Finding Text
2022-001 The District?s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements. Assistance Listing Number and Title: 93.323 COVID 19 ? Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Health Pass-through Award/Contract Number: CLH18244 Known Questioned Cost Amount: $0 Description of Condition The objective of the Epidemiology and Laboratory Capacity for Infectious Diseases program is to protect the public?s health and safety by enhancing the capacity of public health agencies to effectively detect, respond, prevent, and control known, emerging, or reemerging infectious diseases. In 2022, the District spent $1,252,430 in federal funding to operate a COVID-19 testing site. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations 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 or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify contractors are not suspended, debarred or otherwise excluded from participating in federal programs. The District may accomplish this verification 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 perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Our audit found the District?s internal controls were ineffective for ensuring it verified all contractors were not suspended or debarred. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition District staff did not know they needed to check the suspension and debarment status of contractors paid more than $25,000 in program funds. Effect of Condition Without verification, the District increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any program funds the District made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. The District did not verify the suspension and debarment status for two contractors that were paid $76,815 during the audit period. We subsequently verified the contractors were not suspended or debarred, so we are not questioning the related costs. Recommendation We recommend the District improve its internal controls to ensure all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them. District?s Response Grant County Health District agrees with the finding and will update its written procurement policy and procedures that conform with Uniform Guidance standards (2 CFR 200.318-327) that will formalize a process to check all new contractor?s exclusion records in the System for Award Management (SAM.gov) and to retain copies of those searches in the vendor?s file including those searches where the vendor is not found in the system. Auditor?s Remarks We appreciate the steps the District is taking to resolve this issue. We will review the condition 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.