Kittitas Reclamation DistrictLocal Government

The District did not have adequate internal controls and did not comply with federal suspension and debarment requirements. Assistance Listing Number and Title: 15.517 – Fish and Wildlife Coordination Act; 15.574 – Water Storage Enhancement Federal Grantor Name: U.S. Department of the Interior Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background Fish and Wildlife Coordination Act The objective of the Fish and Wildlife Coordination Act is to provide financial assistance, through grants or cooperative agreements, to public or private organizations for the improvement of fish and wildlife habitat associated with water systems or water supplies affected by Bureau of Reclamation projects. During fiscal year 2024, the District spent $8,909,323 in Fish and Wildlife Coordination Act program funds. Water Storage Enhancement The objective of the Water Storage Enhancement Program is to identify and assess storage projects within the Kittitas Reclamation service area that could utilize conserved water or water diverted for storage for tangible improvements in meeting instream flow objectives, tributary supplementation efforts, and others. During fiscal year 2024, the District spent $826,416 in federal funding for these purposes. Suspension and Debarment Federal regulations require recipients to establish 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 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 that the contractors have not been suspended, debarred or otherwise excluded. The District 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 District must verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Fish and Wildlife Coordination Act Our audit found the District did not have internal controls to verify four of five contractors we tested that it paid more than $25,000 in federal funds were not suspended or debarred from participating in federal programs before purchasing from them. Water Storage Enhancement Our audit found the District did not have internal controls to verify the one contractor tested that it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs before purchasing from them. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. Cause of Condition Although staff responsible for reviewing purchases under both programs were aware of suspension and debarment verification requirements, they were unable to locate support showing that they verified contractors were not suspended or debarred. Effect of Condition The District did not obtain a written certification from the contractors, insert a clause into the contracts or check for exclusion records at SAM.gov to verify contractors it paid $549,684 using federal funds for the Fish and Wildlife Coordination Act Program and $37,806 using federal funds for the Water Storage Enhancement Program were not suspended or debarred. Without adequate internal controls, the District increases its risk of awarding 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 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 District 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 before contracting with or purchasing from them and maintain documentation demonstrating compliance with this requirement. District’s Response The District is adding additional controls to assist the Assistant Manager’s tracking of the suspension and debarment requirements for the vendors that are paid within the grants. This will be on ongoing collaboration throughout the year as the District isn’t always aware of which vendors will be needed throughout the year. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the status of this issue 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.

