2024-001 The District did not have adequate internal controls for ensuring compliance with federal procurement and suspension and debarment requirements, and it did not comply with federal suspension and debarment requirements. Assistance Listing Number and Title: 10.902 – Soil and Water Conservation Federal Grantor Name: U.S Department of Agriculture Federal Award/Contract Number: NR230546XXXXG001 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 The purpose of the Soil and Conservation program is to provide conservation technical assistance to private landowners, conservation districts, tribes, and other organizations through a national network of professional conservationists and assist them in conserving, improving, and sustaining natural resources and the environment. In 2024, the District spent $2,812,023 in program funds for lake treatment. 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. Procurement Federal regulations require recipients to establish and 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 federal, state or local procurement thresholds and methods when using federal funds. Suspension and Debarment 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 and 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 from participating in federal programs. 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 Procurement Our audit found the District did not have adequate internal controls for ensuring compliance with federal procurement requirements. Specifically, the District did not establish its own written procurement procedures, as federal regulations require. We consider this deficiency in internal controls to be a significant deficiency. Suspension and Debarment Our audit found the District did not have internal controls to verify the contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition District staff were not aware of the federal procurement and suspension and debarment requirements. The District does not typically receive large federal grants and this is its first single audit. Staff responsible for complying with these requirements did not dedicate necessary time and resources to understanding the requirements. Effect of Condition Procurement Without written policies and procedures that conform to federal procurement standards, the District is at an increased risk of not complying with the most restrictive of federal, state or local procurement methods and standards of conduct requirements when using federal funds. Although the District did not have written policies or procedures over procurement in place, it received guidance from the federal grantor and did comply with procurement requirements for the competitive solicitation and selection of the contractor hired for lake treatment. Suspension and Debarment The District did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify one contractor it paid $2,760,992 using federal funds was not suspended or debarred before contracting. 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. The District subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning costs. Recommendation Procurement We recommend the District establish written procurement procedures that conform to federal procurement requirements. Suspension and Debarment 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 and maintain documentation demonstrating compliance with this requirement. District’s Response The Columbia Basin Conservation District appreciates the opportunity to respond to the Washington State Auditor’s Office (SAO) findings and recommendations. We extend our sincere thanks to the audit staff for their professionalism, patience, and guidance throughout the audit process. The District agrees with the findings and recommendations. We recognize the importance of maintaining strong internal controls and ensuring full compliance with federal requirements. This audit provided valuable insight into areas where improvements were needed, and we have taken proactive steps to address the identified deficiencies. Auditor’s Remarks We appreciate the District’s commitment to resolving the issue and the District’s helpfulness and professionalism during the audit. We will review the status of the 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. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Non-procurement), establishes non-procurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689. 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.