City of Brewster

City of Brewster January 1, 2020, through December 31, 2020 2020-001 The City did not have adequate internal controls to ensure compliance with federal procurement requirements. CFDA Number and Title: 10.760 Water and Waste Disposal Systems for Rural Communities Federal Grantor Name: United States Department of Agriculture Federal Award/Contract Number: 580110934 Pass-through Entity Name: N/A Pass-through Award/Contract Number: Questioned Cost Amount: $0 Description of Condition During fiscal year 2020 the City spent $3,586,888 in Water and Waste Disposal Systems for Rural Communities loan and grant funding. The City used this loan and grant funding for its manganese abatement project. 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. Additionally, 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. The City has a written procurement policy that allows it to initiate and approve the procurement of goods and services. However, the policy does not conform to or include federal procurement requirements and does not include the methods for procurement, such as the procedures to solicit and award architectural and engineering services and public works contracts. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition The City has not received a federal grant compliance audit recently and relied on external legal counsel to review and update written policies and procedures to maintain compliance, including the procurement policy and procedures. Effect of Condition Without updated written policies and procedures, the City is at greater risk of non-compliance with the most restrictive of federal, state, or local procurement methods and requirements when procuring contractors paid all or in part with federal funds. Although the City did not update its written policy, it did comply with federal requirements for the solicitation and award of the architectural and engineering services and public works contracts for the manganese abatement project. Recommendation We recommend the City update and maintain its written procurement policy and ensure the policy conforms to federal regulations for all procurement transactions. City?s Response As stated in the ?Effective Condition? portion of the finding, while the City?s written policy may not have complied with the federal requirements for solicitation and award of Architectural and Engineering Services and Public Works contracts for the Manganese Abatement Project, the actions taken by the City were in compliance with all federal requirements for the applicable procurements. This City is a small Eastern Washington rural community with a population of less than 3,000. The City purchasing policies in effect at the time of the procurements in question stated that the City would follow the most restrictive of the federal, state, or local procurement requirements. The City did follow these requirements. The City recognizes the Auditor desires the City to maintain a more comprehensive written policy and procedure for procurements when using federal funds. In response, the City is in the process of developing more comprehensive purchasing policies and procedures and is committed to adoption of the same prior to the end of 2021. Because of the size of the City, the City will endeavor to revise the policies and procedures every other year to update the policies and procedures with appropriate references to any new federal and state procurement rules, regulations, and requirements. Auditor?s Remarks We appreciate the City?s commitment to resolve this finding and thank the City 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 318 General procurement standards, establishes requirements for documented procurement procedures which reflect applicable state, local, and federal laws and regulations.