Mass Transportation AuthorityLocal Government

2025-001 - Procurement, Suspension, and Debarment Finding Type. Immaterial Noncompliance (Procurement, Suspension, and Debarment) Program. Federal Transit Cluster; Assistance Listing Number 20.507 and 20.526; All Award Numbers. Criteria. Recipients of federal awards are required to follow their own internal purchasing policies, as well as comply with purchasing standards set forth in the Uniform Guidance. Under the requirements of 2 CFR Part 180 covered transactions for procurement and nonprocurement contracts that are expected to equal or exceed $25,000, the grantee must verify that the party being awarded a procurement and nonprocurement contract is not suspended, debarred, or otherwise excluded by checking the list of excluded parties, obtaining certification from the vendor or subrecipient, or including a clause or condition to the covered transaction with that entity before entering into a contract. Condition. The Authority was unable to provide documentation to support its consideration of suspension and debarment requirements for four out of ten vendors selected for testing. Cause. Management has indicated that the Authority is conducting proper procurement processes and checking for suspension and debarment during the initial bidding process however, was unable to provide documentation that the verification was completed and retained in accordance with federal requirements. Effect. The Authority is exposed to an increased risk that future noncompliance could occur and not be prevented or detected by the Authority's internal controls. Questioned Costs. No costs were required to be questioned as a result of this finding inasmuch as our testing did not reveal any unallowed costs, and the vendors in question were not actually suspended or debarred. Recommendation. We recommend that the Authority complete a search on sam.gov and document the results of that search in the vendor file or require the vendor to sign a certification that they are neither suspended nor debarred as part of new contracts for covered transactions to determine if a particular vendor has any active exclusions from participating in federal award programs during the initial bidding process, as required of the Uniform Guidance, and again on an annual basis for best practice. View of Responsible Officials. The Authority will take the following corrective action steps 1) update procurement policies to require verification of vendors through SAM.gov prior to contract award and annually thereafter for vendors expected to receive payments exceeding $25,000 in federal funds; 2) require a printed or electronically saved SAM.gov search result showing date of verification to be retained in the vendor file (electronic or hard copy); 3) develop and maintain an annual review schedule to re-verify suspension and debarment status for all applicable vendors and document completion; 4) provide training to procurement and finance staff regarding Uniform Guidance requirements for suspension and debarment compliance and documentation standards; and 5) incorporate suspension and debarment verification into the internal compliance checklist used during year-end federal reporting and Single Audit preparation. All corrective actions will be fully implemented no later than April 30, 2026, with ongoing monitoring procedures in place thereafter.

Assistance Listing Number, Federal Agency, and Program Name ALN 20.507, U.S. Department of Transportation, Federal Transit Cluster Federal Award Identification Number and Year 20.507, fiscal year 2023 Pass through Entity N/A Finding Type Material weakness Repeat Finding No Criteria Per 2 CFR 200.510(b): The auditee must also prepare a schedule of expenditures of federal awards for the period covered by the auditee's financial statements, which must include the total federal awards expended determined in accordance with §200.502. Condition The schedule of expenditures of federal awards (SEFA) was inaccurate. Questioned Costs None Identification of How Questioned Costs Were Computed Not applicable Context In fiscal year 2023, the Authority expended approximately $21.7 million of federal funding. The Authority accumulates the financial data and other required information to complete the SEFA. Due to lack of control on reviewing drawdowns after year end to ensure they are reported properly, an adjustment was identified by the auditors related to ALN 20.507 for approximately $1,500,000 that was improperly excluded from the original SEFA provided by the Authority to the auditors. Cause and Effect Controls in place to ensure the SEFA was complete and accurate were not effective. The error in the SEFA has been corrected. Recommendation The Authority should implement a process to ensure the SEFA is complete and accurate by thoroughly reviewing agreements for grants received and reconciling the SEFA to a final trial balance prior to the start of the audit. The Authority should also ensure completeness by reviewing drawdowns after year end to ensure that they are reported in the correct period on the SEFA. Views of Responsible Officials and Planned Corrective Actions Management would like to point out that this finding is related to Finding 2023 001. The accrual of additional grant invoices resulted in parallel updates to our SEFA schedule. Therefore, this finding is a direct result of Finding 2023 001. As an aside, our current process for SEFA reporting is manual. We are investing in a new accounting system, in which the SEFA information will not require manual intervention and, thus, will reduce any potential entry errors in the future.

