City of Sumner January 1, 2025 through December 31, 2025 2025-001 The City overcharged costs to the Highway Planning and Construction program. Assistance Listing Number and Title: 20.205, Highway Planning and Construction Federal Grantor Name: Department of Federal Highway Administration, Transportation Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation Pass-through Award/Contract Number: LA-8230 Known Questioned Cost Amount: $206,149 Prior Year Audit Finding: N/A Background The purpose of the Highway Planning and Construction grant funds is to provide funds for the planning, design, construction, and rehabilitation of highways and bridge transportation systems. During fiscal year 2025, the City spent $13,829,055 in program funds. The City incurs costs for construction projects approved by the Washington State Department of Transportation (WSDOT) under the program and submits reimbursement requests for allowable costs to WSDOT for reimbursement. The City is responsible for ensuring reimbursement requests occurred, are supported, occurred and are complete. Federal regulations establish principles and standards for determining allowable direct costs for federal awards. All costs that recipients charge to the program must comply with program requirements and recipients must support this compliance with proper documentation that demonstrates costs are allowable. Description of Condition Although the City’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and cost requirements, the City claimed reimbursement for a project expenditure when it received an invoice from its vendor and inadvertently included the same invoice in the following claim reimbursement. As a result, the City claimed reimbursement for the same expense twice, therefore overcharging the Highway Planning and Construction program. Cause of Condition Staff did not identify the duplicate claims when preparing the reimbursements. Due to the processing time for WSDOT reimbursement requests at the end of the state fiscal year, City staff pulled that invoice into the June 2025 reimbursement request when it entered the payables process. The pay estimate inadvertently was pulled into the next reimbursement request for July through September 2025 when the posted invoice was included on the project ledger report. Effect of Condition and Questioned Costs City staff claimed reimbursement twice for one invoice in the amount of $238,322, of which the City was required to match $32,173 from another funding source. We are questioning costs in the amount of $206,149 in award number LA-8230. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the City has not complied with grant regulations and/or when it does not have adequate documentation to support expenditures. The City notified WSDOT of the duplicate reimbursement when it was identified during the audit and subsequently repaid WSDOT for the duplicate reimbursement. Recommendation We recommend the City ensure all costs it charges to federal programs are allowable and comply with cost principles. City’s Response The City of Sumner appreciates the opportunity to respond to the Washington State Auditor’s Office notification of a finding for the period ending December 31, 2025. The City of Sumner holds their responsibility 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. The City concurs with the finding. The questioned cost resulted from an invoice being inadvertently included in two reimbursement requests under the federal award. The granting agency operates on a June 30 fiscal year-end and required reimbursement requests for costs incurred through June 30, 2025 to be submitted no later than July 17, 2025. At the time the City prepared its June reimbursement request, an eligible invoice for work performed through June 30 was still in process and had not yet completed final posting through the City's accounts payable system. To ensure the expenditure was included in the year-end reimbursement request, the City manually included the invoice in the June billing. After the invoice subsequently completed the City's normal accounts payable posting process in July, it was included in a later reimbursement request without being identified as an expenditure that had previously been manually claimed. This resulted in the invoice being reimbursed twice. Upon identification of the duplicate reimbursement, the City confirmed the duplication and repaid the questioned amount. Auditor’s Remarks We thank the City for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the City’s corrective action 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 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs.