Audit 292985

Finding 2021-005 Deadline for Federal Single Audit – Reporting - Noncompliance and Material Weakness in Internal Control Over Compliance Agency U.S. Department of the Treasury and Environmental Protection Agency Assistance Listing Numbers (ALN) 21.019 66.202 Program Name COVID-19 - Coronavirus Relief Fund Congressionally Mandated Projects Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development, State of Alaska Department of Environmental Conservation Pass-Through Entity Identifying Number 20-CRF-024, 18EQ57, 20ER77, 21ES93 Criteria or Specific Requirement 2 CFR 200.512, Report Submission, establishes that the audit shall be completed and the data collection form and reporting package submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 days after receipt of the auditor's report or 9 months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit, and any extensions granted by the Office of Management and Budget. Condition The City did not comply with the required submission date of the data collection form and reporting package to the FAC for the fiscal year ended June 30, 2021. Cause The City did not have controls in place to ensure the audit was completed timely so that the reporting package could be submitted to the FAC within the required timeframe. Effect or Potential Effect The City is not compliant with 2 CFR 200.512. The City could be exposed to a reduction or elimination of funds by the Federal awarding agencies. Questioned costs Not applicable. Context This is a condition identified per review of the City's compliance with the specified requirements. Identification as a repeat finding Not a repeat finding. Recommendation We recommend the City establish controls to ensure the audit is completed timely and the reporting package is submitted to the FAC within the required timeframe. Views of Responsible Officials Management concurs with this finding. Management will ensure beginning balance reconciliations and year-end adjustments will be complete by September, and will work with external auditors to have a financial statement draft prior to their fieldwork.

Finding 2021-005 Deadline for Federal Single Audit – Reporting - Noncompliance and Material Weakness in Internal Control Over Compliance Agency U.S. Department of the Treasury and Environmental Protection Agency Assistance Listing Numbers (ALN) 21.019 66.202 Program Name COVID-19 - Coronavirus Relief Fund Congressionally Mandated Projects Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development, State of Alaska Department of Environmental Conservation Pass-Through Entity Identifying Number 20-CRF-024, 18EQ57, 20ER77, 21ES93 Criteria or Specific Requirement 2 CFR 200.512, Report Submission, establishes that the audit shall be completed and the data collection form and reporting package submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 days after receipt of the auditor's report or 9 months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit, and any extensions granted by the Office of Management and Budget. Condition The City did not comply with the required submission date of the data collection form and reporting package to the FAC for the fiscal year ended June 30, 2021. Cause The City did not have controls in place to ensure the audit was completed timely so that the reporting package could be submitted to the FAC within the required timeframe. Effect or Potential Effect The City is not compliant with 2 CFR 200.512. The City could be exposed to a reduction or elimination of funds by the Federal awarding agencies. Questioned costs Not applicable. Context This is a condition identified per review of the City's compliance with the specified requirements. Identification as a repeat finding Not a repeat finding. Recommendation We recommend the City establish controls to ensure the audit is completed timely and the reporting package is submitted to the FAC within the required timeframe. Views of Responsible Officials Management concurs with this finding. Management will ensure beginning balance reconciliations and year-end adjustments will be complete by September, and will work with external auditors to have a financial statement draft prior to their fieldwork.

Finding 2021-006 Payroll Documentation - Activities Allowed and Unallowed, Allowable Costs/Cost Principles – Noncompliance and Material Weakness in Internal Control over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. 2 CFR 200.430 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Per 2 CFR 200.430, these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and be incorporated into the official records of the non-Federal entity. Condition During our testing of payroll disbursements, we noted the following exceptions: - 20 out of the 60 expenditures sampled did not have properly maintained personnel action forms signed by the employee. - one out of the 60 expenditures sampled had an employee whose pay rate had decreased; however, no adjustment was made in the payroll system to reflect this decrease. Cause Internal controls were not in place throughout the entire fiscal year to ensure that all personnel action forms were reviewed and signed by the designated individuals and the payroll system is updated to reflect changes in pay rates. Effect or potential effect Federal funds could be expended for unallowed activities and unallowed costs. Questioned costs Below the reporting threshold. Context We tested a sample of 60 payroll transactions totaling to $148,729 from a population of 454 payroll transactions. The total amount of payroll expenditures charged to the program in fiscal year 2021 were $1,220,281. We noted 21 exceptions as noted in the condition. This is a condition identified per review of City's compliance with the specified requirements not using a statistically valid sample. Identification as a repeat finding This is a repeat finding from prior year. This was reported as finding 2020- 005 in the 2020 report. Recommendation Management should ensure the most current personnel action forms are reviewed and signed by the designated personnel. Views of responsible officials Management concurs with the finding. Management will review current employee pay rates within the payroll module and ensure the rates agree to the most current pay rate as specified in the employee’s current personnel action form.

