SAN JUAN COUNTY FIRE PROTECTION DISTRICT NO. 2

2020-001 The District did not have adequate internal controls to ensure compliance with federal suspension and debarment and procurement requirements. CFDA Number and Title: 97.044 Assistance to Firefighters Grant Federal Grantor Name: Federal Emergency Management Agency Federal Award/Contract Number: EMW-2018-FR-00475 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Description of Condition The purpose of the Assistance to Firefighters Grant program is to enhance the safety of the public and firefighters with respect to fire and fire-related hazards by providing direct financial assistance to eligible fire departments for critically needed resources to equip and train emergency personnel to recognized standards. During fiscal year 2020, the District spent $811,020 in program funding to purchase breathing apparatus and related equipment and supplies. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Suspension and debarment Federal regulations prohibit recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the District contracts for goods or services expected to equal or exceed $25,000, paid all or in part with federal funds, the District must verify the contractor is not suspended or debarred or otherwise excluded. This verification may be accomplished by checking the Excluded Parties List System (EPLS) maintained by the General Services Administration, collecting a certification from the contractor, or adding a clause or condition to the contract stating the contractor is not suspended or debarred. The District must perform one of these verification methods before entering the contract. The District did not obtain a written certification, insert a clause in the contract or review the federal EPLS to verify the one contractor it paid with federal program funds was not suspended or debarred before entering into the contract. Procurement Federal regulations require grant recipients to follow their own documented procurement procedures, which must reflect the most restrictive of applicable federal, state or local requirements. The procedures must conform to federal procurement standards of 2 CFR 200.318.327 to ensure recipients follow the most restrictive thresholds and methods when using federal funds. Additionally, federal regulations require recipients to maintain written standards of conduct covering conflicts of interest and governing the actions of employees involved in the selection, award, or administration of contracts procured with federal funds. Specifically, the written procedures must include the following elements: ? No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. ? The officers, employees, and agents may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. ? Disciplinary actions for violations of such standards. The District does not have its own documented procurement procedures to ensure the most restrictive of federal, state, and local methods are followed when using federal funds. Additionally, the District does not have its own written standards of conduct procedures covering employees involved in the selection, award or administration of federal awards. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. These issues were not reported as findings in the prior audit. Cause of Condition The District has not received a federal grant compliance audit since fiscal year 2003. It was aware of the suspension and debarment requirements, and the requirements were stipulated it the awarding documents. However, the District overlooked them. Additionally, District staff were unaware of the federal requirements to establish written procedures for procurement and standards of conduct. Effect of Condition Suspension and debarment Without adequate internal controls, the District cannot ensure it pays federal funds to contractors that are eligible to participate in federal programs. Any payments of program funds to a contractor that is suspended or debarred would be unallowable and subject to recovery by the grantor. The District entered into a contract for $855,710, of which it paid $811,020 of program funds without verifying that the contractor was not suspended or debarred. We verified that the contractor was not suspended or debarred. Therefore, we are not questioning the related costs. Procurement Without written procedures in place the District is at greater risk of non-compliance with following the most restrictive of federal, state, or local procurement methods and standards of conduct requirements when procuring contractors paid all or in part with federal funds. Although the District did not have written procedures in place, it did comply with federal requirements when soliciting proposals for the project. Recommendation We recommend the District establish internal controls for verifying the suspension and debarment status of contractors paid $25,000 or more before entering into contracts. Additionally, we recommend the District establish and maintain written procedures for procurement and standards of conduct, as required by federal regulations. District?s Response We, the District, will be establishing and maintaining written procedures for procurement and standards of conduct, as required by federal regulations along with establishing internal controls for verifying the suspension and debarment status of contractors paid $25,000 or more before entering into contracts. Auditor?s Remarks We appreciate the District?s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during the next regular 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 Government wide Debarment and Suspension (Nonprocurement) establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 200, Uniform Guidance, section 318 General procurement standards, establishes requirements for documented procurement procedures which reflect applicable state, local, and federal laws and regulations.