Finding 541981 (2024-003)

Material Weakness

Requirement

Questioned Costs

Year

2024

Accepted

2025-03-31

Audit: 350782

Organization: Town of Easton (the Easton Utilities Commission) (MD)

Auditor: Cliftonlarsonallen LLP

AI Summary

Core Issue: There is a material weakness in internal controls and non-compliance with procurement requirements for federal funds.
Impacted Requirements: Procurement must ensure full competition and follow formal methods for contracts over $250,000, as outlined in §200.319 and §200.320.
Recommended Follow-Up: Enhance staff training on procurement policies and ensure adherence to established procedures to mitigate risks.

Finding Text

Federal Agency: U.S. Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: MD-0044 and 2021 Award Period: March 11, 2021 through December 31, 2024, liquidated by December 31, 2026 Type of Finding: Material Weakness in Internal Control Over Compliance, Material Non-Compliance Criteria or Specific Requirement: Per §200.319 and §200.320, all procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition. Per §200.320, there are specific circumstances in which noncompetitive procurement can be used. Per §200.320, formal procurement methods must be used on procurements exceeding $250,000. Questioned Costs: Unknown Condition/Context: Two of five vendors tested did not have the proper documentation maintained to support that the non-competitive procurement method used was appropriate under the circumstances. Three of five vendors tested did not follow the appropriate procurement method given the dollar value of expenditures paid to the vendor. Cause: At the time of grant inception, the non-compliance was primarily due to a lack of awareness and training among staff regarding the procurement policy requirements. Effect: The failure to follow proper procurement procedures increases the risk of favoritism, fraud, and inefficient use of resources. Repeat Finding: This is not a repeat finding. Recommendation: We recommend the Commission continue to follow the procurement policy and procedures now established and provide comprehensive training to all relevant staff on procurement policies and procedures. Views of Responsible Officials: Management agrees with the finding.

Corrective Action Plan

State and Local Fiscal Recovery Funds– Assistance Listing No. 21.027 Procurement – Material Weakness in Internal Control Over Compliance, Material Non-Compliance Recommendation: We recommend the Commission continue to follow the procurement policy now established and provide comprehensive training to all relevant staff on procurement policies and procedures. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: In April 2024, the Commission implemented a federal funding procurement policy. The sources of grant funding have expanded extensively since the inception of expanding broadband service to underserved communities. The original primary source of funding was ReConnect, a federal grant from the USDA, and funding subsequently expanded to include the State of Maryland. The Commission received guidance from ReConnect, allowing the Commission to single source vendors for inventory for standardization within the system, both our existing and the new system. The Commission issued purchased orders to stockpile materials under that guidance starting in May 2021 to avoid construction delays due to long lead times experienced throughout the industry. Maryland grants agreements were signed August 2021, July 2022, and June 2023. The use of material procured using the methods allowed by the ReConnect grant had been discussed and agreed upon between the Commission’s Chief Financial Officer (at the time) and the Director of the Department of Housing and Community Development Office of Statewide Broadband; however, approval had not been memorialized in writing. The Commission also has contracts with vendors established under the ReConnect grant following their guidance. The Commission utilizes consistent and established vendors on this project as the project as a whole covers the entire county and some areas overlap or are intertwined. Vendors used are familiar with the entire project. Name of the contact person responsible for corrective action: Tracie Thomas Planned completion date for corrective action plan: Corrective action was taken April 2024.

Other Findings in this Audit

541979 2024-001

Significant Deficiency
541980 2024-002

Significant Deficiency Repeat
541982 2024-001

Significant Deficiency
541983 2024-002

Significant Deficiency Repeat
541984 2024-003

Material Weakness
1118421 2024-001

Significant Deficiency
1118422 2024-002

Significant Deficiency Repeat
1118423 2024-003

Material Weakness
1118424 2024-001

Significant Deficiency
1118425 2024-002

Significant Deficiency Repeat
1118426 2024-003

Material Weakness

Programs in Audit

ALN	Program Name	Expenditures
10.752	Rural Econnectivity Pilot Program	$4.89M
21.027	Coronavirus State and Local Fiscal Recovery Funds	$4.05M
10.863	Community Connect Grant Program	$107,108
32.002	Universal Service Fund - High Cost	$18,905