Audit 348452

Federal Agency: U.S. Department of Defense Program/Cluster: Community Economic Adjustment Assistance for Responding to Threats to the Resilience of a Military Installation Federal Assistance Listing Number: 12.003 Award No.: MIR1973-22-01 Award Year: 2023 Compliance Requirement: Matching, Level of Effort and Earmarking Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. 2 CFR 200.430(g)(4) Salaries and wages of employees used in meeting cost sharing requirements on Federal awards must be supported in the same manner as salaries and wages claimed for reimbursement from Federal awards. 2 CFR 200.306(f) requires that if services furnished by a third-party organization are claimed as a cost-sharing match, these services must be valued at the employee’s regular rate of pay, plus an amount of fringe benefits that is reasonable, necessary, allocable, and otherwise allowable. Condition: We noted personnel services furnished by third-party organizations totaled $31,025 for the life of the grant, including $10,854 in fiscal year 2024. For the services furnished by third-party organizations as a local match of costs, the City valued the personnel time based on budgeted rates. The City could not provide documentation supporting the actual cost incurred by the third-party organization to support the in-kind services claimed. Cause: The City’s policies and procedures for in-kind services furnished by third-party organizations toward the grant did not include obtaining documentation to support the actual costs incurred and value of services claimed. Effect: The City did not comply with required local match of expenses for the grant. Questioned Costs: We identified questioned costs totaling $2,435 for unsubstantiated costs furnished by third-party organizations claimed as local cost share expenditures. Context/Sampling: A nonstatistical sample of 13 out of 54 local cost share expenditures were tested. This represents $9,114 of local cost share expenditures out of a total of $46,809 incurred for fiscal year 2024. Upon further investigation, the questioned costs were isolated to contributed services furnished by third-party organizations which totaled $10,854 in the fiscal year 2024. Repeat Finding from Prior Year(s): No. Recommendation: We recommend the City establish policies and procedures and documentation standards to comply with the Uniform Guidance standards for documentation of personnel expenses used to meet the local share of expenses. Views of Responsible Officials: Management concurs with the finding. See separate corrective action plan.

Federal Agency: U.S. Department of Defense Program/Cluster: Community Economic Adjustment Assistance for Responding to Threats to the Resilience of a Military Installation Federal Assistance Listing Number: 12.003 Award No.: MIR1973-22-01 Award Year: 2023 Compliance Requirement: Procurement, Suspension and Debarment Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR Section 200.214 of the Uniform Guidance states that the City must comply with 2 CFR part 180, which implements Executive Orders 12549 and 12689. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Per 2 CFR Section 180.300, when a non-Federal entity enters into a covered transaction with an entity at a lower tier, the non-Federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1)checking the System for Award Management (SAM) Exclusions maintained by the GeneralServices Administration (GSA) and available at https://www.sam.gov/SAM/, (2) collecting acertification from the entity, or (3) adding a clause or condition to the covered transaction withthat entity. 2 CFR 200.318(i) Procurement records. The recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. The City’s grant policy, chapter 100 of the City’s administrative policy, section 34 states that contracts valued between $3,500 to $150,000 allow for informal procurement methods but requires that price or rate quotes must be obtained (and kept on hand for audit purposes) from an adequate number of qualified sources. 2 CFR 200.327 requires that the recipient's or subrecipient's contracts must contain the applicable provisions described in Appendix II of 2 CFR 200. Condition: During our testing of the City’s provisions for procurement requirements, we noted the following: 1)For two (2) of two (2) contracts selecting for testing there was no evidence that the Cityverified the entity was not suspended or debarred or otherwise excluded from participatingin the transaction, prior to entering the contract. Upon our search, none of the vendorswere suspended or debarred. 2)For one (1) of two (2) contracts selected for testing with a contract value of $103,800, theCity did not document the history of the procurement, including the rationale for themethod of procurement, selection of contract type, basis for contractor selection, and thebasis for the contract price. 3)For two (2) out of two (2) contracts selected for testing, the City did not include allapplicable provisions described in 2 CFR 200 Appendix II. Cause: The City did not follow their policy to verify the information described in the condition prior to entering the transactions. The City did not follow their policy documenting the history of the procurement, including the rationale for the method of procurement, selection of contract type, basis for contractor selection, and the basis for the contract price. The City’s policy does not include the requirement to include all applicable provisions identified in 2 CFR 200 Appendix II in its contracts. Effect: Failure to implement and maintain a proper control process could result in payments to vendors that are suspended or debarred or improper awarding of contracts under the procurement guidance. Questioned Costs: No questioned costs were identified. Context/Sampling: We tested 100% of the procurement transactions. This represented a total of $1,323,800 in contracted services under the grant. $862,375 was paid for contracted services in fiscal year 2024. Repeat Finding from Prior Year(s): No. Recommendation: We recommend the City strengthen its policies and procedures to ensure that the verification of the debarment and suspension is documented and retained, the history of procurement transactions is documented and retained in its official records, and that contracts include all applicable provisions of 2 CFR 200 Appendix II. Views of Responsible Officials: Management concurs with the finding. See separate corrective action plan.

Federal Agency: U.S. Department of Defense Program/Cluster: Community Economic Adjustment Assistance for Responding to Threats to the Resilience of a Military Installation Federal Assistance Listing Number: 12.003 Award No.: MIR1973-22-01 Award Year: 2023 Compliance Requirement: Matching, Level of Effort and Earmarking Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. 2 CFR 200.430(g)(4) Salaries and wages of employees used in meeting cost sharing requirements on Federal awards must be supported in the same manner as salaries and wages claimed for reimbursement from Federal awards. 2 CFR 200.306(f) requires that if services furnished by a third-party organization are claimed as a cost-sharing match, these services must be valued at the employee’s regular rate of pay, plus an amount of fringe benefits that is reasonable, necessary, allocable, and otherwise allowable. Condition: We noted personnel services furnished by third-party organizations totaled $31,025 for the life of the grant, including $10,854 in fiscal year 2024. For the services furnished by third-party organizations as a local match of costs, the City valued the personnel time based on budgeted rates. The City could not provide documentation supporting the actual cost incurred by the third-party organization to support the in-kind services claimed. Cause: The City’s policies and procedures for in-kind services furnished by third-party organizations toward the grant did not include obtaining documentation to support the actual costs incurred and value of services claimed. Effect: The City did not comply with required local match of expenses for the grant. Questioned Costs: We identified questioned costs totaling $2,435 for unsubstantiated costs furnished by third-party organizations claimed as local cost share expenditures. Context/Sampling: A nonstatistical sample of 13 out of 54 local cost share expenditures were tested. This represents $9,114 of local cost share expenditures out of a total of $46,809 incurred for fiscal year 2024. Upon further investigation, the questioned costs were isolated to contributed services furnished by third-party organizations which totaled $10,854 in the fiscal year 2024. Repeat Finding from Prior Year(s): No. Recommendation: We recommend the City establish policies and procedures and documentation standards to comply with the Uniform Guidance standards for documentation of personnel expenses used to meet the local share of expenses. Views of Responsible Officials: Management concurs with the finding. See separate corrective action plan.

Federal Agency: U.S. Department of Defense Program/Cluster: Community Economic Adjustment Assistance for Responding to Threats to the Resilience of a Military Installation Federal Assistance Listing Number: 12.003 Award No.: MIR1973-22-01 Award Year: 2023 Compliance Requirement: Procurement, Suspension and Debarment Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR Section 200.214 of the Uniform Guidance states that the City must comply with 2 CFR part 180, which implements Executive Orders 12549 and 12689. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Per 2 CFR Section 180.300, when a non-Federal entity enters into a covered transaction with an entity at a lower tier, the non-Federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1)checking the System for Award Management (SAM) Exclusions maintained by the GeneralServices Administration (GSA) and available at https://www.sam.gov/SAM/, (2) collecting acertification from the entity, or (3) adding a clause or condition to the covered transaction withthat entity. 2 CFR 200.318(i) Procurement records. The recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. The City’s grant policy, chapter 100 of the City’s administrative policy, section 34 states that contracts valued between $3,500 to $150,000 allow for informal procurement methods but requires that price or rate quotes must be obtained (and kept on hand for audit purposes) from an adequate number of qualified sources. 2 CFR 200.327 requires that the recipient's or subrecipient's contracts must contain the applicable provisions described in Appendix II of 2 CFR 200. Condition: During our testing of the City’s provisions for procurement requirements, we noted the following: 1)For two (2) of two (2) contracts selecting for testing there was no evidence that the Cityverified the entity was not suspended or debarred or otherwise excluded from participatingin the transaction, prior to entering the contract. Upon our search, none of the vendorswere suspended or debarred. 2)For one (1) of two (2) contracts selected for testing with a contract value of $103,800, theCity did not document the history of the procurement, including the rationale for themethod of procurement, selection of contract type, basis for contractor selection, and thebasis for the contract price. 3)For two (2) out of two (2) contracts selected for testing, the City did not include allapplicable provisions described in 2 CFR 200 Appendix II. Cause: The City did not follow their policy to verify the information described in the condition prior to entering the transactions. The City did not follow their policy documenting the history of the procurement, including the rationale for the method of procurement, selection of contract type, basis for contractor selection, and the basis for the contract price. The City’s policy does not include the requirement to include all applicable provisions identified in 2 CFR 200 Appendix II in its contracts. Effect: Failure to implement and maintain a proper control process could result in payments to vendors that are suspended or debarred or improper awarding of contracts under the procurement guidance. Questioned Costs: No questioned costs were identified. Context/Sampling: We tested 100% of the procurement transactions. This represented a total of $1,323,800 in contracted services under the grant. $862,375 was paid for contracted services in fiscal year 2024. Repeat Finding from Prior Year(s): No. Recommendation: We recommend the City strengthen its policies and procedures to ensure that the verification of the debarment and suspension is documented and retained, the history of procurement transactions is documented and retained in its official records, and that contracts include all applicable provisions of 2 CFR 200 Appendix II. Views of Responsible Officials: Management concurs with the finding. See separate corrective action plan.