Audit 406755

Criteria or Specific Requirement: 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of procurement, suspension, and debarment. The City should have internal controls designed to ensure compliance with those provisions. Condition: The prior-year finding related to suspension and debarment procedures remains unresolved. During the current year, there were no federally funded covered transactions subject to suspension and debarment requirements available for testing. As a result, the City was unable to demonstrate that corrective actions related to the prior-year finding had been implemented and were operating effectively. Questioned Costs: None. Context: The City did not perform timely suspension and debarment verification for six out of the six samples tested. However, none of those vendors were suspended or debarred. Cause: The finding is reported as a repeat finding because no covered transactions occurred during the current year; therefore, the implementation and effectiveness of corrective actions could not be verified. Effect: There is a potential the City could contract with a disbarred or suspended entity if the verification is not performed. Repeat Finding: This is a repeat of a finding from the immediately prior year, finding number 2024-001. Recommendation: We recommend the City perform suspension and debarment procedures on all vendors with which it plans to enter into a covered transaction. View of Responsible Officials: There is no disagreement with the audit finding.

Criteria or Specific Requirement: Tier I day care homes are those operated by providers whose own household meets the income standards for free or reduced price meals, or those located in low-income areas. A low-income area is one where at least 50% of the children are eligible for free or reduced price school meals. Sponsoring organizations may use school enrollment data or census data to determine if a home is located in a low-income area. Condition: During our follow-up of prior-year finding 2024-003, we noted that the two day care homes identified as incorrectly classified as Tier II instead of Tier I were not reclassified during FY 2024-25 and continued to receive Tier II reimbursement rates. However, no exceptions were noted in the three additional day care home tier determinations tested during the current year. Questioned Costs: None. Context: The prior-year finding identified two of 35 day care home tier determinations that were based on outdated school enrollment data, resulting in the providers being incorrectly classified as Tier II rather than Tier I. During FY 2024-25, those two providers remained classified as Tier II. In addition, we tested three current-year tier determinations and noted no exceptions. Cause: Although the City appears to have implemented procedures to ensure current tier determinations utilize the most current school enrollment data, corrective action was not taken to address the two provider classifications identified in the prior-year finding. Effect: The affected providers continued to receive reimbursement rates associated with Tier II status rather than the higher reimbursement rates available under Tier I status. As a result, federal expenditures may have remained understated. Repeat Finding: This is a repeat of a finding from the immediately prior year, finding number 2024-003. Recommendation: The City should review and correct the tier classifications of the affected providers identified in finding 2024-003, make any necessary reimbursement adjustments, and continue its procedures to ensure current tier determinations are based on the most current school enrollment data available. This approach acknowledges the improvement in controls (which is important to be fair to the auditee) while still justifying a repeat finding because the original error was never remediated. View of Responsible Officials: There is no disagreement with the audit finding.