Pacific County Public Transportation Benefit AreaLocal Government

Pacific Transit System January 1, 2024 through December 31, 2024 2024-001 The Transit did not have adequate internal controls and did not comply with federal suspension and debarment requirements. Assistance Listing Number and Title: 20.509 – COVID-19 Formula Grants for Rural Areas and Tribal Transit program Federal Grantor Name: 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: PTD0236, PTD0542, PTD0700, PTD0701 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-001 Background The Formula Grants for Rural Areas provides financial assistance to rural communities for initiating, improving or continuing public transportation services. Rural communities can use funding for operating, planning and administrative expenses, or for acquiring, constructing, and improving facilities and equipment. The Transit spent $1,466,140 in program funds during fiscal year 2024. Federal regulations require recipients to establish, document and maintain effective 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 Transit 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 are not suspended, debarred or otherwise excluded from participating in federal programs. The Transit may verify this by obtaining 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 Transit must verify this before entering into the contract and must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the Transit did not have internal controls in place to verify three contractors it paid more than $25,000 in federal funds were not suspended or debarred from participating in federal programs. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Although Transit staff were aware of the requirements, they could not locate documentation to show that they verified the contractors suspension and debarment status. Effect of Condition The Transit did not obtain a written certification from the contractor, insert a clause into the contract, or check for exclusion records at SAM.gov to verity three contractors it paid $38,948, $28,936 and $27,621, respectively, using federal funds were not suspended or debarred before contracting. Without adequate internal controls, the Transit increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the Transit made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the Transit strengthen its internal controls to verify all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and maintain documentation demonstrating compliance with this requirement. Transit’s Response Pacific Transit will confirm all vendors selected for purchases of $25,000 or more are registered with SAM.gov and are not suspended or debarred from doing business with the federal government. Auditor’s Remarks We thank the Transit for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the Transit’s corrective action 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.

2023-001       ​​The Transit did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements. Assistance Listing Number and Title: 20.509 - COVID-19 Formula Grants for Rural Areas and Tribal Transit Program Federal Grantor Name: 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: PTD0236, PTD0276, PTD0542, PTD0700, PTD0701    Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A     Description of Condition The Formula Grants for Rural Areas provides financial assistance to rural communities for initiating, improving, or continuing public transportation service. Rural communities can use grant funding for operating, planning and administrative expenses, or for acquiring, constructing and improving facilities and equipment. The Transit spent $1,492,613 in program funds during fiscal year 2023.   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 requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the Transit 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 that the contractors have not been suspended, debarred or otherwise excluded from participating in federal programs. The Transit may verify this by obtaining 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 Transit must verify this before entering into the contract and must maintain documentation demonstrating compliance with this federal requirement.   Our audit found the Transit did not have adequate controls in place to verify two contractors it paid more than $25,000 in federal funds were not suspended or debarred from participating in federal programs.   We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.  Cause of Condition Transit staff were not aware they were required to check suspension and debarment for one of the contractors when piggybacking off a state contract. The Transit also did not retain documentation showing it performed a SAM.gov check at the time it established the contract with the other contractor to verify they were not suspended or debarred. Effect of Condition The Transit did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify two contractors it paid $268,939 and $76,905 using federal funds, were not suspended or debarred before contracting. Without adequate internal controls, the Transit cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs.  Any program funds the Transit used to pay contractors that have been suspended or debarred would be unallowable, and the awarding agency could potentially recover them.  Because we subsequently verified the contractors were not suspended or debarred, we are not questioning costs. Recommendation We recommend the Transit strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them. Transit’s Response Pacific Transit will confirm all vendors selected for purchases of $25,000 or more are registered with SAM.gov and are not suspended or debarred from doing business with the federal government. Auditor’s Remarks We thank the Transit for its cooperation throughout the audit and the steps it is taking to address these concerns.  We will review the status of the Transit’s corrective action 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.

Pacific Transit System January 1, 2019 through December 31, 2019 2019-001 The Transit did not have adequate internal controls to ensure compliance with federal suspension and debarment requirements. CFDA Number and Title: 20.526 Federal Transit Cluster ? Buses and Bus Facilities Formula, Competitive, and Low or No Emissions Programs Federal Grantor Name: 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: GDG2618 Questioned Cost Amount: $0 Description of Condition During fiscal year 2019, the Transit spent $690,526 in Federal Transit Cluster ? Buses and Bus Facilities Formula program grant funds. The objective of the program is to provide financial assistance to replace, rehabilitate, and purchase buses and related equipment as well as construct bus-related facilities through both formula and competitive selection procedures. The Transit used all of these federal grant funds to purchase two buses from one contractor. Federal regulations require grant recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Federal regulations prohibit recipients from contracting with parties that have been suspended or debarred from doing business with the federal government. Whenever the Transit contracts for goods and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that the contractor is not suspended or debarred or otherwise excluded. The Transit can obtain a written certification from the contractor or insert a clause into the contract where the contractor states it is not suspended or debarred. Alternatively, the Transit may review the contractor?s status on the federal Excluded Parties List System (EPLS) maintained by the U.S. General Service Administration. This verification must be performed before entering into a contract or purchase. The Transit?s controls were not effective to ensure it complied with federal suspension and debarment requirements. The Transit made two bus purchases, each exceeding $25,000, from one contractor in March 2019 and did not ensure the contractor was not suspended or debarred before making the purchases. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Transit was not aware of the requirement at the time of the purchases. During our audit of fiscal year 2018, the Transit became aware of this requirement and verified that the contractor was not suspended or debarred. However, it made the purchases before this verification. Effect of Condition Without adequate internal controls over suspension and debarment requirements, the Transit cannot guarantee it pays federal funds only to eligible contractors. Any payments made to an ineligible party would be subject to recovery by the funding agency. In February 2020, the Transit verified the contractor was not suspended or debarred. Therefore, we are not questioning the related costs. Recommendation We recommend the Transit ensure its internal controls are adequate to verify that all contractors it pays $25,000 or more, paid all or in part with federal funds, are not suspended or debarred from participating in federal programs before awarding contracts or making purchases. Authority?s Response We became aware that documentation was needed to verify an entity is not in suspension or debarment with the federal government if goods were bought off the WA State Contract. We felt this was undeserved since the entities should have been checked for suspension or debarment before being placed as a state contract. We are currently checking and documenting the status of all entities for suspension, debarment, or excluded from doing business with the federal government, prior to awarding a contract paid in part or all with federal funds exceeding $25,000. Auditor?s Remarks We appreciate the Transit?s commitment to resolve this finding. Utilizing a state contract does not eliminate the Transit?s requirement to verify for itself that all contractors it pays $25,000 or more, paid all or in part with federal funds, are not suspended or debarred from participating in federal programs before awarding contracts or making purchases from the vendors. We thank the Transit for its cooperation and assistance during the audit. We will review the corrective action taken during our next regularly scheduled 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. 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 303 Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 213 ? Suspension and Debarment, establishes suspension and debarment requirements. 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.