2025-001 The City did not have adequate internal controls and did not comply with federal suspension and debarment requirements. Assistance Listing Number and Title: 15.916 – Outdoor Recreation Acquisition, Development and Planning Federal Grantor Name: National Park Service, Department of the Interior Federal Award/Contract Number: Pass-through Entity Name: Washington State Recreation and Conservation Office Pass-through Award/Contract Number: RCO- 19- 1740D, RCO- 22- 1724D Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2025, the City spent $2,104,710 in Outdoor Recreation Acquisition, Development and Planning program funds. The program’s purpose is to provide financial assistance to states and their political subdivisions' projects that are included in Statewide Comprehensive Outdoor Recreation Plans and acquisition and development of outdoor recreation areas and facilities for the public, to meet current and future needs. This program supports communities in creating and improving parks, outdoor recreation areas, and public spaces that everyone can enjoy. The program provides matching grants that help local and state governments build and upgrade places where people play, gather, and connect with nature. These projects can include building new playgrounds, splash pads, trails, sports courts, restrooms, and parking areas, as well as restoring natural areas and modernizing aging facilities to make them safer and more accessible. This program serves the general public, especially families, youth, older adults, and people with disabilities who rely on safe and welcoming outdoor places. It also supports communities that want to expand outdoor opportunities, improve environmental quality, and encourage healthy lifestyles. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal requirements prohibit 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 and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors are not suspended, debarred or otherwise excluded from participating in federal programs. The City may verify this 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 verify this before entering into the contract and must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Although the City has a process to verify the suspension and debarment status for contractors it pays more than $25,000, our audit found that one of the City’s departments did not follow this process and did not verify all six contractors we tested were not suspended or debarred before purchasing from them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition City staff within the parks and recreation department were unaware of the federal requirements for suspension and debarment because they do not typically receive federal funding. Effect of Condition The City did not obtain a written certification from the contractors, insert a clause into the contracts, or check for exclusion records at SAM.gov to verify the contractors it paid $2,063,604 with federal funds were not suspended or debarred before contracting. 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 awarding agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the City strengthen its internal controls to verify all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and maintain documentation demonstrating compliance with this requirement. City’s Response The City agrees with the finding. The City will strengthen its procedures and internal controls over federally funded procurements to ensure suspension and debarment verification is completed and documented for all applicable transactions. The City will reinforce these requirements with staff involved in federal procurement and implement a review process to verify that required documentation is retained prior to payment or contract award, as applicable. Auditor’s Remarks We appreciate the steps the City is taking to resolve this issue. We will review the condition 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 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.