Finding 2025-011 – Allowable Costs (Material Weakness and Noncompliance) Identification of the Federal Program: Highway Planning and Construction, ALN 20.205, Department of Transportation (HPC). Criteria: 2 CFR Part 200 Subpart E establishes cost principles to apply in determining costs under federal awards. Nonfederal entities are also required to establish controls over the disbursement process to ensure compliance with allowable cost requirements. The accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. Condition: We selected one month’s payroll which included the same five employees reimbursed each month by the state agency. For those five, the time charged to the grant did not agree to the hours that should have been charged based on the recalculation performed from the timesheets. In addition, one employee was paid at an old rate for the first two paychecks of the month after city employees received a 5% COLA effective 10/1/24. And lastly, one employee was not paid 1.5 hours of overtime according to the timesheet and paycheck detail. Also for those five, documentation and/or support for the leave calculation could not be provided. Cause: The City uses a spreadsheet provided by the state agency to calculate the number of hours worked plus a portion of leave to be reimbursed. The hours entered into the spreadsheet did not agree to the hours documented on the timesheets. In addition, the rationale for the amount of leave calculated could not be provided. Lastly, a pay rate was not updated and overtime was not paid during the normal payroll process and controls in place did not detect or prevent the mistake. Effect: The City did not retain proper documentation to support the amounts reimbursed by the grant. Payroll review and approval process did not detect two mistakes noted in the month tested. Questioned Costs: $415. Recommendation: We recommend the City strengthen the fiscal policies and procedures to ensure all pay is properly documented and reviewed for accuracy. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.
Finding 2025-009 – Reporting (Material Weakness and Noncompliance)(Repeat Finding) Identification of the Federal Program: Community Development Block Grants, ALN 14.218, Department of Housing and Urban Development (CDBG) and Coronavirus State and Local Fiscal Recovery Funds, ALN 21.027, Department of the Treasury (CRF). Criteria: 2 CFR 200.328-330 establish the requirements of nonfederal entities for financial and performance reporting that include timely and accurate reporting. 2 CFR 200.303 requires nonfederal entities to establish, document and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Typical control procedures for reporting include having a supervisor review the submitted report and ensuring the work is performed and documented in a way that confirms the accuracy and completeness of all data and information included. Condition: We selected five reports for the two grant programs to test for compliance and controls over reporting requirements. No documentation of review or approval of the reports was available. For CDBG, 2 quarterly cash reports and the FY24 Consolidated Annual Performance and Evaluation Report (CAPER) were tested, one cash report was late. Cause: The City did not retain documentation of a review and approval of federal reports submitted. Effect: The City did not have appropriate controls in place over documentation of reporting requirements. Questioned Costs: None reported. Recommendation: We recommend the City strengthen its policies and procedures over the grant reporting process to ensure controls are properly implemented and working effectively. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.
Finding 2025-010 – Procurement (Material Weakness and Noncompliance) Identification of the Federal Program: Coronavirus State and Local Fiscal Recovery Funds, ALN 21.027, Department of the Treasury (CRF); Highway Planning and Construction, ALN 20.205, Department of Transportation (HPC). Criteria: 2 CFR 200.317-327 establishes procurement standards for nonfederal entities. This includes different requirements based on the amount of purchases made from the vendor during the year. Specifically, the recipient or subrecipient must maintain and use documented procedures for procurement transactions under a federal award or subaward, including for acquisition of property or services. Per the City’s Fiscal Policy and Procedures Manual, the small purchase method has a lower threshold of $15,000. All contracts and purchases over $15,000 must be bid. 2 CFR Part 180 requires nonfederal entities to verify that an entity they are entering into a contract with is not suspended or debarred or otherwise excluded. Condition: We selected seven vendors for the two grant programs to test compliance and controls over procurement. Of those seven, it was noted that for five vendors the City did not document the appropriate procurement procedures took place and three were not verified as not being suspended or debarred. Cause: On HPC, the City contracted or accumulated costs for two vendors over the small purchase threshold and did not provide documentation of bid procedures. Also, documentation was not provided that the City ensured the vendor was not suspended or debarred prior to contracting with them. On CRF, the City contracted two vendors over the small purchase threshold and did not provide documentation of bid procedures. And finally, one vendor was disclosed as part of a cooperative purchase agreement but documentation to support the City’s participation in that agreement was not provided. In 4 instances, The City followed state bid law which allows exemptions of certain professional services from requiring a bid. The federal regulations only allow specific circumstances in which a vendor does not have to be competitively procured. These vendors did not meet that criteria. Effect: The City did not have appropriate documentation to support compliance with the procurement, suspension, and debarment requirements. Questioned Costs: HPC - $383,445; CRF - $1,538,000 Recommendation: We recommend the City reinforce its procurement policies for purchases with federal funding through regular training and clear communication to all relevant staff members. Additionally, implementing a periodic review process to ensure compliance with this policy can help prevent future occurrences. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.