2022-001 The County did not have adequate internal controls for ensuring
compliance with federal suspension and debarment requirements.
Assistance Listing Number and Title: 20.205 Highway Planning and Construction
Federal Grantor Name: Federal Highway Administration U.S. Department of Transportation
Federal Award/Contract Number: N/A
Pass-through Entity Name: Washington State Department of Transportation
Pass-through Award/Contract Number:
LA-10283, LA-10284, LA 10156,
LA-10151, LA-10157, LA – 10340,
LA-10328, LA-9782, LA - 9920
Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
During fiscal year 2022, the County spent $1,594,832 in Highway Planning and Construction grant funds. The County used this grant funding for the Washington State Department of Transportation Improvements project. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts or purchases goods and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The County may accomplish this verification by collecting 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 County must perform this verification before entering into the contract, and it must keep documentation demonstrating compliance with this federal requirement.
Description of Condition
Our audit found the County did not have controls in place to ensure staff verified one of two contractors paid more than $25,000 in Highway Planning and Construction grant funds during 2022 was not suspended or debarred from participating in federal programs.
We consider this internal control deficiency to be a material weakness, which led to material noncompliance.
Cause of Condition
County staff responsible for the program said they were unable to create an account on SAM.gov. Instead, they searched the contractor’s status in a state-debarred contractors list. However, this website only lists contractors who are not allowed to work on public works projects in Washington due to violations of state law and does not list contractors who are debarred from participating in federally funded projects.
Effect of Condition
The County did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify that one of two contractors was not suspended or debarred before entering into the contract. Without this verification, the County increases its risk of awarding federal funds to parties that are excluded from participating in federal programs. Any payments the County made to an ineligible party would be unallowable, and the federal agency could potentially recover them.
We subsequently verified the contractor was not suspended or debarred, so we are
not questioning costs.
Recommendation
We recommend the County improve its internal controls to ensure compliance with federal requirements. Specifically, we recommend the County ensure all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs.
County’s Response
The County respectfully concurs with the finding and understands the importance of compliance with federal program requirements. The County will implement internal controls that ensures that staff who are responsible for purchasing goods or services with federal dollars are obtaining a written certification whether by language within a contract or documentation from SAM.gov are vendors that are not suspended or debarred from participating in federal programs.
Auditor’s Remarks
We appreciate the County’s commitment to resolving 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.