SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Port of Woodland January 1, 2024 through December 31, 2024 2024-001 The Port did not have adequate internal controls and did not comply with federal procurement and suspension and debarment requirements. Assistance Listing Number and Title: COVID 19 - 21.029 – Coronavirus Capital Projects Fund Federal Grantor Name: U.S. Department of Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Commerce Pass-through Award/Contract Number: S21-96401-023 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the COVID-19 Coronavirus Capital Projects Fund is to fund multi-purpose community centers and broadband-related infrastructure projects designed to deliver reliable internet service that meets or exceeds 100/100 Mbps symmetrical speeds. In 2024, the Port expended $1,327,754 related to broadband-related infrastructure. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Suspension and Debarment Federal requirements prohibit grant recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the Port 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 are not suspended, debarred or otherwise excluded from participating in federal programs. The Port 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 Port must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. 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 thresholds and methods. When using federal funds to procure goods and services, governments must apply the more restrictive requirements of federal, state or local laws by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. The Port must maintain documentation showing the procurement process it performed. Additionally, federal regulations require recipients to maintain written standards of conduct that cover conflicts of interest and govern the actions of employees and officers involved in selecting, awarding and administering contracts procured with federal funds. Finally, federal regulations require nonfederal entities to incorporate the Build America, Buy America Act (BABAA) preference requirements in all applicable contracts and purchase orders for work performed or products supplied under a federal award with an infrastructure project. Nonfederal entities can meet this requirement by including the BABAA domestic preference provisions in the agreement or obtaining a BABAA waiver. Description of Condition Suspension and Debarment Although the Port has a process to verify the suspension and debarment status for contractors it pays more than $25,000, our audit found the Port did not follow this process and did not verify all five contractors were not suspended or debarred before purchasing from them. Procurement Our audit found the Port’s internal controls were ineffective for ensuring it complied with federal procurement requirements. Although the Port has an established procurement policy, it does not conform with federal requirements. Specifically, it does not include methods and thresholds for purchases, the correct thresholds for public works projects, and requirements included in 2 CFR § 200.321-327. Further, the Port does not have a standards of conduct policy covering conflicts of interest for employees or agents who award contracts, as federal regulations require. Additionally, the Port did not have a process to ensure it followed the most restrictive of federal, state or local procurement requirements when procuring a professional service firm for about $19,750. Finally, the Port did not have a process in place to ensure it included the BABAA preference requirements in all applicable contracts for work performed or products supplied to the infrastructure project. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. Cause of Condition Since the District does not regularly manage federal funds, staff were unaware of the applicable federal requirements. In addition, the project was funded by multiple sources that each had their own requirements, which further added to the complexity of ensuring compliance. Effect of Condition Suspension and Debarment The Port did not obtain written certification from the contractors, insert a clause into the contract or retain evidence that it checked for exclusion records at SAM.gov to verify contractors it paid $1,226,616 using federal funds were not suspended or debarred before contracting. Without adequate internal controls, the Port increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the Port made to an ineligible party would be unallowable, and the federal agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs. Procurement Without written policies and procedures that conform to federal procurement standards, the Port increases its risk of not complying with standards of conduct requirements when using federal funds. Additionally, without effective internal controls, the Port cannot demonstrate it complied with federal procurement standards, allowed for full and open competition, received the best price or selected the most qualified contractor, and that federal funds were spent on American products. Recommendation Suspension and Debarment We recommend the Port 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 and maintain documentation demonstrating compliance with this requirement. Procurement We recommend the Port update and maintain internal controls to comply with federal procurement requirements, including establishing written procurements and standards of conduct procedures that conform to federal procurement standards in Uniform Guidance (2 CFR 200.318-327). We also recommend the Port establish internal controls to ensure that contracts include the BABAA under a federal award with an infrastructure project, include the BABAA domestic preference provisions in the agreement, or obtain a BABAA waiver. Port’s Response The Port of Woodland thanks the Washington State Auditor’s Office (SAO) for a thorough review of our financial statements and compliance with federal procurement requirements related to the port’s capital infrastructure program. The Port respects the findings of SAO and will implement the recommendations, including improving adequate internal controls related to procurement policies, implementing processes where necessary, and training staff designed to comply with Title 2 U.S Code of Federal Regulations (CFR) Part 180, Part 184, Part 200, and other guidance accepted as best practice for compliance audits. Concerning SAO’s findings related to 2 CFR Part 180, verification of suspension and debarment status of contractors, the Port can state with confidence that none of the contractors were suspended or debarred from participating in federal programs for the duration of their contract with the Port. The Port concurs that it was unable to produce a time-stamped verification that these checks occurred before contract award. The Port will implement new procedures that conform to the Port’s existing policy to verify suspension and debarment status of all applicable contractors in the future. This includes performing verification, modifying future contract language, and retaining evidence of verification. Regarding SAO’s recommendations, designed to ensure the Port complies with federal procurement requirements, the Port intends to review 2 CFR Parts 184 and 200 and modify existing policies and procedures to conform with federal procurement standards. The Port is currently restructuring staffing and work functions, which will provide staff with greater clarity on their specific roles and responsibilities. This will also allow the Port to ensure staff have sufficient training to carry out those responsibilities in accordance with the updated internal controls, including compliance with the Build America, Buy America Act. Auditor’s Remarks We thank the Port for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the Port’s corrective action 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. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring goods and services, including noncompetitive procurement. Title 2 CFR Part 184, Buy America Preferences for Infrastructure Projects, describes the requirements to purchase iron, steel, manufactured products, and construction materials incorporated into an applicable infrastructure project produced in the United States.