The City did not have adequate internal controls for ensuring compliance with federal subrecipient monitoring, procurement, suspension and debarment requirements, and it did not comply with federal subrecipient monitoring, suspension and debarment requirements. Background. The Justice Assistance Grant (JAG) program provides states, tribes and local governments with critical funding necessary to support personnel, equipment, supplies, contractual support, training, technical assistance and information systems for criminal justice or civil proceedings for a variety of programs. In 2024, the City spent $650,928 for its JAG program. Federal regulations require recipients to establish, document and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Subrecipient Monitoring. When the City passes on federal funds to subrecipients, federal regulations require it to ensure every subaward agreement clearly identifies that it is a federal award and includes the applicable federal requirements. Further, the City is required to evaluate every subrecipient’s risk of noncompliance with federal requirements to determine the appropriate level of subrecipient monitoring. Subrecipient monitoring requirements include ensuring compliance with program requirements, ensuring the subrecipient receives a federal single audit when required, following up and ensuring the subrecipient takes timely and appropriate action on all audit findings, and issuing a management decision as required. Procurement. Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive of federal, state or local procurement thresholds and methods. When using federal funds to purchase goods or services, governments must follow their own documented procurement procedures that reflect the most restrictive of federal, state or local requirements, and apply them by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. A local government may use noncompetitive procurement procedures when certain circumstances apply, such as if an item is only available from a single source, a public emergency or when the awarding agency expressly authorizes a noncompetitive procurement in response to a written request. In those circumstances, the local government must evaluate each procurement action individually and document its rationale for waiving competition. Suspension and Debarment. 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. Subrecipient Monitoring. The City did not have effective internal controls for ensuring compliance with subrecipient monitoring requirements. Specifically, the City provided funds to one subrecipient to administer crime prevention and control, community-based violence interventions and advancing racial equity to underserved communities and did not include all required elements in the subaward agreement. Further, it did not perform a risk assessment and did not sufficiently monitor the subrecipient as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Procurement. The City’s procurement policy did not conform to federal regulations in that they did not include procedures to competitively procure services when using federal funds as required by federal regulations. Our audit found the City did not competitively procure one service contract. We consider this deficiency in internal controls to be a significant deficiency. Suspension and Debarment. Although the City has a process to verify the suspension and debarment status for contractors it pays more than $25,000, our audit found the City did not follow this process and did not verify one of three contractors we tested was 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. Subrecipient Monitoring. Although the City has a process to include all requirements in a subrecipient contract and perform risk assessments and subrecipient monitoring, City employees said they were not aware that the entity was a subrecipient because they operated under a memorandum of understanding each year instead of a subrecipient agreement. Because staff did not consider the entity a subrecipient, they did not follow their normal processes for subrecipient monitoring. Procurement. City staff were not aware they should perform a competitive process when awarding service contracts. The City has a procurement policy, however, it did not include all the necessary requirements to comply with federal regulations. As a result, staff relied on the City’s policy that allowed them to perform a noncompetitive process for services, which does not comply with federal regulations. Suspension and Debarment. City staff were aware of the federal suspension and debarment verification requirements and normally verify this during the procurement process using a contract template that includes a suspension and debarment clause that the contractor signs. However, when the City entered into the contract, it used the contractor’s contract that did not include the clause, and staff did not verify the contractor’s status through another method. Effect of Condition and Questioned Costs. Subrecipient Monitoring. By not clearly identifying the required information in subawards, the City cannot ensure that subrecipients are adequately informed of program requirements for each federal award. By not conducting risk assessments, the City risks inadequately monitoring its subrecipient to ensure it complies with program requirements and uses federal funds appropriately. Procurement. Because the City's policy does not conform to Uniform Guidance, it is at a higher risk of not complying with the most restrictive of federal, state or local procurement requirements when using federal funds for purchases. The City paid one contractor $40,350 in federal program funds without competitively procuring. Without effective internal controls, the City cannot demonstrate it complied with federal procurement requirements, allowed for full and open competition, and received the best price. Suspension and Debarment. 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 the contractor it paid $43,776 using federal funds was 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 contractor was not suspended or debarred. Therefore, we are not questioning costs. Recommendation. Subrecipient Monitoring. We recommend the City correctly identify its subrecipients and include all required elements in federally funded subaward agreements, perform risk assessments for its subrecipients and monitor them accordingly to verify they are in compliance with the terms and conditions of the award. Procurement. We recommend the City update its procurement policy to conform with federal procurement requirements and strengthen internal controls to ensure it procures goods and services in accordance with federal procurement requirements and its own procurement policies and procedures. Suspension and Debarment. 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.