Alaska Village Electric Cooperative, Inc. and Subsidiary

Finding 2023-002 Procurement and Suspension and Debarment – Significant Deficiency in Internal Control Over Compliance Agency/Pass-through Grantor Denali Commission, Denali Commission passed through Alaska Energy Authority, Department of Energy ALN and Program Name 90.100 – Denali Commission Program 81.087 – Research and Development Cluster Award # 7110096, 7210049, 1750-01, 1686-02, 1693-00, 1605-02, 1546-06, 1561-06, 1654-00, 1724-00, 1511-05, 1423-10, 1517-10, 1545-09, 1711-00, 1721-01, 1834-00, DE-IE0000098, DE-IE0000173 Award Year 90.100 – 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023 81.087 – 2019, 2023 Criteria or Specific Requirement The regulations in 2 CFR Part 180 prohibits contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal programs or activities. Non-federal entities must verify that parties to covered transactions are not suspended or debarred or otherwise excluded from participating in the transaction. Condition Testing of 21 procurements identified 19 exceptions where evidence was not retained to support the required verification of whether a contractor or subrecipient was a suspended or debarred party. Cause The Cooperative’s policies over procurement and issuance of sub-awards were not designed appropriately to retain evidence of suspension and debarment review for all contracts or sub-awards funded with federal awards. Effect or Potential Effect By failing to retain documentation over procedures performed, the Cooperative is unable to substantiate that its procurements were appropriately reviewed to ensure compliance in accordance with regulations in 2 CFR Part 180. Questioned costs None. Context For the Denali Commission Program, we tested a sample of 20 procurements, consisting of 18 purchase orders and 2 task orders, totaling to $721,671. The purchase order population of 36 items totaled to $1,477,400, and the task order population of 3 items totaled to $319,123. BDO did not identify any vendors that the Cooperative entered into covered transactions with, wherein the vendor was disbarred. In addition, BDO identified that the Cooperative appropriately documented that vendors were checked for suspension and debarment before entering into task orders for procurements related to construction projects. However, the Cooperative did not retain sufficient documentation to substantiate that purchase orders for smaller procurements were checked for suspended or debarred vendors before their execution. For the Research and Development Cluster, we tested a sample of 1 procurement, consisting of 1 purchase order, totaling to $45,022. The procurement tested was the entire population of procurements during the year that were not micropurchases. The Cooperative did not retain sufficient documentation to substantiate that purchase order was checked for suspended or debarred vendors before its execution. Identification as a Repeat Finding Not a repeat finding. Views of Responsible Officials Management agrees with the findings and is working to revise our policies and procedures to improve retention of evidence and documentation over the procedures performed which ensure and substantiate compliance with regulations.

Finding 2022-001: Significant Deficiency in Internal Control over Compliance, – Cash Management Agency: U.S. Department of Energy Award Number: DE-IE0000098 Assistance Listing Number: 81.087 Program Name: Research and Development Program Cluster: Renewable Energy Research and Development Criteria: Based on 2 CFR section § 200.514, auditors are required to test that internal controls are effective in preventing or detecting noncompliance. Management is responsible for the design, implementation, and maintenance of internal controls over compliance. There were inadequate controls over cash management. Condition: Alaska Village Electric Cooperative, Inc. and Subsidiary started drawing down on this award for the first time in the current year. A single request was made during the year for reimbursement of funds. During examination the support for request for reimbursement, there was no noncompliance identified. However, it was determined there were not sufficient review controls implemented to prevent or detect potential noncompliance with cash management requirements. Cause: The method for requesting reimbursement over the award are different than other programs operated by Alaska Village Electric Cooperative, Inc. and Subsidiary Requests are entirely electronic and controls were not originally in place to address the method of reimbursement requests. Effect or potential effect: Without sufficient review, it would be possible for funds to be requested for unallowable costs or prematurely resulting in funds not being properly tracked for potential earnings requiring repayment to the granting agency. Questioned costs: None identified. Context: In accordance with Uniform Guidance, the auditor performed inquiries with staff and management surrounding to controls and procedures surrounding the compliance requirements of the major programs. Through this inquiry it was identified that sufficient controls were not in place for cash management of the program. Identification as a repeat finding: Not applicable, not a repeat finding. Recommendation: We recommend Alaska Village Electric Cooperative, Inc. and Subsidiary develop controls procedures to ensure compliance with cash management requirements are met. Views of responsible officials: Management acknowledges the observed recommendation. New controls will be implemented to ensure proper review of requests for reimbursement are performed.

Finding 2022-002: Significant Deficiency in Internal Control over Compliance, Noncompliance – Reporting Agency U.S. Department of Energy and the Denali Commission Award number DE-IE0000098 and Various Denali Commission Awards Assistance listing number: 81.087 and 90.100 Program names: Research and Development Program Cluster: Renewable Energy Research and Development and Denali Commission Programs Criteria: Alaska Village Electric Cooperative, Inc. and Subsidiary is required to submit the single audit report and Form SF-SAC within nine months of the fiscal year end. Cause: The single audit was not completed in time to file the form, due to a delay in preparation of records. Effect or potential effect: Alaska Village Electric Cooperative, Inc. and Subsidiary was not able to file the Form FS-SAC by the required time. Questioned Costs: None Context: The Form SF-SAC is due nine months after the fiscal year-end. The form for the fiscal year ending December 31, 2022 was filed late. Identification as a repeat finding: Not applicable, not a repeat finding Recommendation: We recommend Alaska Village Electric Cooperative, Inc. and Subsidiary implement internal controls and procedures to ensure single audit records are timely prepared and reconciled to ensure timely submission of the form SF-SAC in the future. View of responsible Officials: Management acknowledges the observed recommendation. Management will ensure timely preparation and reconciliation of audit schedules related to single audit to ensure timely reporting.

Finding 2019-001 Information on Federal Program: Compliance and Internal Control over Compliance ? Significant Deficiency - Procurement Assistance to High Energy Cost Rural Communities, 10.859, Direct Federal Program Criteria: Pursuant to Uniform Guidance - Procurement records and files for purchases in excess of the small purchase threshold shall include the following at a minimum: (a) basis for contractor selection, (b) justification for lack of competition when competitive bids or offers are not obtained, and (c) basis for award cost or price. Condition: Upon review of supporting documentation of the Assistance to High Energy Cost Rural Communities major program, it was discovered that prior to entering into a contract for certain services, AVEC did not fully document formal procurement procedures. No documentation was retained regarding price or rate quotations obtained from an adequate number of qualified sources in accordance with 2 CFR 200.320(b), nor was permission from the granting agency obtained for a sole source contract. Cause: This was an exceptional situation, due to the fact that the contractor was available at the very rural job site. AVEC believed this contractor would be the only one able to provide a reasonable price, due to having equipment on site. Effect: AVEC?s documentation of procurement was not in compliance with 2 CFR 200.320(b). Questioned Costs: None noted. Context: This contract was identified in testing of procurement by the auditor. Recommendation: AVEC should establish and/or update formal procurement policies and conduct periodic trainings for employees responsible for compliance. Views of responsible officials See Corrective Action Plan.