City of Jackson, Michigan

Finding Type. Material Noncompliance; Material Weakness in Internal Control over Compliance (Period of Performance). Federal Program(s) U.S. Environmental Protection Agency Congressionally Mandated Projects (ALN 66.202); Direct; All project numbers. Criteria. A non-Federal entity may charge to a Federal award only allowable costs incurred during the approved period of performance, except where authorized by the Federal awarding agency. Condition. During our testing, we identified costs that were incurred prior to the approved grant period. Of the$1,553,273 of costs charged to the program during the year ended June 30, 2025, which included a local match requirement of $464,118, $300,576 were incurred prior to the period of performance stated in the grant agreement. Cause. The condition resulted from inadequate review controls to verify that expenditures charged to the Federal program occurred within the allowable grant period. Program staff did not consistently compare transaction dates to the authorized period of performance before approving charges. Effect. As a result of this condition, unallowable costs totaling $300,576 were charged to the grant. Questioned Costs. $300,576 Recommendation. We recommend that management strengthen procedures to ensure all expenditures are reviewed for compliance with the award’s period of performance before costs are charged to the grant. This should include implementing system controls or secondary reviews to prevent unallowable charges. View of Responsible Officials. Funds were drawn outside of the approved grant period because construction began before the grant start date. A reimbursement request was submitted and approved erroneously by the Environmental Protection Agency (EPA) for work completed prior to the eligible period. To correct this, the City is working with the EPA and has submitted a corrective request for reimbursement that will apply the funds already received to eligible work performed within the grant period. No additional funds will be transferred, as the total eligible amount in the corrective request will equal the amount previously received, ensuring all reimbursements align with allowable costs. To prevent recurrence, the City will avoid beginning construction before the official grant period begins and will ensure future grant budget periods include adequate contingencies for early project start dates. Additionally, all future reimbursement requests will undergo a thorough internal review to verify that costs were incurred within the approved grant period, rather than relying solely on federal approval.

2024-002 - Procurement, Suspension and Debarment. Finding Type. Immaterial Noncompliance; Significant Deficiency in Internal Control over Compliance. Federal Program(s) U.S. Department of Treasury Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027). Criteria. A recipient of federal awards is required to determine that vendors being paid with federal funds are not suspended or debarred from doing business with the government. Such procedures are required whenever the amount disbursed to a single vendor in a given fiscal year is expected to be at least $25,000. Also, recipients of federal awards are required to ensure that federal procurement standards are followed for any purchases over the federal micropurchase threshold. 2 CFR 200.320 requires that these purchases must adhere to one of the allowable procurement methods (sealed bids, competitive proposals, noncompetitive procurement) and maintain documentation of this procurement decision. Condition. In cases where the vendor did not sign a suspension or debarment certification, either within the vendor contract or as a separate certification, the City did not have a process in place to manually search the Excluded Parties List System to verify the vendor was not suspended or debarred. Cause. This condition is the result of lack of management oversight. Effect. As a result of this condition, while none of the vendors tested appeared to be suspended or debarred, documentation does not exist to support that the City verified its vendors paid with federal dollars were not suspended or debarred prior to contracting with them. Questioned Costs. No costs were questioned as a result of this finding. Recommendation. We recommend that the City create procedures and a related checklist to ensure all federal requirements are being addressed. View of Responsible Official. Due to the influx of new employees managing federal funds under the Coronavirus State and Local Fiscal Recovery Funds program, many were unaware of the requirement to document their searches for suspended or debarred vendors. As a result, search results showing no matches were not retained in the files. Moving forward, all relevant employees will receive additional training to ensure proper documentation of these searches. This training will help to ensure this requirement is consistently met in the future. Responsible Official. Finance Director. Estimated Completion Date. June 30, 2025.