Snohomish Conservation District

2021-001 The District?s internal controls were inadequate for ensuring compliance with federal requirements for subrecipient monitoring. ?See Schedule of Findings and Questioned Costs for chart/table? Background During fiscal year 2021, the District spent $860,455 in Puget Sound Action Agenda program funds, which included $371,495 passed through to seven subrecipients to help fulfill components of the program?s objectives. The purpose of the program is to protect and improve water quality and minimize the effects of rapid development in the Puget Sound Basin. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established program controls in areas like subrecipient monitoring. Whenever the District passes on federal funds to a subrecipient, federal regulations require the District to clearly identify the subaward contract as a federal award and include all applicable program requirements. Further, the District must evaluate each subrecipient?s risk of noncompliance with federal requirements to determine the appropriate amount and type of subrecipient monitoring. Subrecipient monitoring requirements include ensuring compliance with program statues, regulations and the terms and conditions of the award. Description of Condition The District entered into interlocal agreements with six local governments and one tribal government to administer several projects, including a land purchase, technical assistance, community events and trainings. Initially, the District had not considered the local governments and tribal government to be subrecipients when it formed the agreements. However, the District subsequently determined they were subrecipients, mainly because they were responsible for carrying out the program on the District?s behalf and making programmatic decisions. Consequently, the District did not follow the federal subrecipient monitoring requirements. Additionally, the interlocal agreements did not include all of the elements required for federal awards. Finally, the District did not perform risk assessments and did not monitor the subrecipients for program compliance. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was reported as a finding in the two prior audits. Cause of Condition When the District entered into these agreements during the prior audit, it experienced significant staff turnover, which included grant management positions and the Business Operation Director. The District had not previously used federal money to pass funding through to subrecipients. As such, District employees lacked adequate experience and needed training to know what subrecipient monitoring requirements the District must meet. Finally, because staff did not become aware of subrecipient monitoring requirements until after fiscal year 2021, the District did not have time to implement an adequate control process over subrecipient monitoring. Effect of Condition and Questioned Costs The District did not include all the required information in its subrecipient contracts, such as the subrecipient unique entity identifier, the federal award identification number, CFDA number and CFDA name. When contracts do not indicate they are federal subawards and do not include the required information, subrecipients are at an increased risk of not knowing the award comes from a federal program. This also increases the risk subrecipients would not know they need to comply with specific program requirements, which could lead to spending funds for unallowable purposes. The District passed a total of $371,495 in program funds from nine subawards. Of those, six subawards totaling $299,745 were not in compliance with the subrecipient monitoring requirements. Without performing risk assessments and monitoring subrecipients, the District cannot ensure it is performing the proper level of monitoring and that its subrecipients are complying with program requirements. As a result, we are considering these costs to be unsupported payments. Recommendation We recommend the District provide adequate training to staff responsible for administering federal programs. We also recommend the District dedicate the necessary resources to ensure compliance with all program requirements. This includes: - Ensuring all subaward agreements are clearly identified as federal awards and contain all required elements - Assessing subrecipients? risk and monitoring them accordingly to verify they are complying with the terms and conditions of their subawards District?s Response The District appreciates the opportunity to respond to the Washington State Auditor?s Office?s (SAO) conclusions. We would like to thank the audit staff for their patience, guidance, and open communication throughout the audit. The District is committed to establishing and following effective internal controls for administering federal grants and ensuring compliance with all program requirements. We agree with the finding and recommendations. We began identifying aspects of these deficiencies in 2021 and at that time began implementing changes to strengthen internal controls. We feel that the new processes and tools that were launched in September 2021 address the auditor?s concerns and meet the federal requirements. However, we appreciate the recommendations provided within this report and will continuing improving our policies, processes, and practices. 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 our 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 200, Uniform Guidance, section 332, Requirements for pass- through entities, establishes subrecipient monitoring and management requirements for pass through entities. Title 2 CFR Part 200, Uniform Guidance, section 331, Subrecipient and contractor determinations, establishes the requirements for pass through entities to make case-by-case determinations whether the agreement it makes for the disbursement of federal program funds casts the party receiving the funds in the role of a subrecipient or contractor and provides characteristics of the relationships.

