City of Longview
January 1, 2022 through December 31, 2022
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
Description of Condition
During fiscal year 2022, the City spent $2,086,004 in federal funding from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF). This program gives funding 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.
Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program 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 that the contractors have not been suspended, debarred, or otherwise excluded. The City may accomplish this verification 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 perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement.
Our audit found the City’s controls were ineffective for ensuring that it verified all parties receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the City did not verify that one of the seven contractors we tested was not suspended and debarred from participating in federal programs before entering into contracts with them.
We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance.
Cause of Condition
City staff were aware of the federal suspension and debarment verification requirements, and they normally verify this information during the procurement process. However, when this contract was entered into, the City did not intend to pay for it with federal funds, so staff did not verify the contractor’s status.
Effect of Condition
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 federal agency could potentially recover them.
The City subsequently verified the contractor was not suspended or debarred, so we are not questioning costs.
Recommendation
We recommend the City strengthen internal controls to ensure that all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them. The City should also maintain documentation demonstrating compliance with this federal requirement.
City’s Response
The City of Longview takes its responsibility over internal controls with the highest regard. Management is committed to ensuring the City has strong internal controls and appropriate procedures that demonstrate compliance with federal grant programs. The City appreciates the Auditor’s recognition and credit of the events listed above under Cause and Condition, and appreciates the Auditor’s acknowledgement that the funds paid to the contractor were allowable and appropriate.
Auditor’s Remarks
We appreciate the City’s response and commitment to resolving this finding. We thank it for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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.
City of Longview
January 1, 2022 through December 31, 2022
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
Description of Condition
During fiscal year 2022, the City spent $2,086,004 in federal funding from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF). This program gives funding 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.
Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program 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 that the contractors have not been suspended, debarred, or otherwise excluded. The City may accomplish this verification 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 perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement.
Our audit found the City’s controls were ineffective for ensuring that it verified all parties receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the City did not verify that one of the seven contractors we tested was not suspended and debarred from participating in federal programs before entering into contracts with them.
We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance.
Cause of Condition
City staff were aware of the federal suspension and debarment verification requirements, and they normally verify this information during the procurement process. However, when this contract was entered into, the City did not intend to pay for it with federal funds, so staff did not verify the contractor’s status.
Effect of Condition
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 federal agency could potentially recover them.
The City subsequently verified the contractor was not suspended or debarred, so we are not questioning costs.
Recommendation
We recommend the City strengthen internal controls to ensure that all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them. The City should also maintain documentation demonstrating compliance with this federal requirement.
City’s Response
The City of Longview takes its responsibility over internal controls with the highest regard. Management is committed to ensuring the City has strong internal controls and appropriate procedures that demonstrate compliance with federal grant programs. The City appreciates the Auditor’s recognition and credit of the events listed above under Cause and Condition, and appreciates the Auditor’s acknowledgement that the funds paid to the contractor were allowable and appropriate.
Auditor’s Remarks
We appreciate the City’s response and commitment to resolving this finding. We thank it for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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.