s tracking of the suspension and debarment requirements for the vendors that are paid within the grants. This will be on ongoing collaboration throughout the year as the District isn’t always aware of which vendors will be needed throughout the year. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue 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 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.