Finding 2021-007 Late Reporting – Significant Deficiency in Internal Control Over Compliance Agency Environmental Protection Agency ALN 66.202 Program Congressionally Mandated Projects Award Year FY 2021 Pass-Through Agency State of Alaska Department of Environmental Conservation Pass-Through Entity Identifying Number(s) 18EQ57, 20ER77, 21ES93 Criteria 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving federal awards establish and maintain internal control designed to reasonably ensure compliance with federal statues, regulations, and the terms and conditions of the federal award. Condition During our testing of reporting, we noted two of the three reports tested were submitted after the due date. Cause The City’s internal controls over reporting are not designed appropriately to ensure timely reporting. Effect or potential effect Information submitted to granting agency may not be received in time. Questioned costs Not applicable. Context We tested a sample of three reports and found two exceptions as noted in the condition. The total population consisted of 11 reports. This is a condition identified per review of the City’s compliance with reporting requirements not using a statistically valid sample. Identification as a repeat finding Not a repeat finding. Recommendation Management should review report due dates and ensure that accurate reports are submitted before they are due. Views of responsible officials Management concurs with the finding. Management will carefully review report deadlines and ensure that submission of reports is made before they are due.

Finding 2021-008 Subrecipient Agreements - Subrecipient Monitoring – Material Noncompliance and Material Weakness in Internal Control over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.332 requires pass-through entities to ensure that subrecipients comply with the terms and conditions of 2 CFR 200.501 related to audit requirements. This includes ensuring that every subaward is (1) clearly identified to the subrecipient as a subaward; (2) includes the necessary information at the time of the subaward for subrecipient reporting on federal awards (2 CFR 200.332) and (3) includes requirement to follow 2 CFR 200.501 if expenditure thresholds are met. This also includes verifying that every subrecipient is audited as required by 2 CFR 200.501 if the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold. Condition During our testing of subrecipient monitoring, we noted the subrecipient agreements did not include the required federal award identification or applicability of audit requirements. No action was taken to ensure the subrecipients were audited in accordance with 2 CFR 200.501 if applicable. Cause The issuance of subrecipient agreements for these grants related to new funding streams in response to the COVID-19 pandemic. Significant amounts of funding were provided in a short period of time, and systems to distribute these monies were newly created and implemented. The standard award agreements were not reviewed in advance to ensure adherence to federal requirements. Staff were not fully trained on the informational requirements and monitoring responsibilities related to audit requirements. Effect or potential effect Subrecipients may be unaware and not in compliance with the requirements of 2 CFR Part 200. Questioned costs Not applicable. Context We tested the sole subaward agreement for the program and noted the agreement did not contain the necessary language under 2 CFR 200.332 to inform subrecipients of the applicability of 2 CFR 200, Subpart F. Identification as a repeat finding Not a repeat finding. Recommendation Management should establish policies to ensure subawards contain required federal award information. In addition, procedures should be established to monitor subrecipient compliance with audit requirements of 2 CFR 200.501. Views of responsible officials Management concurs with the finding. Management will revise policies and procedures related to subrecipient monitoring and will ensure that policies are established to ensure subawards contain the required federal award information.

Finding 2021-009 Monitoring Activities - Subrecipient Monitoring – Material Noncompliance and Material Weakness in Internal Control over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.332 requires that pass-through entities monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR 200.332 also requires pass-through entities to verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in 2 CFR 200.501. Condition The City did not have controls in place to monitor subrecipient activities and ensure the subrecipient was audited in accordance with 2 CFR 200.501 if applicable. Cause Staff were not fully trained on the informational requirements and monitoring responsibilities related to audit requirements. Effect or potential effect The City was not in compliance with subrecipient requirements outlined in 2 CFR 200.332. Furthermore, not communicating proper compliance requirements and other information may increase the likelihood of noncompliance on the part of the subrecipient and non-fulfillment of program goals and objectives. Questioned costs Not applicable. Context We were not able to verify controls over subrecipient monitoring. The audit of the subrecipient was completed by other auditors including an audit in accordance with the Uniform Guidance requirements on December 3, 2021. The City obtained the audited reports in April 2023. Identification as a repeat finding Not a repeat finding. Recommendation Management should establish policies and procedures to monitor subrecipient compliance with audit requirements of 2 CFR 200.501. Views of responsible officials Management concurs with the finding. Management will revise policies and procedures related to subrecipient monitoring and will ensure that policies are established to ensure subawards contain the required federal a ward information.

Finding 2021-010 Sole Source Vendors - Procurement and Suspension and Debarment – Material Noncompliance and Material Weakness in Internal Control Over Compliance Agency Environmental Protection Agency ALN 66.202 Program Congressionally Mandated Projects Award Year FY 2021 Pass-Through Agency State of Alaska Department of Environmental Conservation Pass-Through Entity Identifying Number(s) 18EQ57, 20ER77, 21ES93 Criteria 2 CFR 200.320 states the non-federal entity must have and used documented procurement procedures consistent with 2 CFR 200.317-.319, and identifies the methods of procurement to be followed. 2 CFR 200.320(c) states the specific circumstances in which noncompetitive procurement can be used. Condition During our testing of procurement and suspension and debarment, we noted the following exception: One of the three procurement transactions tested was procured via sole source without adequate support of the rationale to limit competition. Cause The City’s policies and procedures were not appropriately designed to ensure compliance with the requirements of the Uniform Guidance concerning use of noncompetitive procurement. Effect or potential effect The City was not compliant with 2 CFR 200.320 concerning specific circumstances in which noncompetitive procurement can be used. The incorrect use of noncompetitive procurement increases the probability that federal funds are spent wastefully. Questioned costs $208,291 Context We tested a sample of three procurement transactions totaling to $1,516,880 from a population of four procurement transactions totaling to $1,560,666. We noted one exception as noted in the condition. This is a condition identified per review of the City’s compliance with the specified requirements not using a statistically valid sample. The known amount of the one exception is $208,291. Identification as a repeat finding Not a repeat finding. Recommendation We recommend that the controls and processes that have been established be implemented and to ensure the City is following its procurement policy and meeting the Uniform Guidance compliance requirements. Views of responsible officials Management agrees with the finding. The City will follow the Uniform Guidance thresholds that are established for federal programs, as well as follow the City Council’s policy.

Finding 2021-011 Expenditure Documentation - Activities Allowed and Unallowed, Allowable Costs/Cost Principles – Noncompliance and Material Weakness in Internal Control Over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.403(g) states that for costs to be allowable under federal awards, they must be adequately documented and there must be sufficient documentation. Condition During our testing of nonpayroll disbursements, we noted the following exception: Three of the 62 disbursements sampled did not have adequate supporting documentation. Cause Policies and procedures were not appropriately adhered to in certain instances to ensure that supporting documentation was maintained correctly to evidence that costs were allowable and that an appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or potential effect We were unable to confirm the allowability and existence of three disbursements charged to the program. Questioned costs None over the questioned costs reporting threshold. Context We tested a sample of 62 nonpayroll transactions totaling to $947,814 from a population of 470 transactions totaling to $2,768,962. We noted three exceptions as noted in the condition. This is a condition identified per review of the City’s compliance with the specified requirements not using a statistically valid sample. The known amount of the three exceptions is $1,608. Identification as a repeat finding Not a repeat finding. Recommendation Management should review policy and ensure documentation supporting each expenditure will be retained. Views of responsible officials Management concurs with the finding. Management will implement policies and procedures to ensure supporting documentation over expenditures are retained.

Finding 2021-012 Expenditure Approval - Activities Allowed and Unallowed, Allowable Costs – Material Weakness in Internal Control Over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.303 requires that non-federal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal statues, regulations, and terms and conditions of the federal award. Condition During our testing of nonpayroll transactions, we noted the following exception: 17 out of 62 transactions sampled did not have documentation of approval by management. Cause Policies and procedures were not appropriately adhered to in certain instances to ensure that the appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or potential effect Federal funds could be expended for unallowed activities and unallowed costs. Questioned costs None. Context We tested a sample of 62 nonpayroll transactions totaling to $947,814 from a population of 470 transactions totaling to $2,768,962. We noted 17 exceptions as noted in the condition. This is a condition identified per review of the City’s compliance with the specified requirements not using a statistically valid sample. Identification as a repeat finding Not a repeat finding. Recommendation Management should review policy and ensure documentation supporting each expenditure, as well as of timely review and approval, will be retained. Views of responsible officials Management concurs with the finding. Management will implement policies and procedures to ensure expenditures are reviewed timely and approved prior to posting.

Finding 2021-013 Gift Cards - Activities Allowed or Unallowed; Allowable Costs/Cost Principles – Noncompliance and Material Weakness in Internal Controls Over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 – Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.403(g) states that for costs to be allowable under Federal awards, they must be adequately documented and there must be sufficient documentation. 2 CFR 200.303 requires that non-federal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. Condition During our testing of gift cards purchased by the City for distribution to individuals as an incentive for receiving the COVID-19 vaccine, we noted that the City did not maintain evidence of reconciling the gift card purchases to the gift cards distributed. Cause Policies and procedures were not appropriately adhered to in certain instances to ensure that reconciliation is done for gift card distributions. Effect or potential effect We were unable to confirm that all gift cards purchased using program funds were distributed only to eligible individuals per the City’s COVID-19 vaccination incentive program. Gift cards may have been distributed to individuals not meeting the City’s requirements for eligibility. Questioned costs None. Context The City used program funds to purchase $76,013 in gift cards for use as an incentive to encourage individuals to receive the COVID-19 vaccine. The City was not able to provide documentation that reconciled the gift cards purchases against distributions of gift cards. Identification as a repeat finding Not a repeat finding. Recommendation We recommend the City ensure its policies and procedure are followed on a consistent basis. Views of responsible officials Management concurs with the finding. Management will review current policies and will ensure that policies and procedures are adhered to ensure that proper reconciliations are done.

Finding 2021-005 Deadline for Federal Single Audit – Reporting - Noncompliance and Material Weakness in Internal Control Over Compliance Agency U.S. Department of the Treasury and Environmental Protection Agency Assistance Listing Numbers (ALN) 21.019 66.202 Program Name COVID-19 - Coronavirus Relief Fund Congressionally Mandated Projects Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development, State of Alaska Department of Environmental Conservation Pass-Through Entity Identifying Number 20-CRF-024, 18EQ57, 20ER77, 21ES93 Criteria or Specific Requirement 2 CFR 200.512, Report Submission, establishes that the audit shall be completed and the data collection form and reporting package submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 days after receipt of the auditor's report or 9 months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit, and any extensions granted by the Office of Management and Budget. Condition The City did not comply with the required submission date of the data collection form and reporting package to the FAC for the fiscal year ended June 30, 2021. Cause The City did not have controls in place to ensure the audit was completed timely so that the reporting package could be submitted to the FAC within the required timeframe. Effect or Potential Effect The City is not compliant with 2 CFR 200.512. The City could be exposed to a reduction or elimination of funds by the Federal awarding agencies. Questioned costs Not applicable. Context This is a condition identified per review of the City's compliance with the specified requirements. Identification as a repeat finding Not a repeat finding. Recommendation We recommend the City establish controls to ensure the audit is completed timely and the reporting package is submitted to the FAC within the required timeframe. Views of Responsible Officials Management concurs with this finding. Management will ensure beginning balance reconciliations and year-end adjustments will be complete by September, and will work with external auditors to have a financial statement draft prior to their fieldwork.

