Finding 1073438 (2023-001)

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Longview January 1, 2023 through December 31, 2023 2023-001 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: WA Department of Commerce Pass-through Award/Contract Number: 24-4619D-105 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2022-001 Description of Condition During fiscal year 2023, the City spent $6,495,663 in federal funding from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program. 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 maintain 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 that the contractors have not been 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. Our audit found the City did not have adequate controls in place to verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition City staff were aware of the federal suspension and debarment verification requirements and normally verify this during the procurement process. However, the City did not intend to pay for this contract with federal funds when it entered into this contract, so staff did not verify the contractor’s status. Effect of Condition The City did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify one contractor it paid $469,583 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the City cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the City used to pay the contractors that have been suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the contractor was not suspended or debarred, we are not questioning costs. Recommendation We recommend the City strengthen internal controls to ensure 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 before contracting with or purchasing from them. 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 listed above under Cause of Condition and also appreciates the Auditor’s acknowledgment that 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.