Grays Harbor Transit January 1, 2025 through December 31, 2025 2025-001 The Authority did not have adequate internal controls and did not comply with the federal suspension and debarment requirements. Assistance Listing Number and Title: 20.509 – Formula Grants for Rural Areas and Tribal Transit Program Federal Grantor Name: Federal Transit Administration Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation Pass-through Award/Contract Number: PTD0649 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes – 2024-001 Background During fiscal year 2025, the Authority spent $846,131 in federal funds from the Formula Grants for Rural Areas and Tribal Transit program. The purpose of the program is to initiate, improve, or continue public transportation services in rural areas by providing financial assistance for operating, planning and administrative expenses, and the acquisition, construction and improvement of related facilities and equipment. The Authority used these funds to support its operations and maintenance of its vehicles and bus fleet. 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. Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the Authority 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 the contractors are not suspended, debarred or otherwise excluded from participating in federal programs. The Authority 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 Authority must verify this before entering into the contract and must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the Authority did not have internal controls to verify the two vendors it paid more than $25,000 in federal funds were 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 Authority staff were unaware that the federal requirements for suspension and debarment were applicable to purchase orders more than $25,000. Effect of Condition The Authority 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 the two vendors it paid a total of $261,134 using federal funds were not suspended or debarred before contracting. Without adequate internal controls, the Authority increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the Authority made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the Authority 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. Authority’s Response Grays Harbor Transit (GHT) agrees with the finding. GHT identified the suspension and debarment compliance issue during the 2024 Single Audit and began implementing corrective action in September 2025. Because these corrective actions were implemented during the 2025 audit period, the finding carried forward into the 2025 Single Audit. GHT has since strengthened its internal controls by establishing procedures that require SAM.gov suspension and debarment verification for applicable vendors prior to the award of contracts or the issuance of purchase orders exceeding $20,000. For vendor expenditures that cumulatively exceed $20,000 during the calendar year, GHT also conducts and documents a SAM.gov verification. GHT implemented a tracking process to document completed verifications and identify vendors requiring updated reviews. The Grants & Procurement Coordinator reviews the tracking information monthly and performs new SAM.gov searches when prior verifications have expired. These procedures provide a consistent, documented process for verifying vendor eligibility before applicable contract awards and throughout the year and are intended to ensure ongoing compliance with federal suspension and debarment requirements. GHT considers the corrective action fully implemented as of September 9, 2026. Auditor’s Remarks We appreciate the steps the Authority is taking to resolve this issue. We will review the corrective action taken 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 on Agencies on Governmentwide Department and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.