Finding 2021-005 Deadline for Federal Single Audit – Reporting - Noncompliance and Material Weakness in Internal Control Over Compliance Agency U.S. Department of the Treasury and Environmental Protection Agency Assistance Listing Numbers (ALN) 21.019 66.202 Program Name COVID-19 - Coronavirus Relief Fund Congressionally Mandated Projects Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development, State of Alaska Department of Environmental Conservation Pass-Through Entity Identifying Number 20-CRF-024, 18EQ57, 20ER77, 21ES93 Criteria or Specific Requirement 2 CFR 200.512, Report Submission, establishes that the audit shall be completed and the data collection form and reporting package submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 days after receipt of the auditor's report or 9 months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit, and any extensions granted by the Office of Management and Budget. Condition The City did not comply with the required submission date of the data collection form and reporting package to the FAC for the fiscal year ended June 30, 2021. Cause The City did not have controls in place to ensure the audit was completed timely so that the reporting package could be submitted to the FAC within the required timeframe. Effect or Potential Effect The City is not compliant with 2 CFR 200.512. The City could be exposed to a reduction or elimination of funds by the Federal awarding agencies. Questioned costs Not applicable. Context This is a condition identified per review of the City's compliance with the specified requirements. Identification as a repeat finding Not a repeat finding. Recommendation We recommend the City establish controls to ensure the audit is completed timely and the reporting package is submitted to the FAC within the required timeframe. Views of Responsible Officials Management concurs with this finding. Management will ensure beginning balance reconciliations and year-end adjustments will be complete by September, and will work with external auditors to have a financial statement draft prior to their fieldwork.

Finding 2021-006 Payroll Documentation - Activities Allowed and Unallowed, Allowable Costs/Cost Principles – Noncompliance and Material Weakness in Internal Control over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. 2 CFR 200.430 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Per 2 CFR 200.430, these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and be incorporated into the official records of the non-Federal entity. Condition During our testing of payroll disbursements, we noted the following exceptions: - 20 out of the 60 expenditures sampled did not have properly maintained personnel action forms signed by the employee. - one out of the 60 expenditures sampled had an employee whose pay rate had decreased; however, no adjustment was made in the payroll system to reflect this decrease. Cause Internal controls were not in place throughout the entire fiscal year to ensure that all personnel action forms were reviewed and signed by the designated individuals and the payroll system is updated to reflect changes in pay rates. Effect or potential effect Federal funds could be expended for unallowed activities and unallowed costs. Questioned costs Below the reporting threshold. Context We tested a sample of 60 payroll transactions totaling to $148,729 from a population of 454 payroll transactions. The total amount of payroll expenditures charged to the program in fiscal year 2021 were $1,220,281. We noted 21 exceptions as noted in the condition. This is a condition identified per review of City's compliance with the specified requirements not using a statistically valid sample. Identification as a repeat finding This is a repeat finding from prior year. This was reported as finding 2020- 005 in the 2020 report. Recommendation Management should ensure the most current personnel action forms are reviewed and signed by the designated personnel. Views of responsible officials Management concurs with the finding. Management will review current employee pay rates within the payroll module and ensure the rates agree to the most current pay rate as specified in the employee’s current personnel action form.

Finding 2021-007 Late Reporting – Significant Deficiency in Internal Control Over Compliance Agency Environmental Protection Agency ALN 66.202 Program Congressionally Mandated Projects Award Year FY 2021 Pass-Through Agency State of Alaska Department of Environmental Conservation Pass-Through Entity Identifying Number(s) 18EQ57, 20ER77, 21ES93 Criteria 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving federal awards establish and maintain internal control designed to reasonably ensure compliance with federal statues, regulations, and the terms and conditions of the federal award. Condition During our testing of reporting, we noted two of the three reports tested were submitted after the due date. Cause The City’s internal controls over reporting are not designed appropriately to ensure timely reporting. Effect or potential effect Information submitted to granting agency may not be received in time. Questioned costs Not applicable. Context We tested a sample of three reports and found two exceptions as noted in the condition. The total population consisted of 11 reports. This is a condition identified per review of the City’s compliance with reporting requirements not using a statistically valid sample. Identification as a repeat finding Not a repeat finding. Recommendation Management should review report due dates and ensure that accurate reports are submitted before they are due. Views of responsible officials Management concurs with the finding. Management will carefully review report deadlines and ensure that submission of reports is made before they are due.

