Finding 571358 (2024-001)

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Public Utility District No. 1 of Franklin County January 1, 2024 through December 31, 2024 2024-001 The District did not have adequate internal controls for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 21.029, COVID-19 Coronavirus Capital Projects Fund Federal Grantor Name: Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Commerce Pass-through Award/Contract Number: 23-96810-020 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $925,587 in federal Coronavirus Capital Projects program funds awarded from the Department of Treasury and passed through the Washington State Department of Commerce. During 2024, the District used program funding on one project to install fiber cable to provide broadband services. 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 require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive of federal, state or local procurement thresholds and methods when using federal funds. Description of Condition Our audit found the District’s internal controls were ineffective for ensuring compliance with federal procurement requirements. Specifically, the District did not include any of the federal procurement standards (2 CFR 200.318-327) in its purchasing policy. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District does not regularly manage federal funds and as a result, staff did not know about the requirement to have written standards of conduct and procurement policies or procedures. Effect of Condition Without written policies and procedures, the District is at an increased risk of not complying with following the most restrictive of federal, state, or local procurement requirements when using federal funds to procure contractors. Although the District does not have policies in place, it followed the procurement requirements in the Washington State Broadband Office’s Infrastructure Acceleration Grants Handbook and complied with federal procurement requirements for the contracts we tested. Recommendation We recommend the District update its policies and procedures that conform to federal procurement standards in Uniform Guidance (2 CFR 200.318-327). District’s Response The District followed the federal procurement requirements for the grant award as found and upheld in the audit. Staff also communicated these requirements to the District’s Board of Commissioners on multiple occasions and held weekly internal meetings to discuss grant requirements. Additionally, staff consulted with the granting agency to ensure the procedures undertaken complied with federal requirements. The District has a long-standing history of demonstrated legal compliance and implementation of audit recommendations.   For this reason, the District maintains that a simple policy change does not support the issuance of a finding. The District will revise the language in its Purchasing Policy to reflect more specific federal requirements. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to resolve this finding. 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures.