Finding Text
U.S. Department of Homeland Security Emergency Operations Center Assistance Listing Number: 97.052 Passed Through Minnesota Department of Public Safety Pass Through Number: EMC-2024-EO-05011 Award Period: September 1, 2024 – August 31, 2027 Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance (Qualified Opinion) Criteria or specific requirement: The City should have controls in place to ensure compliance with the Build America, Buy America Act (BABAA) domestic content procurement preference. Section 70914 of the Build America, Buy America Act provides that none of the funds made available for a federal award for an infrastructure project may be obligated unless all of the iron, steel, manufactured products, and construction materials incorporated into the project are produced in the United States. Under 2 CFR part 184, construction materials must have all manufacturing processes occur in the United States; manufactured products must be manufactured in the United States with greater than 55 percent domestic component cost; and iron and steel products must have all manufacturing processes, from initial melting through the application of coatings, occur in the United States. Absent a waiver approved by the federal awarding agency, these requirements apply to all covered items incorporated into the infrastructure project. Condition: The City did not have policies or procedures in place to identify items subject to BABAA requirements, determine the applicable domestic content standard for each item, or obtain and retain supporting certifications from vendors prior to incurring costs charged to the award. The construction agreements do not contain Buy America contract provisions, and domestic content certifications were not obtained from vendors. Approved waivers were not obtained prior to the incurrence of costs charged to the award. Context: Federal expenditures of $1,575,000 were charged to the award during the fiscal year. Of the total federal expenditures charged, $1,069,021 related to covered items incorporated into the infrastructure project, and $505,979 related to construction labor, project supervision and general conditions, temporary protection and safety equipment, and consumable materials not subject to the domestic content procurement preference. For all $1,069,021 of federal expenditures related to covered items, the City was unable to provide documentation supporting compliance with the applicable domestic content standard. The City submitted waiver requests to the federal awarding agency which remain pending and were not approved as of the date of our report. Questioned costs: $1,069,021 Cause: The City did not have a policy or established procedures for identifying federal infrastructure awards subject to BABAA requirements, for classifying items to be incorporated into a project under the applicable domestic content standard, or for obtaining domestic content certifications from vendors at the time contracts were awarded and materials were procured. Effect: The absence of policies and procedures over the domestic content procurement preference resulted in the City incurring and charging costs to the federal award for covered items without documentation that the items were produced in the United States or that an approved waiver had been obtained, which may result in those costs being determined unallowable by the federal awarding agency. Repeat finding: No Recommendation: We recommend the City establish a formal policy over the Build America, Buy America Act domestic content procurement preference that includes identifying whether a federal award is subject to BABAA requirements, classifying each item to be incorporated into the project as an iron or steel product, a construction material, or a manufactured product, determining the applicable domestic content standard for each classification, and obtaining and retaining vendor certifications supporting compliance prior to incurring costs. We further recommend the City include Buy America contract provisions in all agreements associated with federally funded infrastructure projects and request and obtain any necessary waivers from the federal awarding agency in advance of procurement. Views of responsible officials: See corrective action plan.