Snohomish Health DistrictLocal Government

Snohomish Health District January 1, 2021 through December 31, 2021 2021-002 The District lacked internal controls for ensuring compliance with federal suspension and debarment requirements. "See Schedule of Federal Award Findings and Questioned Costs" Background The objective of the Epidemiology and Laboratory Capacity for Infectious Diseases program is to protect the public?s health and safety by enhancing the capacity of public health agencies to effectively detect, respond, prevent, and control known, emerging, or reemerging infectious diseases. During fiscal year 2021, the District spent about $9.9 million in federal funding to operate COVID-19 testing sites. 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. Additionally, federal regulations prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or 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 District may accomplish this verification by searching for exclusion records in the U.S. Government Services Administration?s System for Award Management (SAM.gov), obtaining a written certification from the contractor, or adding a clause or condition into the contract that states the contractor is not suspended or debarred. The District must perform this verification before entering into the contract and charging the costs to a federal award, and it must keep documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the District did not have an adequate process in place to verify that all parties receiving $25,000 or more in federal funds were not suspended or debarred. The District did not obtain written certifications, include a clause in the contracts, or check SAM.gov to verify two contractors were not suspended or debarred from participating in federal programs. We consider this internal control deficiency to be a material weakness, which led to a material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition In response to the Governor?s state of emergency declaration regarding COVID-19, the District issued its own emergency declaration via Resolution 20-06, which waived competitive bidding requirements in hopes of mitigating delays with public health supplies that would otherwise increase the risk to public health. Uniform Guidance (2 CFR ? 200.320(f)) allows procurement by noncompetitive proposals when there is a public emergency, as does state law (RCW 39.04.280). District staff thought the emergency waiver for bidding requirements also applied to suspension and debarment requirements because the two processes usually occur simultaneously. The District also awarded these contracts before adding a suspension and debarment clause to its contract template. Effect of Condition The District did not verify the suspension and debarment status for the two contractors that it paid a total of $1,714,143 during the audit period. At the time of the award, the District did not check the contractors? status on SAM.gov and retain support, have an attestation clause in the contracts, or obtain signed certifications from the contractors attesting they were not suspended or debarred. Without this verification, the District increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the federal grantor could potentially recover funding. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs for these payments. The District has since inserted a clause in its contract templates, whereby the signer attests they are not suspended or debarred. Recommendation We recommend the District strengthen its internal controls to ensure it verifies all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before contracting with them. Additionally, the District should use its updated contract template that includes the suspension and debarment clause for contracts greater than $25,000 to ensure compliance with federal requirements. District?s Response The District concurs with this finding. During the year, District staff had implemented an updated contract template and approval process. The template requires staff involved with entering a new contract, to verify the suspension and debarment status of the parties to the contract. This updated process applies to all new contracts. The two contracts subject to this finding were awarded prior to the implementation of the updated process. Details of the improvements that have been implemented are: ? The District developed and adopted policy 130.004 Contracts in 2022 which includes federal requirements listed in Appendix II to Part 200(A) of 2 CFR relating to suspension and debarment. ? Use of the updated contract template which includes the addition of a suspension and debarment clause. ? With the insertion of the clause, the signer attests they are not suspended or debarred. ? Staff check the parties? status on SAM.gov to verify that the contractors are not suspended or debarred. ? The contract and approval coversheet template requires that District management review and approve the contract and verify the inclusion of the suspension and debarment clauses and the contractors? status. ? New District staff receive training on the updated contract template. Auditor?s Remarks We appreciate the steps the District has taken to resolve these issues. 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 on Agencies on Government Wide Department and Suspension (Nonprocurement) establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

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