Stockton Port DistrictLocal Government

Federal Agency: U.S. Department of Homeland Security Federal Financial Assistance Listing: 97.056 Applicable Federal Award Number: EMW-2019-PU-00447 & EMW-2020-PU-00288 Program Name: Port Security Grants Program Compliance Requirement: Procurement Type of Finding: Significant Deficiency, Instance of Non-compliance Criteria: 2 CFR 200.327 requires that the non-federal entity?s contracts must contain the applicable provisions described in appendix II of 2 CFR 200. Condition: We identified 3 instances in which contracts (agreements, purchases, etc.) did not include the applicable provisions from appendix II of 2 CFR 200. The contracts did not include provision (B) requiring that all contracts in excess of $10,000 must address termination for cause and for convenience by the non-Federal entity including the manner by which it will be effected and the basis for settlement. Cause: The District?s procurement procedures did not ensure that all required provisions were included in the contract. Effect: The District did not comply with the requirements of 2 CFR 200.327. Questioned Costs: None reported. Context/Sampling: A non-statistical sample of 5 procurement actions out of a population of 13 procurement actions were selected for testing. Repeat Finding from Prior Year(s): No. Recommendation: We recommend that the District strengthen its procurement procedures to ensure that all required provisions are included in its contracts. Views of Responsible Officials: Management Agrees. See separate corrective action plan.

Federal Agency: U.S. Department of Homeland Security Federal Financial Assistance Listing: 97.056 Applicable Federal Award Number: EMW-2019-PU-00447 & EMW-2020-PU-00288 Program Name: Port Security Grants Program Compliance Requirement: Reporting Type of Finding: Significant Deficiency Criteria: Per 2 CFR 200.303, the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. This includes internal controls over maintaining records of the preparer and approver of required reports. Condition: We identified 2 instances in which the District did not retain evidence to document the individual preparing the District?s required performance reports. Cause: The District?s procedures did not include documentation to evidence the individual that prepared the reports. Effect: The District did not comply with the requirements of 2 CFR 200.303. Questioned Costs: None reported. Context/Sampling: A non-statistical sample of 2 semi-annual performance reports out of a population of 4 semi-annual performance reports were selected for testing. Repeat Finding from Prior Year(s): No. Recommendation: We recommend that the District revise its procedures to include documenting the individual that prepared the semi-annual performance reports. Views of Responsible Officials: Management Agrees. See separate corrective action plan.

Program: Highway Planning and Construction Cluster CFDA Number: 20.205 Federal Agency: U.S. Department of Transportation Pass-through: California Department of Transportation Award Year: 2019-2020 Compliance Requirement(s): Procurement, Suspension, and Department Type of Finding: Significant Deficiency, Instance of Noncompliance Criteria: Per the 2 CFR 200.318(a), non-Federal entities other than States, including those operating Federal programs as subrecipients of States, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.327. The non-Federal entity must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR part 200 (Uniform Guidance). Condition: As a result of the testwork performed over the procurement, suspension, and debarment compliance requirements, we identified that the District?s written procedures for procurement of goods or services did not conform with the procurement requirements identified in 2 CFR section 200.318 through 200.327. Cause: The District?s written policy and procedures for purchasing were not updated to incorporate the applicable requirements of sections 200.318 through 200.327 that apply to the procurement action based on the method of procurement. Effect: The District?s written policies and procedures did not comply with the requirements of 200.318(a). Questioned Costs: None reported. Context: Although the District?s purchasing policy incorporated portions of 2 CFR, sections 200.318 through 200.327, the written procedures do not conform to the requirements of 2 CFR, section 200.318(a) which requires that the non-federal entity must have and use documented procedures consistent with the standards identified in sections 200.318 through 200.327. The District?s written procedures do not identify the applicable requirements of sections 200.318 through 200.327 that apply to the procurement action based on the method of procurement. Repeat Finding from Prior Year(s): Yes, prior year Finding 2019-003. Recommendation: We recommend that the District continue to strengthen its written procurement procedures to incorporate the applicable requirements identified in sections 200.318 through 200.327 of the Uniform Guidance that apply based on the procurement action and the method of procurement as required by section 200.318(a). Views of Responsible Officials and Planned Corrective Action: Management?s or Department?s Response: We concur. Views of Responsible Officials and Corrective Action Plan: The District adopted updated Procurement Procedures on May 6, 2020 in response to the 2018/19 audit findings, and the revised procedures were distributed to all applicable staff. However, it was identified that certain requirements of 2 CFR 200 (the Uniform Guidance) were not fully addressed in the revised Procurement Procedures. The District is continuing to update its Procurement Procedures to address the requirements of the Uniform Guidance and anticipates to complete the updates by March 31, 2021. Name of Responsible Individual: Juan G. Villanueva, Director of Planning & Development Anticipated Implementation Date: March 31, 2021 See separate corrective action plan.

