The City did not have adequate internal controls and did not comply with federal suspension and debarment requirements. Background The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide government services to the extent COVID-19 caused a reduction in revenues collected, make necessary investments in water, sewer or broadband infrastructure, provide emergency relief from natural disasters or their negative economic impacts, fund projects eligible under certain programs administered by the U.S. Department of Transportation through three pathways and fund projects eligible under the programs established in Title I of the Housing and Community Development Act of 1974. In 2025, the City spent $476,937 in direct program funds for government services and investments in infrastructure and spent $66,214 from an indirect award passed through from Yakima County for the Redevelopment of Existing Source Wells project. 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 or purchasing goods or services, and must maintain documentation demonstrating compliance with this federal requirement. Additionally, when purchasing from a contract awarded by another party (piggybacking), the City must independently verify this before entering into a contract or purchasing at a lower tier and must maintain documentation demonstrating compliance with this federal requirement. The City cannot rely on or use the other party’s verification of the contractor’s status. Description of Condition Our audit found the City did not have adequate controls to verify two of three contractors we tested that it paid more than $25,000 in federal funds were 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 Staff did not know they were required to verify the contractor’s status when piggybacking on another party’s contract. Staff obtained and relied on the verification that the other party performed and did not know they were required to perform their own verification of the contractor’s status before piggybacking. 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 $281,032 with direct federal funds from U.S. Department of the Treasury 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 of Grandview acknowledges the audit finding regarding inadequate internal controls over compliance with federal suspension and debarment requirements. The City takes its responsibility for compliance with federal grant requirements seriously and has implemented corrective measures to address the finding and prevent recurrence. The condition resulted from a decentralized process in which individual departments responsible for federally funded projects were also responsible for verifying that contractors and vendors were not suspended, debarred, or otherwise excluded from participation in federal programs. While staff understood the general requirement, the City did not have a sufficiently standardized and centralized process to ensure that the required verification was consistently performed and documented. In response to the finding, the City has strengthened its internal controls and established a standardized suspension and debarment verification process. The City has implemented the following corrective actions: 1. Standardized Verification Procedure: Prior to entering into a covered transaction involving federal funds, Department Heads must verify the eligibility of the contractor, vendor, consultant, or other applicable party through the federal System for Award Management (SAM.gov) or another federally authorized method. 2. Documentation Requirement: Evidence of the verification, including the entity name, Unique Entity Identifier (UEI), date of verification, and documentation of the search results, must be retained in the applicable procurement, contract, grant, or project file. 3. Centralized Oversight: Departments administering federal awards remain responsible for initiating the verification, while Administration and Finance will monitor compliance and documentation. 4. Pre-Payment/Contract Controls: For applicable federally funded contracts and purchases, required suspension and debarment documentation must be completed and retained before execution of the contract or expenditure of federal funds. 5. Staff Training: Employees responsible for procurement, contracting, grant administration, and accounts payable will receive guidance regarding federal suspension and debarment requirements and the City’s documentation procedures. 6. Ongoing Monitoring: Administrative staff will periodically review federally funded transactions to ensure the required verification has been performed and supporting documentation is maintained. The City believes these corrective actions establish appropriate internal controls to ensure compliance with federal suspension and debarment requirements and provide sufficient documentation for future audits. The City appreciates the State Auditor’s Office identifying this opportunity to strengthen its federal grant compliance procedures and is committed to maintaining effective internal controls and full compliance with applicable federal requirements. Auditor’s Remarks We thank the City for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the corrective action taken 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.