TOWN OF COLCHESTER, CONNECTICUTLocal Government

Finding 2025-001 Coronavirus State and Local Fiscal Recovery Funds (Internal Control Significant Deficiency and Compliance - Procurement) – 2025 Program U.S. Department of the Treasury, 21.027 Coronavirus State and Local Fiscal Recovery Funds, Passed Through State Department of Education (12060-SDE64370-28434) Criteria Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200.318–200.327) require non-Federal entities to use documented procurement procedures that comply with federal standards and to conduct procurements in a manner providing full and open competition. Additionally, 2 CFR Part 200.318(a) requires non-Federal entities to use their own documented procurement procedures which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal law and the standards identified in 2 CFR Part 200. The Town’s adopted purchasing policy requires competitive bids for purchases exceeding $25,000. The formal process may be waived under certain circumstances, however, for Education department purchases, the Superintendent must, in writing, state the reason(s) for granting such waiver and shall notify the Board of Education, as applicable, of such action by electronic means. Conditions We noted that two grant expenditures selected for testing that were above the bid threshold were not procured in accordance with the Town’s adopted purchasing policy or the procurement requirements established under Uniform Guidance (2 CFR Part 200). Specifically, the Education department did not obtain the required competitive bids or price quotations applicable to the procurement thresholds in effect at the time of purchase. While the intent was to waive the bid process due to time pressures, there is no documentation of the bid waiver and approval of the waiver. Both exceptions related to the State Department of Education pass through grant for the Bacon Academy carpet project. Questioned costs None noted. Context Not applicable. Effect Failure to comply with federal and local procurement requirements increases the risk of noncompliance with federal award terms and conditions. Noncompetitive procurement practices may limit full and open competition and could result in questioned costs or potential repayment of federal funds. Cause The Education department did not follow established procurement procedures for the Bacon Academy carpet project funded by the Coronavirus State and Local Fiscal Recovery Funds grant. Based on discussions with management, the noncompliance appears to have resulted from inadequate understanding and implementation of the bid waiver process. Recommendation We recommend that the Education department: • Strengthen internal controls to ensure all federal procurements comply with 2 CFR Part 200 and the Town’s purchasing policy; • Provide training to personnel responsible for procurement and grant administration on Uniform Guidance procurement requirements; • Implement a documented review and approval process to verify procurement method compliance prior to contract execution and payment; and • Maintain complete procurement documentation, including evidence of bids or price quotations, cost or price analysis (when required), and contract provisions required by 2 CFR Part 200.327 and Appendix II. If applicable, bid waiver documentation should be maintained. Views of responsible official and planned corrective actions Management agrees with this finding. The Education Department is reviewing their procurement process and will implement controls to ensure procurement compliance is verified prior to contract execution and payment. Additionally, procurement training will be provided to administrators and staff involved in purchasing and grant management. Federal procurements will be monitored by the Business Manager and Superintendent.

Finding 2024-003 Coronavirus State and Local Fiscal Recovery Funds (Compliance - Reporting) – 2023 Program 21.027 Coronavirus State and Local Fiscal Recovery Funds Criteria The Town is required to complete the project and expenditure report annually for obligations and expenditures. The report is required to include current period obligations, cumulative obligations, current period expenditures and cumulative expenditures. The report has key line items that are quantifiable and should be reconciled to the Town's general ledger. Conditions The amounts reported in the March 31, 2024 project and expenditure report for cumulative expenditures only included the current year expenditures. Cumulative expenditures at March 31, 2024 should have totaled $3,032,459, the sum of the current and prior year expenditures. Questioned costs None noted. Context Not applicable. Effect The Town was not in compliance with the reporting requirements. Cause The Town did not follow the established procedures and internal controls for grant reporting. Recommendation We recommend the Town implement procedures to ensure amounts reported in the project and expenditures reports agree to the general ledger expenditures in accordance with the grant requirements. Views of responsible official and planned corrective actions Management agrees with this finding. The Town has reviewed the reporting procedures and how to maintain accurate expenditures, in accordance with U.S. Treasury guidelines. This corrective action has been sustained for the March 2025 filing, and will be adhered to for any subsequent reporting by the Director of Finance and the First Selectman.

Finding 2023-003 Coronavirus State and Local Fiscal Recovery Funds Reporting (Compliance) – 2023 Criteria The Town is required to complete the project and expenditure report annually for obligations and expenditures. The report is required to include current period obligations, cumulative obligations, current period expenditures and cumulative expenditures. The report has key line items that are quantifiable and should be reconciled to the Town's general ledger. Conditions The amounts reported in the March 31, 2023 project and expenditure report for current period and cumulative expenditures were not able to be reconciled to the amounts expended in the Town’s general ledger. Additionally, the current period and cumulative obligations reported were lower than the $1,357,672 obligated by the Board of Selectmen by March 31, 2023. Questioned costs None noted. Context Not applicable. Effect The Town was not in compliance with the reporting requirements. Cause The Town did not follow the established procedures and internal controls for grant reporting. Recommendation We recommend the Town implement procedures to ensure amounts reported in the project and expenditures reports agree to the general ledger expenditures in accordance with the grant requirements. Views of responsible official and planned corrective actions Management agrees with this finding. The Town will implement procedures to ensure reports are based upon the Town's general ledger and properly reconciled and in compliance with U.S. Treasury guidelines. The reporting was corrected for the March 31, 2024 filing and the expenditures reported were based on the general ledger. The implementation of this recommendation will be monitored by the Finance Director.