Port of Bellingham

2024-001 The Port did not have adequate controls and did not comply with federal procurement requirements. Assistance Listing Number and Title: Federal Grantor Name: Federal Award/Contract Number: Pass-through Entity Name: Pass-through Award/Contract Number: Known Questioned Cost Amount: Prior Year Audit Finding: Description of Condition 20.823 – Port Infrastructure Development Program U.S. Department of Transportation 693JF72140017 N/A N/A $0 N/A During fiscal year 2024, the Port spent $4,236,662 in Port Infrastructure Development Program funds. The program’s objective is to improve port facilities at coastal seaports. 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. When using federal funds to procure professional services, governments must apply the most restrictive of federal requirements, state laws or local policies by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Governments may procure services using noncompetitive proposals when the service is only available from a single source or, if after performing solicitation, they determine competition is inadequate. Port policy conforms to the most restrictive requirements for procuring architectural and engineering services and requires professional services to be procured using competitive proposals. Governments must also keep documentation supporting the procurement method they used. Our audit found the Port’s internal controls were ineffective for ensuring compliance with federal procurement requirements. Specifically, the Port did not follow competitive procurement requirements when selecting an architectural and engineering firm for its federal infrastructure project. The Port solicited proposals via a competitive process; however, the Port awarded a contract to one firm without evaluating the qualifications of either firm that submitted proposals. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The Port incorrectly concluded that receiving only two proposals meant that competition was inadequate and selected a firm’s proposal without performing a scoring process for either proposal it received. Effect of Condition The Port did not perform a competitive process for selecting an architectural and engineering firm that it paid $906,006 with federal funds. Without effective internal controls over federal procurement requirements, the Port cannot demonstrate it complied with its policy and federal regulations and selected the most qualified firm for architectural and engineering services as required. Recommendation We recommend the Port strengthen its internal controls to ensure it complies with its policy for procuring professional services and that it maintains documentation to demonstrate it complied with federal procurement requirements. Port’s Response The Port takes compliance seriously and has expended significant effort to ensure that all resources are spent effectively and appropriately. However, the Port will improve its controls over procuring using competitive proposals, including the documentation that demonstrates compliance with federal procurement requirements. The Port will also ensure employees have the proper training on federal procurement requirements. Auditor’s Remarks We appreciate the steps the Port is taking to resolve this issue. 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. Title 2 CFR Part 200 Uniform Guidance section 318 General procurement standards establishes requirements for written procedures and maintaining records sufficient to detail the history of procurement. Title 2 CFR Part 200 Uniform Guidance section 320 Methods of procurement to be followed establishes requirements for procuring with Federal funds by nonfederal entities. 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.