2019-003 Program: Highway Planning and Construction Cluster CFDA No.: 20.205 Federal Agency: U.S. Department of Transportation Passed-through: California Department of Transportation Award Year: 2018-2019 Compliance Requirement: Procurement, Suspension, and Debarment Criteria: Per the 2019 OMB Compliance Supplement, non-Federal entities other than States, including those operating Federal programs as subrecipients of States, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR part 200. The non-Federal entity?s policies and procedures for procurement must comply with the requirements of 2 CFR sections 200.318 through 200.326. Condition: Significant Deficiency, Instance of Noncompliance - As a result of the testwork performed over the procurement, suspension, and debarment compliance requirements, we identified the following: ? The District?s written policy for procurement of goods or services did not conform with the procurement requirements identified in 2 CFR section 200.320(a) through 200.320(f), including micro-purchases, small purchase procedures, competitive bids, sealed bids, and noncompetitive proposals. ? The District?s written policy for noncompetitive (sole source) proposals did not include evaluation of the criteria as required by 2 CFR 200.320(f). ? The District?s written policy did not include procedures to ensure that contracts were awarded to vendors that are not currently debarred or suspended from participating in Federally funded contracts as required by 2 CFR section 200.318(h). Questioned Costs: We identified no questioned costs in our tests of compliance with this requirement. Context: The District?s written purchasing policy should include the requirements of 2 CFR, sections 200.318 through 200.326. Cause: The District?s written policy and procedures for purchasing had not been updated to reflect the requirements of the Uniform Guidance. Effect: As a result of the District?s written policies and procedures not complying with the requirements under 2 CFR section 200.318 through 200.326, the District increases its risk of noncompliance with the program procurement, suspension, and debarment requirements. Recommendation: We recommend that the District update its purchasing policies and procedures to include the provisions required by 2 CFR section 200.318 through 200.326. Views of Responsible Officials and Planned Corrective Action Plan: Management?s or Department?s Response: We concur. Views of Responsible Officials and Corrective Action Plan: We agree with the findings and the recommended course of action. Written purchasing policies and procedures will be updated to include the required provisions 2 CFR section 200.318 through 200.326. Name of Responsible Individual(s): Juan G. Villanueva, Director of Planning & Development Anticipated Implementation Date: March 31, 2020 See separate corrective action plan.

2019-004 Program: Port Security Grants CFDA No.: 97.056 Federal Agency: U.S. Department of Homeland Security Passed-through: N/A Award Year: 2018-2019 Compliance Requirement: Procurement, Suspension, and Debarment Criteria: Per the 2019 OMB Compliance Supplement, non-Federal entities other than States, including those operating Federal programs as subrecipients of States, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR part 200. The non-Federal entity?s policies and procedures for procurement must comply with the requirements of 2 CFR sections 200.318 through 200.326. Condition: Significant Deficiency, Instance of Noncompliance - As a result of the testwork performed over the procurement, suspension, and debarment compliance requirements, we identified the following: 1. The District?s written policy for procurement of goods or services did not conform with the procurement requirements identified in 2 CFR section 200.320(a) through 200.320(f), including micro-purchases, small purchase procedures, competitive bids, sealed bids, and noncompetitive proposals. 2. The District?s written policy for noncompetitive (sole source) proposals did not include evaluation of the criteria as required by 2 CFR 200.320(f). 3. The District?s written policy did not include procedures to ensure that contracts were awarded to vendors that are not currently debarred or suspended from participating in Federally funded contracts as required by 2 CFR section 200.318(h). Questioned Costs: We identified no questioned costs in our tests of compliance with this requirement. Context: The District?s written purchasing policy should include the requirements of 2 CFR, sections 200.318 through 200.326. Cause: The District?s written policy and procedures for purchasing had not been updated to reflect the requirements of the Uniform Guidance. Effect: As a result of the District?s written policies and procedures not complying with the requirements under 2 CFR section 200.318 through 200.326, the District increases its risk of noncompliance with the program procurement, suspension, and debarment requirements. Recommendation: We recommend that the District update its purchasing policies and procedures to include the provisions required by 2 CFR section 200.318 through 200.326. Views of Responsible Officials and Planned Corrective Action Plan: Management?s or Department?s Response: We concur. Views of Responsible Officials and Corrective Action Plan: We agree with the findings and the recommended course of action. Written purchasing policies and procedures will be updated to include the required provisions 2 CFR section 200.318 through 200.326. Name of Responsible Individual(s): Juan G. Villanueva, Director of Planning & Development Anticipated Implementation Date: March 31, 2020 See separate corrective action plan.

