2022-002 The City did not have adequate internal controls in place to ensure compliance with federal procurement requirements. Assistance Listing Number and Title: 20.205 ? Highway Planning and Construction Federal Grantor Name: Federal Highway Administration Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation Pass-through Award/Contract Number: STPUS-Y341(001) Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background Dural fiscal year 2022, the City spent $981,372 in federal funding from the Federal Highway Administration through the Highway Planning and Construction program. This program gives funding to help state and local government agencies plan and develop an integrated, interconnected transportation system. The City used this funding for the SW Mosman Ave Phase 2 construction project. Federal regulations require recipients to establish and follow internal controls for ensuring compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive applicable federal requirements, state laws or local policies. Description of Condition Our audit found the City did not have adequate internal controls for ensuring compliance with federal procurement requirements. Although the City implemented a procurement policy in November 2022, it did not have written procurement policies or procedures at the time it procured the construction project to ensure compliance with federal requirements. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The City relied on the Washington State Department of Transportation?s Local Agency Guidelines (LAG) manual. The City was required to follow these guidelines under the terms and conditions of the award, and staff thought this would be sufficient to meet federal procurement requirements. Effect of Condition Without written policies and procedures, the City is at greater risk of noncompliance with the most restrictive of federal, state or local procurement methods when using federal funds to procure contractors. Although the City did not have policies in place at the time of procurement, we verified it followed the LAG manual and properly procured the contractor for the project we reviewed. Recommendation We recommend the City strengthen its internal controls to ensure required policies and procedures are in place when procuring with federal funds, as required by Uniform Guidance. City?s Response The City of Yelm holds its responsibility for enabling internal controls to ensure compliance with federal requirements in the highest regard. Management is committed to ensuring the City has internal controls and procedures in place designed to ensure that it complies with all requirements governing the administration of federal grant programs. The City contracted with a CPA firm in August 2022 to assist with developing a Procurement Policy that ensured compliance with all Federal, State, and Local Office of the Washington State Auditor sao.wa.gov laws and regulations regarding City Procurement. Together with Finance and Department Director?s input, the policy was refined and adopted by City Council via Resolution #629 on December 13, 2022. The development of this policy was communicated to the auditors in the prior audit. The policy is required to be followed by all departments during the procurement process. Auditor?s Remarks We appreciate the steps the City is taking to resolve this issue. We will review the corrective action taken during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring goods and services, including noncompetitive procurement.
2022-001 The City?s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements Assistance Listing Number and Title: 21.027 ? COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic?s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the City spent $ 1,321,101 in program funds. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Federal requirements prohibit grant recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the City enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The City may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The City must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the City?s internal controls were inadequate for ensuring staff verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. Specifically, the City did not verify a contractor was not suspended or debarred from participating in federal programs before entering into a contract. The City paid this contractor $206,430 in fiscal year 2022. Cause of Condition City staff were aware of the federal suspension and debarment verification requirements. However, City staff were unable to provide documentation to support that they verified the contractor was not suspended or debarred. Effect of Condition The City did not obtain a signed certification, insert a clause into the contract, or check SAM.gov to verify the contractor was not suspended or debarred before entering into the contract. Without this verification, the City increases its risk of awarding federal funds to parties that are excluded from participating in federal programs. Any payments the City made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. There was only one covered transaction during the audit period, and the City could not provide any evidence that the contractor was not suspended or debarred. Through a search of SAM.gov, we verified this contractor was not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the City strengthen internal controls to ensure all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs. City?s Response The City of Yelm holds its responsibility for enabling internal controls to ensure compliance with federal requirements in the highest regard. Management is committed to ensuring the City has internal controls and procedures in place designed to ensure that it complies with all requirements governing the administration of federal grant programs. To achieve this, the City will take the following action: ? Work with Legal and Departments to update contract templates to add a clause, or condition into the contract that states the contractor is not suspended or debarred, or have the contractor self-certify they are not suspended or debarred or ? Check System for Award Management for exclusion records and keep a record of that with the contract files. Auditor?s Remarks We appreciate the steps the City is taking to resolve this issue. We will review the corrective action taken during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
