Finding 576095 (2024-002)

Material Weakness
Requirement
I
Questioned Costs
-
Year
2024
Accepted
2025-09-10
Audit: 366000
Organization: City of Tukwila (WA)

AI Summary

  • Core Issue: The City of Tukwila lacked adequate internal controls and did not verify contractor suspension or debarment status before using federal funds, leading to material noncompliance.
  • Impacted Requirements: Federal regulations require verification of contractors' eligibility for contracts over $25,000 funded by federal money, including checks against the SAM.gov database.
  • Recommended Follow-Up: Strengthen internal controls to ensure all contractors are verified for suspension or debarment status and maintain proper documentation for compliance.

Finding Text

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.

Corrective Action Plan

Corrective action the auditee plans to take in response to the finding: As reflected in the full text of the finding, the City has controls in place for contracts known to be paid with federal grant dollars. Since 2021 the City has worked to tighten controls over suspension and debarment, including significant staff training and clarification to the procurement process to include individual staffs’ responsibility over confirming contractor’s suspension and debarment status as well as internal project checklists. Going forward the City will: • Incorporate verbiage into all future contracts requiring contractors to affirm they are not suspended or debarred from receiving grant funding, even if the contract is not expected to be funded by grant funding. • If a similar situation were to arise in the future where an existing contract’s funding source is changed to include grant funding, only funds spent prospectively would be reimbursable with grant funding and only after the contractor is confirmed to not be suspended or debarred.

Categories

Procurement, Suspension & Debarment Subrecipient Monitoring

Other Findings in this Audit

  • 1152537 2024-002
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.027 Covid–19 Coronavirus State and Local Fiscal Recovery Funds $1.73M
20.205 Highway Planning and Construction $698,431
20.939 Safe Streets and Roads for All $134,370
20.507 Federal Transit Formula Grants $130,009
97.042 Emergency Management Performance Grants $48,653
16.922 Equitable Sharing Program $46,271
14.218 Community Development Block Grants/entitlement Grants $30,201
97.045 Cooperating Technical Partners $28,433
16.554 National Criminal History Improvement Program (nchip) $22,368
16.607 Bulletproof Vest Partnership Program $4,009