The City did not have adequate internal controls and did not
comply 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 Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: N/A
Pass-through Award/Contract
Number:
N/A
Known Questioned Cost Amount: $
Prior Year Audit Finding: N/A
Background
The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF)
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 $885,273 in program funds for these
activities.
Federal regulations require recipients to establish and maintain internal controls
that ensure compliance with program requirements. These controls include
understanding program requirements and monitoring the effectiveness of
established controls.
Federal requirements prohibit 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 and services that it
expects to equal or exceed $25,000, paid all or in part with federal funds, it must
verify the contractors are not suspended, debarred or otherwise excluded from
participating in federal programs. The City may verify this by obtaining 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 verify this before entering into the contract, and must
maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Although the City has a process to verify the suspension and debarment status for
contractors it pays more than $25,000, our audit found the City did not follow this
process and did not verify eight contractors were not suspended or debarred before
purchasing from them.
We consider this deficiency in internal controls to be a material weakness that led
to material noncompliance.
Cause of Condition
City staff were aware of the federal suspension and debarment verification
requirements and usually verify this during the procurement process. However,
City staff had other job responsibilities to prioritize and did not follow its normal
process to complete the verification procedure as required.
Effect of Condition
The City did not obtain a written certification from the contractors, insert a clause
into the contracts or check for exclusion records at SAM.gov to verify contractors
it paid $666,965 using federal funds were not suspended or debarred before
contracting. Without adequate internal controls, the City increases its risk of
awarding federal funds to contractors that are excluded from participating in federal
programs. Any payments the City made to an ineligible party would be
unallowable, and the awarding agency could potentially recover them.
We subsequently verified the contractors were not suspended or debarred.
Therefore, we are not questioning costs.
Recommendation
We recommend the City strengthen its internal controls to verify all contractors it
pays $25,000 or more, all or in part with federal funds, are not suspended or
debarred from participating in federal programs and maintain documentation
demonstrating compliance with this requirement.
City’s Response
The City of Pacific appreciates the opportunity to respond to the Washington State
Auditor’s Office notification of a finding for the period ending December 31, 2022.
The City of Pacific holds their responsibility for enabling internal controls to
ensure compliance with federal requirements at the highest regard. Management
is committed to ensuring the City’s internal controls and procedures ensure
compliance with all requirements governing the administration of federal grant
programs.
In 2021/2022, the City Council authorized contracts for projects to improve city
facilities, some these included HVAC and flooring replacements at City Hall, storm
pipe cleaning and fencing, and Public Works Shop Electrical updates. Although
staff routinely reviews SAM.gov for all federally funded activity, due in part, to
significant staff turnover in key management positions this important step in
contractor verification was missed and a SAM.gov record for these projects were
not able to be located in the project files.
Upon discovery of the oversite during the audit, the contractors were verified and
were not suspended or debarred. The readers of this report should be reassured
that the City strives to maintain strong internal controls, and there were no
questioned costs in this matter.
The City appreciates the importance the Auditor applies to the need for internal
controls and proper federal procurement. The City will immediately add language
to our standard contract and purchase order referencing compliance with federal
procurement, including suspension and debarment, requirements. In addition, the
City will continue to emphasize and encourage training opportunities for all staff
involved in projects receiving federal participation.
Auditor’s Remarks
We thank the City for its cooperation and assistance during the audit and
acknowledge its commitment to improving this condition. We will review the
condition 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.
The City did not have adequate internal controls and did not
comply 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 Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: N/A
Pass-through Award/Contract
Number:
N/A
Known Questioned Cost Amount: $
Prior Year Audit Finding: N/A
Background
The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF)
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 $885,273 in program funds for these
activities.
Federal regulations require recipients to establish and maintain internal controls
that ensure compliance with program requirements. These controls include
understanding program requirements and monitoring the effectiveness of
established controls.
Federal requirements prohibit 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 and services that it
expects to equal or exceed $25,000, paid all or in part with federal funds, it must
verify the contractors are not suspended, debarred or otherwise excluded from
participating in federal programs. The City may verify this by obtaining 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 verify this before entering into the contract, and must
maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Although the City has a process to verify the suspension and debarment status for
contractors it pays more than $25,000, our audit found the City did not follow this
process and did not verify eight contractors were not suspended or debarred before
purchasing from them.
We consider this deficiency in internal controls to be a material weakness that led
to material noncompliance.
Cause of Condition
City staff were aware of the federal suspension and debarment verification
requirements and usually verify this during the procurement process. However,
City staff had other job responsibilities to prioritize and did not follow its normal
process to complete the verification procedure as required.
Effect of Condition
The City did not obtain a written certification from the contractors, insert a clause
into the contracts or check for exclusion records at SAM.gov to verify contractors
it paid $666,965 using federal funds were not suspended or debarred before
contracting. Without adequate internal controls, the City increases its risk of
awarding federal funds to contractors that are excluded from participating in federal
programs. Any payments the City made to an ineligible party would be
unallowable, and the awarding agency could potentially recover them.
We subsequently verified the contractors were not suspended or debarred.
Therefore, we are not questioning costs.
Recommendation
We recommend the City strengthen its internal controls to verify all contractors it
pays $25,000 or more, all or in part with federal funds, are not suspended or
debarred from participating in federal programs and maintain documentation
demonstrating compliance with this requirement.
City’s Response
The City of Pacific appreciates the opportunity to respond to the Washington State
Auditor’s Office notification of a finding for the period ending December 31, 2022.
The City of Pacific holds their responsibility for enabling internal controls to
ensure compliance with federal requirements at the highest regard. Management
is committed to ensuring the City’s internal controls and procedures ensure
compliance with all requirements governing the administration of federal grant
programs.
In 2021/2022, the City Council authorized contracts for projects to improve city
facilities, some these included HVAC and flooring replacements at City Hall, storm
pipe cleaning and fencing, and Public Works Shop Electrical updates. Although
staff routinely reviews SAM.gov for all federally funded activity, due in part, to
significant staff turnover in key management positions this important step in
contractor verification was missed and a SAM.gov record for these projects were
not able to be located in the project files.
Upon discovery of the oversite during the audit, the contractors were verified and
were not suspended or debarred. The readers of this report should be reassured
that the City strives to maintain strong internal controls, and there were no
questioned costs in this matter.
The City appreciates the importance the Auditor applies to the need for internal
controls and proper federal procurement. The City will immediately add language
to our standard contract and purchase order referencing compliance with federal
procurement, including suspension and debarment, requirements. In addition, the
City will continue to emphasize and encourage training opportunities for all staff
involved in projects receiving federal participation.
Auditor’s Remarks
We thank the City for its cooperation and assistance during the audit and
acknowledge its commitment to improving this condition. We will review the
condition 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.