2022-002 The City did not have adequate internal controls in place to ensure compliance with federal procurement requirements. Assistance Listing Number and Title: 20.205 ? Highway Planning and Construction Federal Grantor Name: Federal Highway Administration Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation Pass-through Award/Contract Number: STPUS-Y341(001) Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background Dural fiscal year 2022, the City spent $981,372 in federal funding from the Federal Highway Administration through the Highway Planning and Construction program. This program gives funding to help state and local government agencies plan and develop an integrated, interconnected transportation system. The City used this funding for the SW Mosman Ave Phase 2 construction project. Federal regulations require recipients to establish and follow internal controls for ensuring compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive applicable federal requirements, state laws or local policies. Description of Condition Our audit found the City did not have adequate internal controls for ensuring compliance with federal procurement requirements. Although the City implemented a procurement policy in November 2022, it did not have written procurement policies or procedures at the time it procured the construction project to ensure compliance with federal requirements. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The City relied on the Washington State Department of Transportation?s Local Agency Guidelines (LAG) manual. The City was required to follow these guidelines under the terms and conditions of the award, and staff thought this would be sufficient to meet federal procurement requirements. Effect of Condition Without written policies and procedures, the City is at greater risk of noncompliance with the most restrictive of federal, state or local procurement methods when using federal funds to procure contractors. Although the City did not have policies in place at the time of procurement, we verified it followed the LAG manual and properly procured the contractor for the project we reviewed. Recommendation We recommend the City strengthen its internal controls to ensure required policies and procedures are in place when procuring with federal funds, as required by Uniform Guidance. City?s Response The City of Yelm holds its responsibility for enabling internal controls to ensure compliance with federal requirements in the highest regard. Management is committed to ensuring the City has internal controls and procedures in place designed to ensure that it complies with all requirements governing the administration of federal grant programs. The City contracted with a CPA firm in August 2022 to assist with developing a Procurement Policy that ensured compliance with all Federal, State, and Local Office of the Washington State Auditor sao.wa.gov laws and regulations regarding City Procurement. Together with Finance and Department Director?s input, the policy was refined and adopted by City Council via Resolution #629 on December 13, 2022. The development of this policy was communicated to the auditors in the prior audit. The policy is required to be followed by all departments during the procurement process. Auditor?s Remarks We appreciate the steps the City is taking to resolve this issue. We will review the corrective action taken during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring goods and services, including noncompetitive procurement.
2022-001 The City?s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements Assistance Listing Number and Title: 21.027 ? COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic?s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the City spent $ 1,321,101 in program funds. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Federal requirements prohibit grant recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the City enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The City may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The City must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the City?s internal controls were inadequate for ensuring staff verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. Specifically, the City did not verify a contractor was not suspended or debarred from participating in federal programs before entering into a contract. The City paid this contractor $206,430 in fiscal year 2022. Cause of Condition City staff were aware of the federal suspension and debarment verification requirements. However, City staff were unable to provide documentation to support that they verified the contractor was not suspended or debarred. Effect of Condition The City did not obtain a signed certification, insert a clause into the contract, or check SAM.gov to verify the contractor was not suspended or debarred before entering into the contract. Without this verification, the City increases its risk of awarding federal funds to parties that are excluded from participating in federal programs. Any payments the City made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. There was only one covered transaction during the audit period, and the City could not provide any evidence that the contractor was not suspended or debarred. Through a search of SAM.gov, we verified this contractor was not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the City strengthen internal controls to ensure all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs. City?s Response The City of Yelm holds its responsibility for enabling internal controls to ensure compliance with federal requirements in the highest regard. Management is committed to ensuring the City has internal controls and procedures in place designed to ensure that it complies with all requirements governing the administration of federal grant programs. To achieve this, the City will take the following action: ? Work with Legal and Departments to update contract templates to add a clause, or condition into the contract that states the contractor is not suspended or debarred, or have the contractor self-certify they are not suspended or debarred or ? Check System for Award Management for exclusion records and keep a record of that with the contract files. Auditor?s Remarks We appreciate the steps the City is taking to resolve this issue. We will review the corrective action taken during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.