Published: May 26, 2022

Local governments often find federal procurement requirements challenging. We know this because it’s the most common Single Audit finding that we report—about 33 percent of them. The issues can involve internal control weaknesses and noncompliance with federal requirements. 

The CARES Act, American Rescue Plan Act, and the new Infrastructure Investment and Jobs Act are infusing significant amounts of federal funds into state and local government. This means that local governments will be using federal funds more than ever to contract for goods and services. When using federal funds, local governments must follow very specific procurement requirements. Here are some particularly risky areas to pay attention to when you procure goods and services with federal funds:

  1. Train staff involved with federal procurements. We often cite a lack of training as a common internal control deficiency in audit findings. It’s important to provide adequate training to new staff and refresher trainings to existing staff to make sure they are aware and up to date on all federal requirements. Centralizing the procurement function for federal programs can reduce the amount of staff training needed.
  2. Verify suspension and debarment before you contract. Governments often overlook this step. To comply with the federal requirement, you must verify whether contractors are banned from doing business with the federal government—also known as being suspended or debarred. Read more about this topic in our August 2021 article.
  3. Use your own documented procurement procedures. This was a new requirement established in 2014, but you had a three-year grace period to implement it. Unfortunately, some are still not aware of the change, leading to audit findings today. Uniform Guidance requires you to have documented procurement procedures that reflect your applicable local, state and federal requirements, and that include all the federal procurement requirements (2 CFR §200.318). We advise you to incorporate these written procedures into your policy, but make sure the policy is in effect before you undertake any federal procurements.
  4. Maintain written standards of conduct. This was also a new requirement in 2014, and it had a three-year grace period too. Like the procurement procedures, some were not aware of this change, and we are still finding these issues in audits. As a grant recipient, you must maintain written standards of conduct covering conflicts of interest and governing the actions of employees engaged in the selection, award or administration of contracts procured with federal funds (2 CFR §200.318). It’s best to incorporate these written standards into your policy and procedures.
  5. Follow the most restrictive of your local, state or federal laws. Federal regulations provide bid thresholds and bidding requirements, but they also specify that you must follow the most restrictive of local, state or federal bidding requirements. It can be confusing for your staff to determine the most restrictive of these various sources of requirements on their own. When addressing No. 3 up above, establishing a well-written policy can help clear up the confusion for staff. In some cases, federal requirements are stricter than state law. For example, if you procure using federal funds, you must adhere to the $250,000 federal limitation even though Washington’s small works threshold is $350,000. You’ll also find stricter federal requirements when procuring services like architectural and engineering services. But federal law is not always the most restrictive. For example, your local policy may contain competitive bidding thresholds that are lower than federal or state requirements. The bottom line is that you need to consider all three and follow the most restrictive.
  6. Justify use of sole source contracts (noncompetitive procurement). Be extremely careful if you spend federal funding using a sole source contract. If you can truly only purchase from one single source of supply, then you must document your rationale for not competitively procuring when public bid procedures apply. Keep any and all support that documents your research. Additionally, you must formally waive those competitive procurement requirements, such as by obtaining board approval.
  7. Perform a price or cost analysis. Before you go out to bid, you might be required to prepare your own independent estimate of the prices or costs you expect to pay (although, the method and degree of analysis may vary depending upon the nature of the procurement). You are required to prepare such an estimate if the procurement exceeds your public bidding threshold, which for federal procurements is $250,000 (or a lesser amount if your local or state bid threshold is more restrictive).
  8. Perform due diligence when relying on a project manager or consultant. Some local governments hire a third party to handle procurements and manage federally funded projects for them. That’s fine, but you are still responsible for complying with federal requirements. You’ll want to make sure a project manager or consultant has the appropriate knowledge and experience, and you must monitor them to ensure they’re doing the job you expect. Also, make sure you have the documentation you need for federal Single Audit purposes.
  9. Follow all applicable requirements for prevailing wages (public works projects). State and federal prevailing wage requirements differ significantly, and you must comply with both for a federally funded project done in Washington. Sometimes staff mistakenly assume that state prevailing wage requirements are the same as federal, and this leads to audit issues. For information about state laws, check the Washington Department of Labor and Industries’s website. For information on the federal Davis-Bacon Act, visit the U.S. Department of Labor’s website.
  10. Document your procurement steps. Maintain records that adequately detail the history of the procurement. If you obtain quotes or bids, keep all that you receive—not just that of the successful bidder. Some governments use checklists to ensure they have completed all the steps. Retain any checklists or other tools you use. Keep your documentation in a central location so that you have access even when there are staff changes.

Contact us

While your grantor is the best source for information about a federal program, you can also submit technical questions about federal awards to our HelpDesk in the client portal.

Looking for more guidance on federal awards? The Washington Finance Officers Association’s (WFOA) pre-conference on Sept. 13 will include an 8-hour class on federal award requirements. SAO’s Single Audit specialist, Felicia DenAdel, will be facilitating this session. Registration for the conference opens soon on WFOA’s website.

If you have other questions, comments or suggestions, feel free to email us at Center@sao.wa.gov

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