2020-001 The District?s internal controls were inadequate for ensuring compliance with federal requirements for subrecipient monitoring, procurement and suspension and debarment. See Schedule of Findings and Questioned Costs for chart/table Background During fiscal year 2020, the District spent $742,340 in Puget Sound Action Agenda program funds, which included $197,237 passed through to six subrecipients to help fulfill components of the program?s objectives. The purpose of the program is to protect and improve water quality and minimize the effects of rapid development in the Puget Sound Basin. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding various grant requirements and monitoring the effectiveness of established program controls in areas like: Subrecipient Monitoring When the District passes on federal funds to subrecipients, federal regulations require the District to ensure every subaward agreement clearly identifies that it is a federal award and includes all applicable federal requirements. Further, the District must evaluate each subrecipient?s risk of noncompliance with federal requirements to determine the appropriate amount and type of subrecipient monitoring. Subrecipient monitoring requirements include ensuring compliance with program requirements. Procurement Federal regulations require grant recipients to follow their own written procurement procedures, which must reflect the most restrictive of applicable federal, state, or local laws. Established procedures must conform to federal procurement requirements to ensure recipients follow the most restrictive thresholds and methods when using federal funds. For purchases and purchased services greater than $10,000 but less than $40,000, District policy requires price or rate quotations from an adequate number of qualified sources and that employees keep records to demonstrate compliance with this requirement. Suspension and Debarment Federal regulations prohibit recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the District makes subawards or contracts for goods or services that it expects to equal or exceed $25,000, paid all or in part with federal awards, it must verify the subrecipients (including governments) or contractors have not been suspended or debarred or otherwise excluded. The District can accomplish this by (1) checking the U.S. General Services Administration?s Excluded Parties List system (EPLS), (2) collecting a written certification from the contractor or subrecipient, or (3) adding a clause or condition into the contract where the contractor or subrecipient states that is not suspended or debarred. The District must perform this verification before awarding the contract or subaward, as well as keep records to show compliance with this requirement. Description of Condition Subrecipient Monitoring The District entered into interlocal agreements with five local governments and one tribal government to administer several projects, including a land purchase, technical assistance, community events and trainings. Initially, the District had not considered the local governments and tribal government to be subrecipients when it formed the agreements. However, the District subsequently determined they were subrecipients, mainly because they were responsible for carrying out the program on the District?s behalf and making programmatic decisions. Consequently, the District did follow the federal subrecipient monitoring requirements. However, the interlocal agreements did not clearly identify that they were subawards and did not include other information required for federal awards. Additionally, the District did not perform risk assessments and did not monitor the subrecipients for program compliance. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Procurement The District did not have an effective process to demonstrate that it engaged in competitive procurement for purchases and purchased services. The District did not have any documentation demonstrating that staff solicited quotes for purchases, which District policy requires. We consider this internal control deficiency to be a significant deficiency. Suspension and Debarment The District did not have internal controls in place to ensure compliance with suspension and debarment requirements. The District did not obtain a written certification, include a clause in the contract, or review the EPLS to verify its contractors and subrecipients that were subject to this requirement during the audit period were not suspended or debarred from doing business with the federal government. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. These issues were reported as a finding in the prior audit as finding 2019-001. Cause of Condition During the audit period, the District experienced significant turnover, which included grant management positions and the Business Operation Director. Federal compliance audits are new for the District, and it had a difficult time identifying and providing support to show it had adequate controls in place. Additionally, the District has not previously used federal funds to pass funding through to subrecipients. As such, District employees lacked adequate experience and needed training to know what requirements the District must meet for subrecipient monitoring. Finally, though the District was aware of and had standard documentation protocols to demonstrate that it had met all procurement and suspension and debarment requirements, staff did not follow these protocols and did not keep documentation to demonstrate the District met these requirements. Effect of Condition and Questioned Costs Subrecipient Monitoring When contracts do not indicate they are federal subawards and do not include the required information, subrecipients are at an increased risk of not knowing the award comes from a federal program. This also increases the risk subrecipients would not know they need to comply with specific program requirements, which could lead to spending funds for unallowable purposes. The District passed a total of $197,237 in program funds to six subrecipients. Without performing risk assessments and monitoring subrecipients, the District cannot ensure it is performing the proper level of monitoring and that its subrecipients are complying with program requirements. As a result, we are considering these costs to be unsupported payments. Procurement Without adequate internal controls over procurement, the District cannot demonstrate that it complied with federal regulations for procuring goods and services, or that it received the best possible price for the services. During the fiscal year, the District entered into one contract to purchase soil, totaling $19,324, and one purchased service for soil debris hauling, totaling $18,683. We determined the purchase and service are allowable under the federal program. Therefore, we