Assistance Listing Number, Federal Agency, and Program Name 20.509, U.S. Department of Transportation, Formula Grants for Rural Areas Federal Award Identification Number and Year MI 2020 008 07 Pass through Entity Michigan Department of Transportation (MDOT) Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria Per 2 CFR 200.212 and 200.318, 2 CFR Section 180.300, and 48 CFR Section 52.209 6, recipients must have procedures in place for verifying that an entity with which they plan to enter into a covered transaction is not debarred, suspended, or otherwise excluded. They must also have procedures in place to ensure procurement policies are followed for all contracts that are partially or fully funded with federal funds. Condition Of the 40 contracts with a contractor, 2 were entered into without verification that the entity was not debarred, suspended, or otherwise excluded. Additionally, 2 of the 40 contracts tested did not have documentation to support that either the small purchase procedures were followed or the rationale for a noncompetitive solicitation was documented. Questioned Costs None Identification of How Questioned Costs Were Computed N/A Context Of the sample of 40 contracts procured this year that we selected for testing, 2 of them did not include adequate documentation regarding review that the contractor was not debarred, suspended, or otherwise excluded. The Authority has since confirmed, as of the date of the audit, that that contractor was not on the suspended or debarred list, and, therefore, there are no questioned costs. Also, 2 of the 40 samples selected did not have required support for the procurement method selected based on federal guidelines, as well as the Authority's purchasing policy. Cause and Effect Internal control procedures related to compliance with suspension and debarment requirements and to ensuring the procurement policy is followed and all factors documented properly did not operate effectively. As a result, the Authority did not perform procedures to ensure that a contractor is not debarred, suspended, or otherwise excluded from entering into contracts with federal funding. The Authority has since confirmed, as of the date of the audit, that that contractor was not on the suspended or debarred list, and, therefore, there are no questioned costs. The Authority also did not obtain price quotes, as required by the small purchases provision, or have the appropriate rationale, as required by the noncompetitive solicitation provision, before selecting a vendor for services. That resulted in insufficient documentation to support the procurement for the 1 contract. Recommendation Internal control procedures should be implemented to ensure that all contracts include verification that an entity is not debarred, suspended, or otherwise excluded and that documentation of this review is maintained in the contract file. The Authority should also implement internal control procedures to ensure the proper documentation is kept in the procurement files to support any and all procurement decisions in accordance with the purchasing policy. Views of Responsible Officials and Corrective Action Plan Management will ensure that all contracts include verification that an entity is not debarred, suspended, or otherwise excluded and maintain documentation of this review in the contract file. While our current internal controls already support this practice, we acknowledge that there were instances in which this was unintentionally missed. We are re educating procurement staff regarding the necessity of these verifications. Additionally, the contract in question related to emergency professional services in support of the Authority's response to the global pandemic. Due to the emergent situation, the ideal processes were not followed. We acknowledge that internal controls must be followed for all contracts, regardless of urgency. Furthermore, the contract should have been reevaluated when the public health emergency ended, and the processes used should have been fully documented. We will endeavor to have full documentation in the future.

Assistance Listing Number, Federal Agency, and Program Name 20.509, U.S. Department of Transportation, Formula Grants for Rural Areas Federal Award Identification Number and Year MI 2020 008 07 Pass through Entity Michigan Department of Transportation (MDOT) Finding Type Material weakness Repeat Finding No Criteria As outlined in 2 CFR 200.303, the Authority should have internal controls in place to ensure the accuracy of reimbursement requests submitted to the State. Condition Currently one person prepares the reimbursement requests and no one reviews them for accuracy prior to submitting the requests to the State through the Operating Assistance Report (OAR) for reimbursement. Questioned Costs None Identification of How Questioned Costs Were Computed N/A Context During our testing of the internal controls related to cash management, Plante & Moran, PLLC noted that there is no independent review of reimbursement requests prepared and submitted to the State by the Authority. Plante & Moran, PLLC did note, through our testing, that the amounts requested for reimbursement did tie to the expenditures recorded in the general ledger for the samples we selected, and, therefore, there are no questioned costs. Cause and Effect Internal control procedures related to compliance with cash management did not exist during the year, which could have resulted in an error on the reimbursement request that did not get caught. Plante & Moran, PLLC did not note any errors on the samples selected for testing. Recommendation Internal control procedures should be implemented to ensure all reimbursement requests are reviewed by an individual who is not charged with preparing those same source documents. Views of Responsible Officials and Planned Corrective Actions Management will identify a new process for OAR assignment and submission. Currently, the OARs are prepared and submitted by the CFO due to staffing limitations. Nevertheless, the CFO will work to identify an individual within the finance department who has the skill set and capacity to prepare the OARs for CFO review prior to submission.