Finding Text
SIGNIFICANT DEFICIENCY; CRITERIA: Per 2 CFR 200.320 the auditee must use appropriate procurement methods based on dollar amounts and conditions of project-level contracts.; CONDITION: For the fiscal year ending June 30, 2025 one FEMA‑funded project reviewed during the audit period, the Town allowed the contractor to begin work before a written contract was executed. The contractor mobilized and started work without a signed agreement defining scope, pricing, Federal requirements, or terms and conditions.; EFFECT: Noncompliance with Federal procurement regulations increases the risk that FEMA may consider associated costs ineligible or unreasonable. The Town could be subject to disputes over scope, pricing, or performance due to the absence of formal terms agreed upon before work began. Lack of assurance that required Federal contract provisions were included carries the potential for questioned costs that could lead to deobligation or repayment of FEMA funds.; CAUSE: The Town initiated work urgently due to the nature of the emergency event and did not follow formal procurement procedures. Staff cited time constraints and the immediate need for response activities, but no emergency procurement documentation or justification was concurrently prepared as allowed under 2 CFR §200.320(c) (noncompetitive procurement during public exigency). Personnel were also not fully aware of FEMA documentation requirements.; RECOMMENDATION: The Town should update its written procurement policies to fully incorporate the current Federal procurement standards under 2 CFR §200.317–§200.327 and applicable state laws. The Town should provide staff training on the revised procurement procedures and establish a periodic review schedule to ensure ongoing compliance with Federal and state requirements.; VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: The Town of Spruce Pine agrees with this finding. Finance procedures will be updated to include a standard form and procedure for cost and price analysis that will be implemented immediately.