2019-005 Program: Port Security Grants CFDA No.: 97.056 Federal Agency: U.S. Department of Homeland Security Passed-through: N/A Award Year: 2018-2019 Compliance Requirement: Procurement, Suspension, and Debarment Criteria: Per the 2019 OMB Compliance Supplement, non-Federal entities other than States, including those operating Federal programs as subrecipients of States, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR part 200. The non-Federal entity?s policies and procedures for procurement must comply with the requirements of 2 CFR sections 200.318 through 200.326. Per the 2019 OMB Compliance Supplement and 2 CFR 180.220, the non-Federal entity is prohibited from entering into a covered-transactions with parties that are suspended or debarred when the amount to be paid under the covered transaction is expected to exceed $25,000. The non-Federal entity must verify that the entity (the contractor/vendor) is not suspended, debarred, or otherwise excluded from participating in the transaction. Condition: Significant Deficiency, Instance of Noncompliance - As a result of the testwork performed over the procurement, suspension, and debarment compliance requirements, we identified the following: 1. We identified one (1) instance in which no procurement documentation or contract (agreement, purchase order or other written instrument) was available for a procurement of services within the micro-purchase threshold. 2. We identified two (2) instances in which the history of the procurement of services was not documented with records to evidence the rationale for method of procurement and contractor selection, as required by 2 CFR 200.318(i). For these same instances, we found that the contracts were for time and materials; however, the contracts did not include a ceiling price as required by 2 CFR 200.318(j). Furthermore, for these instances, we found that the responsibility for determining the method of procurement, evaluation of price/rate quotes, and selection of the contractor was not segregated. 3. We identified one (1) instance in which the District did not have evidence of the vendor?s suspension/debarment status prior to purchasing goods/equipment from a vendor. Questioned Costs: We identified no questioned costs in our tests of compliance with this requirement. Context: For condition 1 above, the District was unable to provide the history of procurement and contract documentation related to the payments to the contractor. For condition 2 above, the contractors were selected from a prequalified contractor listing. However, the selection of the contractors and award of the contracts for the specific services was performed informally and did not provide documented procurement history sufficient to evidence the rationale for 1) the method of procurement, 2) evaluation of price/rate quotes, and 3) the selection of the contractors and award of the contract. Additionally, the contracts were for time and materials with no maximum not to exceed amount. The District asserted that the price/rate quotes were obtained, evaluated, and the contractor selected for award of the contract by the same individual. However, this evaluation was not documented. For condition 3 above, the District did not perform a verification of the vendors suspension and debarment status prior to purchasing the goods/equipment from the vendor. The vendor was selected from an existing cooperative contract with the General Services Administration, and the District did not believe an independent verification was required for in this instance. Cause: For condition 1 above, the District?s purchasing policy does not require that a contract (agreement, purchase order, or other equivalent written instrument) be obtained for all procurement of goods or services under Federal programs. For condition 2 above, the District?s purchasing policy does not require a maximum not to exceed amount for contracts for time and materials when procured under a Federal program. Additionally, the District?s purchasing policies do not require that procurement documentation include records sufficient to evidence the rationale of the procurement method, evaluation of price or rate quotations, and selection of the contractors/vendors. The District?s policies also do not identify the procedures for evaluating price or rate quotations or require segregation of duties of evaluation of price or rate quotations and the selection of the contractor/vendor. For condition 3 above, the District?s purchasing policy does not require that the contractor/vendor?s debarment/suspension status be verified through checking the System for Award Management exclusions, obtaining a certification from the contractor/vendor, or including a clause of condition in the contract with the contractor/vendor. Effect: As a result of the conditions noted above, the District did not comply with the requirements under the Uniform Guidance for the selected procurement actions. Recommendation: We recommend that the District update its policies and procedures to ensure that a contract or equivalent be established for all procurements of goods or services, and that all procurement actions are documented sufficiently to evidence the rationale for method of procurement, evaluation of price/rate quotes, and selection of the contractor/vendor, including evidence of the individuals performing these activities. We also recommend that the District require segregation of duties for those evaluating price/rate quotes and those selecting contractors/vendors for award of contracts. Furthermore, we recommend that the District require all time and material contracts for Federal programs include a maximum, not to exceed amount. Views of Responsible Officials and Planned Corrective Action Plan: Management?s or Department?s Response: We concur. Views of Responsible Officials and Corrective Action Plan: We agree with the findings and the recommended course of action. The District policies and procedures will be strengthened to ensure that contracts or equivalents are established for all procurements of good and services, and that procurement actions are documented sufficiently. The District will ensure segregation of duties for evaluation and selection of vendors for award of contracts by establishing new review and approval processes to ensure this recommendation is met. All contracts for time and materials will include maximum not to exceed amounts as recommended. Name of Responsible Individual(s): Juan Villanueva, Director of Planning & Development Anticipated Implementation Date: March 31, 2020 See separate corrective action plan.

GSA_MIGRATION

GSA_MIGRATION