A 2024 state audit found the Port of Bellingham had failed to follow procurement procedures in its handling of a federal program, a failure the auditor described as material, the most severe category of internal control deficiency in federal auditing.
“We consider this deficiency in internal controls to be a material weakness that led to material noncompliance,” the report from the Office of the Washington State Auditor stated. The state auditor gave the port’s financial statements a clean bill of health otherwise.
Only one federal program was examined as a major program in this audit – the Port Infrastructure Development Program. The audit specifically examined a federal award from the U.S. Department of Transportation that involved more than $4.2 million in federal spending during fiscal year 2024. The port paid $906,006, or about 21 percent of the total federal funds spent in this program, to California-based engineering firm Moffat & Nichol, without following proper competitive procurement procedures.
Following a competitive call for bids, the port had received only two proposals for architectural and engineering services. It incorrectly concluded that receiving only two bids meant competition was inadequate and awarded the contract to Moffat & Nichol without evaluating or scoring either bid submission. While the port received a clean opinion on its financial statements and compliance with the major federal program overall, the finding was significant enough to be reported as a material weakness in internal controls over major programs. It’s required to be disclosed under federal regulations and included in the audit as a federal award finding.
The finding means the port cannot demonstrate it complied with its own procurement policy, met federal procurement regulations or selected the most qualified firm as required. However, the auditors did not question any costs, meaning the state didn’t find evidence of actual financial harm or that the selected firm was unqualified – just that the proper competitive process wasn’t followed.
In response, the port has agreed to institute a selection checklist that will be completed “by the selection team, and the resulting scorecards will be forwarded to the contracts department and retained in their files. This step has been added to the procurement checklist to ensure there is confirmation by someone outside of the selection team that the proper scoring has been documented. Contracts requiring a scorecard will not be compiled without this documentation.”
The state auditor will follow up during its next annual audit to ensure the new procedure is being followed.
