SCHEDULE OF FEDERAL AWARD FINDINGS AND
QUESTIONED COSTS
City of Tukwila
January 1, 2024 through December 31, 2024
2024-002 The City did not have adequate internal controls and did not
comply 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: N/A
Pass-through Award/Contract
Number:
N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The purpose of the Coronavirus State and Local Fiscal Recovery funds is 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. In 2024, the City spent $1,727,545 in program funds for these
activities.
Federal regulations require recipients to establish and follow 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 or 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. 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 it 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 $25,000 or more, our audit found the City did not follow this
process and did not verify three of four contractors 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 were aware of the federal suspension and debarment verification
requirements and normally verify this during the procurement process. However,
when the City entered into the contracts, it did not intend to pay for them with
federal funds, so staff did not verify the contractors’ status.
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 contractors
it paid $368,520 using 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.
The City 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 appreciates the efforts of the Auditors office in its thorough review of this
matter, meeting several times attempt to work through resolving this matter. As is
stated in the Cause of Condition, prior to the City entering into the contracts with
the contractors in question and incurring the expenses, other dollars were budgeted
to pay for those expenses. Subsequently, to ensure all remaining SLFRF funding
was expended during 2024, the City re-appropriated its SLFRF funding to these
projects. As result, the contractors in question were not reviewed to ensure they
complied with suspension and debarment requirements. The City will take this
issue into consideration when receiving and appropriating federal grant funding in
the future and looks forward to continued collaboration with the Auditor’s office.
Auditor’s Remarks
We thank the City for its cooperation and assistance during the audit. We will
follow up on 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.