Kittitas Reclamation District January 1, 2022 through December 31, 2022 2022-001 The District?s internal controls were inadequate for ensuring it complied with federal procurement requirements. Assistance Listing Number and Title: 15.517 Fish and Wildlife Coordination Act Federal Grantor Name: U.S. Department of the Interior, Bureau of Reclamation Federal Award/Contract Number: R22AP00447-00, R21AP10328-03, R18AP00036-02, R21AP10329-01 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the Fish and Wildlife Coordination Act program is to provide financial assistance, through grants or cooperative agreements, to public or private organizations for the improvement of fish and wildlife habitat associated with water systems or water supplies affected by Bureau of Reclamation projects. During fiscal year 2022, the District spent $7,097,974 in federal Fish and Wildlife Coordination Act funds, which were awarded by the Bureau of Reclamation at the U.S. Department of the Interior. The District used program funding on four projects in Kittitas County. 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 controls. Federal regulations require grant recipients to follow their own written procurement procedures, which must conform to the Uniform Guidance procurement standards Page 6 Office of the Washington State Auditor sao.wa.gov found in 2 CFR 200.318-327. These procedures must reflect the most restrictive of applicable federal requirements, state law or local policies. When procuring architectural and engineering services, federal regulations require the District to advertise for each project, identify all evaluation factors and their relative importance, have a written method for conducting technical evaluations, and document the evaluation supporting its decision to go with the best engineer for each separate award. Description of Condition The District has a written policy that conforms to federal regulations that require a qualifications-based selection of architectural and engineering services. However, when it procured its engineer for the four projects, the District selected from an engineering roster, which is not in compliance with its own policy and the Uniform Guidance (2 CFR 200.320(b)(2)). We consider this control deficiency to be a significant deficiency. Cause of Condition The District followed guidance from the U.S. Army Corps of Engineers when creating its architectural and engineering roster, which allowed for a base contract to be awarded to a pool of firms. District officials thought this was an acceptable method to follow and were not aware the District cannot select architects and engineers from a roster when using federal funds to pay for projects. Effect of Condition The District paid one engineer $462,617 with federal funds during the audit period. Without effective internal controls, the District cannot ensure it allowed for full and open competition, selected the most qualified engineer, and complied with federal procurement requirements. Recommendation We recommend the District strengthen internal controls over its procurement of architectural and engineering services to ensure compliance with federal requirements. District?s Response The Kittitas Reclamation District (District) has made a considerable effort to obtain critical climate resiliency and water conservation grant funding over the last 7 years. In that period, the District has been awarded several state and federal awards for infrastructure projects requiring engineering services. These projects were audited and found compliant. Internally, the District?s processes and procedures have been scrutinized and revised after receiving constructive input from prior auditors. It is the District's priority to continue to set a standard of excellence as the District proceeds into the future enhancing the irrigation system and works towards essential water conservation efforts while improving the ecosystem to allow the system to benefit future generations. As the funding opportunities grew, there was a collaborative effort made with the District consultants to utilize the funding opportunities as they arose. Keeping site on the fact that work had to be accomplished within the limited construction window during the winter months when the irrigation system was not running water and being used by the landowners. There was extensive work done to draft and create a Multi-Year Multiple Award Task Order (IDIQ) for Professional Services which allows the District to acquire an indefinite quantity, within stated limits, of supplies or services during a fixed period, with deliveries to be scheduled by placing orders with a contractor. The Federal Acquisition Streamlining Act (FASA) allows agencies to use IDIQ contracts to benefit from an ongoing competitive environment throughout the duration of the contract while minimizing the delay of conducting a separate procurement for each project. The process included developing a scope of work, advertising in multiple newspapers for solicitation of services, establishing a list of qualified applicants, scoring the applicants and utilizing the awardees for prospective funding opportunities as they were granted. The length of the IDIQ has changed from the initial one-year term to the current 5-year term but beyond the term of the contract the process has been unchanged. This process was reviewed in prior audits and the District was not asked to make any changes to the process in past audits. When the current engineering services contracts were procured, the District understood it had met all the uniform guidance and after the appropriate advertising and with only two engineering firms responding, both responding firms were awarded an Indefinite Delivery Contracts (IDICs) in accordance with our interpretation of FAR 16.5 and FAR 36.602-1. These IDCs comprise the District?s roster for engineer firms based on their qualifications relative to the criteria established for Category 1 under the Notice to Consultants, 2022 Kittitas Reclamation District (KRD) On-Call Rosters advertised and evaluated in Page 8 Office of the Washington State Auditor sao.wa.gov February 2022. Specifically, the District Request for Qualifications solicitation evaluated firms on four criteria, qualifications of firm (up to 20points), qualifications of proposed Project Manager(s) (up to 30 points), firm?s technical expertise (up to 50 points), and references/past performances (up to 50 points). The competitive, qualifications-based roster selection is not the same roster or process utilized for the District Vendor List for Limited Public Works and Small Works Roster. The District has since learned that it should have kept documentation as to how the Engineering Firm was chosen for each task order project awarded within the IDC scope. There was no formal documentation to provide on the selection process for each individual project. It should also be noted that, particularly with an irrigation canal, it is imperative to have continuity of engineering on the same project that continues from one winter construction window and funding cycle to the next to ensure the integrity of the canal system and the most efficient use of funds for each project. Upon receiving the guidance on the current audit, the District would like to move forward by reviewing the procurement policy and making any necessary changes while working under the guidance of the SAO Procurement Specialist to ensure that an updated procurement policy continues to meet the needs of the District and the federal guidelines for federal funding. Auditor?s Remarks We appreciate the steps the District?s commitment to resolving this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken 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. Page 9 Office of the Washington State Auditor sao.wa.gov 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 320, Methods of procurement to be followed, establishes requirements for procuring with federal funds by nonfederal entities.

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