are not questioning these costs. Suspension and Debarment Without adequate internal controls over suspension and debarment requirements, the District cannot ensure it paid federal funds only to parties that are eligible to participate in federal programs. Any payments the District made to an ineligible party would be unallowable, and the funding agency could potentially recover them. During fiscal year 2020, the District paid two contractors and six subrecipients $275,685 for various items and services, such as consulting services, a land purchase, community events and trainings, without verifying their suspension and debarment status. The District subsequently verified the contractors and subrecipients were not suspended or debarred. Therefore, we are not questioning these costs. Recommendation We recommend the District provide adequate training to staff responsible for administering federal programs. We also recommend the District dedicate the necessary resources to ensure compliance with all program requirements. This includes: ? Ensuring all subaward agreements are clearly identified as federal awards and contain all required elements ? Assessing subrecipients? risk and monitoring them accordingly to verify they are complying with the terms and conditions of their subawards ? Verifying that the District used all funding in accordance with procurement and suspension and debarment requirements District?s Response The District appreciates the opportunity to respond to the Washington State Auditor?s Office?s (SAO) conclusions. We would like to thank the audit staff for their patience, guidance, and open communication throughout the audit. The District is committed to establishing and following effective internal controls for administering federal grants and ensuring compliance with all requirements. We agree with the finding and recommendations. We began identifying aspects of these deficiencies in 2020 and at that time began implementing changes to strengthen internal controls. We appreciate the recommendations provided within this report and will continuing improving our policies, processes, and practices to ensure that they are fully implemented. Auditor?s Remarks We appreciate the District?s commitment to resolve this finding and that the District for its cooperation and assistance during the audit. We will review the corrective action taken during our 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 200, Section 319 ? Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR Part 200, Section 320 ? Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Government wide Department and Suspension (Nonprocurement) establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes subrecipient monitoring and management requirements for pass through entities. Title 2 CFR Part 200, Uniform Guidance, section 331, Subrecipient and contractor determinations, establishes the requirements for pass through entities to make case-by-case determinations whether the agreement it makes for the disbursement of federal program funds casts the party receiving the funds in the role of a subrecipient or contractor and provides characteristics of the relationships.

2019-001 The District?s internal controls were inadequate for ensuring compliance with federal requirements for subrecipient monitoring, procurement and suspension and debarment. See Schedule of Findings and Questioned Costs for chart/table Background During fiscal year 2019, the District spent $629,805 in Puget Sound Action Agenda program funds, which included $172,105 passed through to six subrecipients to help fulfill components of the program?s objectives. The purpose of the program is to protect and improve water quality and minimize the adverse effects of rapid development in the Puget Sound Basin. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding various grant requirements and monitoring the effectiveness of established program controls in areas like: Subrecipient Monitoring When the District passes on federal funds to subrecipients, federal regulations require the District to ensure every subaward agreement clearly identifies that it is a federal award and includes all applicable federal requirements. Further, the District must evaluate each subrecipient?s risk of noncompliance with federal requirements to determine the appropriate amount and type of subrecipient monitoring. Subrecipient monitoring requirements include ensuring compliance with program requirements. Procurement Federal regulations require grant recipients to follow their own written procurement procedures, which must reflect the most restrictive of applicable federal, state, or local laws. Established procedures must conform to federal procurement requirements to ensure recipients follow the most restrictive thresholds and methods when using federal funds. For purchased services greater than $10,000 but less than $40,000, District policy requires price or rate quotations from an adequate number of qualified sources. For purchased services greater than $40,000, District policy requires a formal competitive bid process that includes solicitation through an invitation for bid or a request for proposal/qualification, advertising, sealed bids, and a reasonable time for the vendor or contractor to prepare a bid. The District must keep records for all items procured to demonstrate compliance. Suspension and Debarment Federal regulations prohibit recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the District makes subawards or contracts for goods or services that it expects to equal or exceed $25,000, paid all or in part with federal awards, it must verify the subrecipients (including governments) or contractors have not been suspended or debarred or otherwise excluded. The District can accomplish this by (1) checking the U.S. General Services Administration?s? Excluded Parties List system (EPLS), (2) collecting a written certification from the contractor or subrecipient, or (3) adding a clause or condition into the contract where the contractor or subrecipient states that is not suspended or debarred. The District must perform this verification before awarding the contract or subward, as well as keep records to show compliance with this requirement. Description of Condition Subrecipient Monitoring The District entered into interlocal agreements with four local governments, one nonprofit organization, and one tribal government to administer several projects, including a land purchase, technical assistance, community events and trainings. Initially, the District had not considered the local governments, nonprofit organization or tribal government to be subrecipients when it formed the agreements. However, the District subsequently determined they were subrecipients, mainly because they were responsible for carrying out the program on the District?s behalf and making programmatic decisions. Consequently, the District did follow the federal subrecipient monitoring requirements. However, the interlocal agreements did not clearly identify that they were subawards and did not include other information required for federal awards. Additionally, the District did not perform risk assessments and did not monitor the subrecipients for program compliance. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Procurement The District did not have an effective process to demonstrate that it engaged in competitive procurement for purchased services. The District did not have any documentation demonstrating that staff solicited quotes for purchases, which District policy requires. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Suspension and Debarment The District did not have internal controls in place to ensure compliance with suspension and debarment requirements. The District did not obtain a written certification, include a clause in the contract, or review the EPLS to verify its contractors or subrecipients that were subject to this requirement during the audit period were not suspended or debarred from doing business with the federal government. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition During the audit period, the District experienced significant turnover, which included grant management positions and the Business Operation Director. Federal compliance audits are new for the District, and it had a difficult time identifying and providing support to show it had adequate controls in place. Additionally, the District has not previously used federal funds to pass funding through to subrecipients. As such, District employees lacked adequate experience and needed training to know what requirements the District must meet for subrecipient monitoring. Finally, though the District was aware of and had standard documentation protocols to demonstrate that it had met all procurement and suspension and debarment requirements, staff did not follow these protocols to demonstrate the District met these requirements. Effect of Condition and Questioned Costs Subrecipient Monitoring When contracts do not indicate they are federal subawards and do not include the required information, subrecipients are at an increased risk of not knowing the award comes from a federal program. This also increases the risk subrecipients would not know they need to comply with specific program requirements, which could lead to spending funds for unallowable purposes. The District passed a total of $172,105 in program funds to six subrecipients. Without performing risk assessments and monitoring subrecipients, the District cannot ensure it is performing the proper level of monitoring and that its subrecipients are complying with program requirements. As a result, we are considering these costs to be unsupported payments. Procurement Without adequate internal controls over procurement, the District cannot demonstrate that it complied with federal regulations for procuring services, or that it received the best possible price for the services. During the fiscal year, the District entered into five contracts with four vendors for consulting and public outreach, totaling $215,220. Of those contracts, one contract added two amendments (one for $110,350 and one for $137,670) for items outside the original scope of services. These amendments were above the formal bidding threshold, per District policy, that would require them to be bid separately. We determined the purchased services are allowable under the federal program. Therefore, we are not questioning these costs. Suspension and Debarment Without adequate internal controls over suspension and debarment requirements, the District cannot ensure it paid federal funds only to parties that are eligible to participate in federal programs. Any payments the District made to an ineligible party would be unallowable, and the funding agency could potentially recovery them. During fiscal year 2019, the District paid three contractors and six subrecipients $367,278 for various items and services, such as consulting services, a land purchase, community events and trainings without verifying their suspension and debarment status. The District subsequently verified the contractors and subrecipients were not suspended or debarred. Therefore, we are not questioned these costs. Recommendation We recommend the District provide adequate training to staff responsible for administering federal programs. We also recommend the District dedicate the necessary resources to ensure compliance with all program requirements. This includes: ? Ensuring all subaward agreements are clearly identified as federal awards and include all required elements ? Assessing subrecipients? risk and monitoring them accordingly to verify they are complying with the terms and conditions of their subawards ? Verifying that the District used all funding in accordance with procurement and suspension and debarment requirements District?s Response The District appreciates the opportunity to respond to the Washington State Auditor?s Office?s (SAO) conclusions. We would like to thank the audit staff for their patience, guidance, and open communication throughout the audit. The District is committed to establishing and following effective internal controls for administering federal grants and ensuring compliance with all requirements. We agree with the finding and recommendations. We began identifying aspects of these deficiencies in 2020 and at that time began implementing changes to strengthen internal controls. We appreciate the recommendations provided within this report and will continuing improving our policies, processes, and practices to ensure that they are fully implemented. Auditor?s Remarks We appreciate the District?s commitment to resolve this finding and that the District for its cooperation and assistance during the audit. We will review the corrective action taken during our 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 200, Section 319 ? Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR Part 200, Section 320 ? Methods of procurement to be followed, describes each allowable procurement method. Title 2 CFR Part 180, OMB Guidelines to Agencies on Government wide Department and Suspension (Nonprocurement) establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes subrecipient monitoring and management requirements for pass through entities. Title 2 CFR Part 200, Uniform Guidance, section 331, Subrecipient and contractor determinations, establishes the requirements for pass through entities to make case-by-case determinations whether the agreement it makes for the disbursement of federal program funds casts the party receiving the funds in the role of a subrecipient or contractor and provides characteristics of the relationships.