Finding 2021-008 Subrecipient Agreements - Subrecipient Monitoring – Material Noncompliance and Material Weakness in Internal Control over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.332 requires pass-through entities to ensure that subrecipients comply with the terms and conditions of 2 CFR 200.501 related to audit requirements. This includes ensuring that every subaward is (1) clearly identified to the subrecipient as a subaward; (2) includes the necessary information at the time of the subaward for subrecipient reporting on federal awards (2 CFR 200.332) and (3) includes requirement to follow 2 CFR 200.501 if expenditure thresholds are met. This also includes verifying that every subrecipient is audited as required by 2 CFR 200.501 if the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold. Condition During our testing of subrecipient monitoring, we noted the subrecipient agreements did not include the required federal award identification or applicability of audit requirements. No action was taken to ensure the subrecipients were audited in accordance with 2 CFR 200.501 if applicable. Cause The issuance of subrecipient agreements for these grants related to new funding streams in response to the COVID-19 pandemic. Significant amounts of funding were provided in a short period of time, and systems to distribute these monies were newly created and implemented. The standard award agreements were not reviewed in advance to ensure adherence to federal requirements. Staff were not fully trained on the informational requirements and monitoring responsibilities related to audit requirements. Effect or potential effect Subrecipients may be unaware and not in compliance with the requirements of 2 CFR Part 200. Questioned costs Not applicable. Context We tested the sole subaward agreement for the program and noted the agreement did not contain the necessary language under 2 CFR 200.332 to inform subrecipients of the applicability of 2 CFR 200, Subpart F. Identification as a repeat finding Not a repeat finding. Recommendation Management should establish policies to ensure subawards contain required federal award information. In addition, procedures should be established to monitor subrecipient compliance with audit requirements of 2 CFR 200.501. Views of responsible officials Management concurs with the finding. Management will revise policies and procedures related to subrecipient monitoring and will ensure that policies are established to ensure subawards contain the required federal award information.

Finding 2021-009 Monitoring Activities - Subrecipient Monitoring – Material Noncompliance and Material Weakness in Internal Control over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.332 requires that pass-through entities monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR 200.332 also requires pass-through entities to verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in 2 CFR 200.501. Condition The City did not have controls in place to monitor subrecipient activities and ensure the subrecipient was audited in accordance with 2 CFR 200.501 if applicable. Cause Staff were not fully trained on the informational requirements and monitoring responsibilities related to audit requirements. Effect or potential effect The City was not in compliance with subrecipient requirements outlined in 2 CFR 200.332. Furthermore, not communicating proper compliance requirements and other information may increase the likelihood of noncompliance on the part of the subrecipient and non-fulfillment of program goals and objectives. Questioned costs Not applicable. Context We were not able to verify controls over subrecipient monitoring. The audit of the subrecipient was completed by other auditors including an audit in accordance with the Uniform Guidance requirements on December 3, 2021. The City obtained the audited reports in April 2023. Identification as a repeat finding Not a repeat finding. Recommendation Management should establish policies and procedures to monitor subrecipient compliance with audit requirements of 2 CFR 200.501. Views of responsible officials Management concurs with the finding. Management will revise policies and procedures related to subrecipient monitoring and will ensure that policies are established to ensure subawards contain the required federal a ward information.

Finding 2021-010 Sole Source Vendors - Procurement and Suspension and Debarment – Material Noncompliance and Material Weakness in Internal Control Over Compliance Agency Environmental Protection Agency ALN 66.202 Program Congressionally Mandated Projects Award Year FY 2021 Pass-Through Agency State of Alaska Department of Environmental Conservation Pass-Through Entity Identifying Number(s) 18EQ57, 20ER77, 21ES93 Criteria 2 CFR 200.320 states the non-federal entity must have and used documented procurement procedures consistent with 2 CFR 200.317-.319, and identifies the methods of procurement to be followed. 2 CFR 200.320(c) states the specific circumstances in which noncompetitive procurement can be used. Condition During our testing of procurement and suspension and debarment, we noted the following exception: One of the three procurement transactions tested was procured via sole source without adequate support of the rationale to limit competition. Cause The City’s policies and procedures were not appropriately designed to ensure compliance with the requirements of the Uniform Guidance concerning use of noncompetitive procurement. Effect or potential effect The City was not compliant with 2 CFR 200.320 concerning specific circumstances in which noncompetitive procurement can be used. The incorrect use of noncompetitive procurement increases the probability that federal funds are spent wastefully. Questioned costs $208,291 Context We tested a sample of three procurement transactions totaling to $1,516,880 from a population of four procurement transactions totaling to $1,560,666. We noted one exception as noted in the condition. This is a condition identified per review of the City’s compliance with the specified requirements not using a statistically valid sample. The known amount of the one exception is $208,291. Identification as a repeat finding Not a repeat finding. Recommendation We recommend that the controls and processes that have been established be implemented and to ensure the City is following its procurement policy and meeting the Uniform Guidance compliance requirements. Views of responsible officials Management agrees with the finding. The City will follow the Uniform Guidance thresholds that are established for federal programs, as well as follow the City Council’s policy.

