Finding Text
Finding 2024-002 – Activities Allowed or Unallowed and Allowable Costs/ Cost Principles, and Procurement Program Name (ALN): Public Transportation Emergency Relief Program (ALN 20.527) Federal Agency: U.S. Department of Transportation Federal Grant Numbers and Years: NJ-44-X004-02 (Federal fiscal years 2012–2025) Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample Finding Type: Significant Deficiency and Noncompliance Repeat Finding: No Criteria: Activities Allowed or Unallowed and Allowable Costs/ Cost Principles Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under federal awards; (1) Be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E. (2) Be adequately documented. Procurement Non-Federal Entities Other than States Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.327. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. A non-federal entity must: (1) Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. Additionally, In accordance with federal requirements, the Port Authority shall maintain internal controls over federal programs designed to provide reasonable assurance that transactions are executed in compliance with federal statutes, regulations, and the terms and conditions of the federal award that could have a direct and material effect on a federal program. Condition: The Port Authority of New York and New Jersey (the Port Authority) used funds received from the Public Transportation Emergency Relief Program (the Program) to purchase equipment to perform maintenance and inspection of the track damaged by Superstorm Sandy, repair the damage, and allow the Port Authority to be more resilient in future events. As part of our testing over the procurement requirements for the Program, we noted for one out of eleven vendors sampled subject to the Port Authority’s procurement policies for a covered transaction, the vendor was operating and incurring expenditures under a call-in contract that did not meet certain federal procurement requirements established by the Port Authority for other federal awards, with total expenditures of $23,772 for the year ended December 31, 2024. The total amount of expenditures for vendors subject to the procurement requirements of the Program and the Port Authority’s procurement policies for a covered transaction during fiscal year 2024 was $4,263,131, and the total amount of other-than-personal service costs for the Program during fiscal year 2024 was $65,782,642. We noted that the vendor was neither suspended nor debarred from receiving federal funds, and also has other procurement contracts with the Port Authority that meet federal procurement requirements. Cause: The Port Authority used the incorrect procurement contract for this vendor that did not meet certain federal procurement requirements and the error was not detected as part of the Port Authority’s established policies and procedures. Effect: The expenditures charged by the vendor to the Program under the wrong procurement contract were not allowable, as there was no awarding contract to the vendor that met all federal procurement requirements established by the Port Authority. Questioned Costs: $23,772. In addition to the known questioned costs, we have identified $338,252 as likely questioned costs, based on amounts included in our sampled items tested and the total population of other-than-personal service costs noted above. Recommendation: We recommend that the Port Authority strengthen its policies and procedures to ensure all vendors have the appropriate contracting awards in accordance with federal procurement requirements for charging allowable expenditures under the requirements of the Program. Views of Responsible Officials Although federal funds were not received for this expenditure, PATH acknowledges an internal control deficiency regarding the recognition of grant funding for work performed under standard nonfederal engineering call-in contracts. PATH will continue to work collaboratively with the Engineering and Procurement Departments to strengthen internal communications and reinforce adherence to established protocols governing capital projects that are eligible for federal funding.