Finding Text
SCHEDULE OF FEDERAL AWARD FINDINGS AND
QUESTIONED COSTS
Town of Twisp
January 1, 2021 through December 31, 2021
2021-002 The Town did not have adequate internal controls for ensuring
compliance with federal procurement requirements.
Assistance Listing Number and Title: 10.760 – Waste and Water Disposal
Systems for Rural Communities
Federal Grantor Name: U.S. Department of Agriculture
Federal Award/Contract Number: N/A
Pass-through Entity Name: N/A
Pass-through Award/Contract
Number:
N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: Yes, Finding 2020-002
Description of Condition
As of the end of fiscal year 2021, the Town had spent $2,379,378 in loan and grant funds from the Water and Waste Disposal Systems for Rural Communities program. The objective of this program is to assist rural communities in obtaining safe drinking water and adequate waste disposal facilities. The Town used these funds primarily for a water line project. 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 for procurements standards in 2 CFR § 200.318 require award recipients to have written standards of conduct that cover conflicts of interest and expectations for their employees who are involved in selecting, awarding, and administrating contracts and purchases.
Our audit found the Town’s internal controls were ineffective for ensuring compliance with federal procurement requirements. Specifically, the Town did not establish written standards of conduct covering these required elements:
• Officers, employees, and agents may not participate in selecting, awarding,
or administrating a contract supported by a federal award if they have a real
or apparent conflict of interest.
• Officers, employees, and agents may neither solicit nor accept gratuities,
favors, or anything of monetary value from contractors or parties to
subcontracts.
• Disciplinary actions for violating these standards
We consider this deficiency in internal controls to be a significant deficiency.
Cause of Condition
The Town has not received a federal compliance audit recently, and staff and management did not know about the requirement to have written standards of conduct covering the selection and administration of contracts involving federal funds.
Effect of Condition
Without written standards of conduct, the Town is at a greater risk of noncompliance with these requirements when using federal funds to procure contractors. Although the Town did not have policies in place, we verified that no one involved with selecting and administrating the contract had a real or apparent conflict of interest with the contract.
Recommendation
We recommend the Town develop written standards of conduct policies that conform to Uniform Guidance.
Town’s Response
The Town of Twisp agrees with the findings as presented and has committed to adopting policy as recommended by the State Auditor’s office in accordance with the BARS Manual, implementing internal controls for federal expenditures and annual reporting. As this audit occurred in the 2023/24 fiscal year, it will not be possible to have these changes in place in advance of the 2023 annual reporting deadline, however staff and management will implement these best practices in lieu of adopted policy.
Auditor’s Remarks
We appreciate the Town’s commitment to resolving the issues noted and will follow up during the 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 318, General Procurement Standards, establishes requirements for written standards of conduct.
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.