Finding 2021-011 Expenditure Documentation - Activities Allowed and Unallowed, Allowable Costs/Cost Principles – Noncompliance and Material Weakness in Internal Control Over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.403(g) states that for costs to be allowable under federal awards, they must be adequately documented and there must be sufficient documentation. Condition During our testing of nonpayroll disbursements, we noted the following exception: Three of the 62 disbursements sampled did not have adequate supporting documentation. Cause Policies and procedures were not appropriately adhered to in certain instances to ensure that supporting documentation was maintained correctly to evidence that costs were allowable and that an appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or potential effect We were unable to confirm the allowability and existence of three disbursements charged to the program. Questioned costs None over the questioned costs reporting threshold. Context We tested a sample of 62 nonpayroll transactions totaling to $947,814 from a population of 470 transactions totaling to $2,768,962. We noted three exceptions as noted in the condition. This is a condition identified per review of the City’s compliance with the specified requirements not using a statistically valid sample. The known amount of the three exceptions is $1,608. Identification as a repeat finding Not a repeat finding. Recommendation Management should review policy and ensure documentation supporting each expenditure will be retained. Views of responsible officials Management concurs with the finding. Management will implement policies and procedures to ensure supporting documentation over expenditures are retained.

Finding 2021-012 Expenditure Approval - Activities Allowed and Unallowed, Allowable Costs – Material Weakness in Internal Control Over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 - Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.303 requires that non-federal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal statues, regulations, and terms and conditions of the federal award. Condition During our testing of nonpayroll transactions, we noted the following exception: 17 out of 62 transactions sampled did not have documentation of approval by management. Cause Policies and procedures were not appropriately adhered to in certain instances to ensure that the appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or potential effect Federal funds could be expended for unallowed activities and unallowed costs. Questioned costs None. Context We tested a sample of 62 nonpayroll transactions totaling to $947,814 from a population of 470 transactions totaling to $2,768,962. We noted 17 exceptions as noted in the condition. This is a condition identified per review of the City’s compliance with the specified requirements not using a statistically valid sample. Identification as a repeat finding Not a repeat finding. Recommendation Management should review policy and ensure documentation supporting each expenditure, as well as of timely review and approval, will be retained. Views of responsible officials Management concurs with the finding. Management will implement policies and procedures to ensure expenditures are reviewed timely and approved prior to posting.

Finding 2021-013 Gift Cards - Activities Allowed or Unallowed; Allowable Costs/Cost Principles – Noncompliance and Material Weakness in Internal Controls Over Compliance Agency Department of the Treasury ALN 21.019 Program COVID-19 – Coronavirus Relief Fund Award Year FY 2021 Pass-Through Agency State of Alaska Department of Commerce, Community, and Economic Development Pass-Through Entity Identifying Number 20-CRF-024 Criteria 2 CFR 200.403(g) states that for costs to be allowable under Federal awards, they must be adequately documented and there must be sufficient documentation. 2 CFR 200.303 requires that non-federal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal statutes, regulations, and terms and conditions of the federal award. Condition During our testing of gift cards purchased by the City for distribution to individuals as an incentive for receiving the COVID-19 vaccine, we noted that the City did not maintain evidence of reconciling the gift card purchases to the gift cards distributed. Cause Policies and procedures were not appropriately adhered to in certain instances to ensure that reconciliation is done for gift card distributions. Effect or potential effect We were unable to confirm that all gift cards purchased using program funds were distributed only to eligible individuals per the City’s COVID-19 vaccination incentive program. Gift cards may have been distributed to individuals not meeting the City’s requirements for eligibility. Questioned costs None. Context The City used program funds to purchase $76,013 in gift cards for use as an incentive to encourage individuals to receive the COVID-19 vaccine. The City was not able to provide documentation that reconciled the gift cards purchases against distributions of gift cards. Identification as a repeat finding Not a repeat finding. Recommendation We recommend the City ensure its policies and procedure are followed on a consistent basis. Views of responsible officials Management concurs with the finding. Management will review current policies and will ensure that policies and procedures are adhered to ensure that proper reconciliations are done.