Audit 414682

Finding 2025-002 Procurement and Suspension and Debarment – Internal Control over Suspension and Debarment Identification of the Federal Program: Assistance Listing Number: 20.205 Assistance Listing Title: Highway Planning and Construction Program (Federal-Aid Highway Program) Federal Agency: U.S. Department of the Transportation Federal Award Identification Number: HSIPL-5384(023); ER-15Y0(003); ER-15Y0(004); ER-15Y0(005) Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Federal Agency: U.S. Department of the Treasury Federal Award Identification Number: 1505-0271 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Prior to entering into subawards and contracts with award funds, recipients must verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded pursuant to 31 CFR section 19.300. Condition: During the audit, we noticed that the City did not perform suspension and debarment checks on the contractors that they hired with Highway Planning and Construction Program (“HPC”) and CSLFRF Funds. Cause: The City does not have formal policies and procedures in place to ensure the suspension and debarment review process over vendors that provides goods or services to the City’s programs was conducted prior to entering into a contract. Effect or Potential Effect: Without verifying whether vendors are suspended or debarred from working on federally-funded projects prior to the contract being awarded, the City could be contracting with vendors that are prohibited from working on federally funded projects and incurring potentially disallowed costs. Questioned Costs: None noted. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See finding 2024-004. Recommendation: We recommended the City develop policies and procedures to incorporate the suspension and debarment verification prior to awarding contracts. Views of Responsible Officials: Management concurs with the finding and agrees to implement necessary corrective procedures.

Finding 2025-003 Allowable Costs/Cost Principles and Cash Management– Compliance and Internal control over Allowable Costs/Cost Principles and Cash Management Identification of the Federal Program: Assistance Listing Number: 97.030 Assistance Listing Title: Federal Emergency Management Agency (“FEMA”) Federal Agency: U.S. Department of the Homeland Security Federal Award Identification Number: DR 4750 Criteria: Pursuant to 2 CFR 200.403, Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. d) Be accorded consistent treatment. e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. f) Not be included as a cost or used to meet cost sharing requirements of any other federally-financed program in either the current or a prior period. g) Be adequately documented. h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. Condition: During our review, we identified that $88,374 of expenditures had been reported under both the Highway Planning and Construction Program (HPC) and the Federal Emergency Management Agency (FEMA), resulting in duplicate reporting of the same expenditures. To correct the error, the City removed the duplicated expenditures from the FEMA program while retaining the expenditures within the HPC program. The City subsequently determined that the duplicated amount had been improperly claimed under FEMA and will be required to refund $88,374 to the applicable grantor. Cause: The City’s decentralized structure, in which consultants and individual departments manage federal awards, resulted in a lack of effective communication and coordination with the Finance Department regarding the tracking and reporting of federal expenditures. This, combined with the absence of adequate internal review procedures and a limited understanding of federal reporting requirements, resulted in duplicate payment of $88,374. Effect or Potential Effect: The lack of communication and internal review procedures resulted in the over claiming of $88,374. Questioned Costs: $88,374 Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: None. Recommendation: We recommend perform frequent communication between the Finance Department and other departments in identifying federal programs. Additionally, we recommend the City review and revise their policies and procedures over financial reporting and grant management, and providing more training to both grant management and finance staff on identifying funding sources, allowable costs, and proper expenditure reporting. Views of Responsible Officials: Management concurs with the finding and agrees to implement necessary corrective procedures.