Audit 392049

2024-003 Improve Internal Controls and Compliance with Procurement Federal Program(s) Information Federal Agency: Department of the Treasury, Department of Transportation Award Name: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds, Highway Planning and Construction Assistance Listing Number: 21.027, 20.205 Award Year: 2024 Compliance Requirement: Procurement Type of Finding Compliance Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement Per Uniform Guidance (2 CFR § 200.327 and 2 CFR Part 200, Appendix II), all contracts made by non-federal entities under federal awards must contain specific provisions as applicable, such as those for equal employment opportunity, Davis-Bacon, termination for cause, compliance with laws and regulations, and others. These provisions are required to ensure compliance with federal program requirements for procurement. Condition and Context During testing of contracts for the American Rescue Plan Act (ARPA) program and the Highway Planning and Construction program, we noted that contracts selected for testing did not contain all the required provisions outlined in Appendix II to 2 CFR Part 200. While services were otherwise procured appropriately, documentation of the required contract clauses was not consistent across all contracts selected for review. Cause The City’s procurement processes did not include sufficient controls to ensure that all federally required contract provisions were incorporated into every contract funded with federal awards. Effect or Potential Effect Lack of inclusion of all required federal contract provisions increases the risk of noncompliance with Uniform Guidance and could lead to disputes or enforcement issues if regulatory or compliance matters arise. No questioned costs were identified, as the services procured were determined to be allowable and otherwise appropriate. Recommendation The City should enhance its procurement procedures to ensure all contracts funded by federal awards include every provision required by Appendix II to 2 CFR Part 200 as applicable. Regular review of contract templates and procurement checklists should be implemented to support compliance. View of Responsible Officials Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.