CITY OF WEST FARGOLocal Government

Department of the Treasury, Passed through North Dakota Office of Management and Budget Federal Financial Assistance Listing 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Activities Allowed or Unallowed Material Weakness in Internal Control over Compliance Criteria – A good system of internal accounting control contemplates an adequate system for review of the allocation of payroll expenditures to federal awards. Condition – During the course of our engagement, we noted that the City has no formal review process for the allocation of payroll costs to federal awards, which could result in a material misstatement of the City’s schedule of expenditures of federal awards. Cause – The City does not have an internal control system designed to review the allocation of payroll costs to federal awards. Effect – This deficiency could result in a misstatement to the financial statements and noncompliance with federal awards that would not be prevented or detected. Questioned Costs – None reported. Context/Sampling – A non-statistical sample of 60 transactions out of a population over 250 total transactions were selected for testing, which accounted for $973,584 of $1,232,007 of federal program expenditures. Of these transactions tested, seven of the seven payroll selections did not have approval, and that accounted for $333,540 of the total being tested. Repeat Finding from Prior Year(s) – Yes, prior year finding 2022-006. Recommendation – A thorough review and reconciliation of the allocation of payroll costs to federal awards should take place prior to the beginning of the audit. This review should be done at both the accounting staff and accounting supervisor levels. Views of Responsible Officials – There is no disagreement with the audit finding.

Department of the Treasury, Passed through North Dakota Office of Management and Budget Federal Financial Assistance Listing 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Procurement, Suspension, and Debarment Material Weakness in Internal Control Over Compliance Criteria – Uniform Guidance and 2 CFR sections 200.318 through 200.326 set forth the procurement standards non-federal entities other than states must follow when operating federal programs and the procurement procedures required. Condition – In our testing of procurement, suspension, and debarment it was identified that the City did not have a written policy on procurement that satisfied the requirements of 2 CFR sections 200.318 through 200.326. Cause – Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, and controls were not adequately designed to ensure compliance with all of these requirements. Effect – A lack of compliant policies increases the overall risk of non-compliance. Questioned Costs – None reported. Context/Sampling – Overall procurement policy. Repeat Finding from Prior Years – Yes, prior year finding 2022-007. Recommendation – We recommend that management establish a written policy that is in compliance with all of the procurement requirements for federal programs as identified in 2 CFR sections 200.318 through 200.326 and maintain adequate supporting documentation and records to document history and methods of procurement and the procedures performed to comply with these CFR sections. Views of Responsible Officials – There is no disagreement with the audit finding.

Department of the Treasury, Passed through North Dakota Office of Management and Budget Federal Financial Assistance Listing 21.027 COVID‐19 – Coronavirus State and Local Fiscal Recovery Funds Activities Allowed or Unallowed Material Weakness in Internal Control over Compliance Criteria – A good system of internal accounting control contemplates an adequate system for review of the allocation of payroll expenditures to federal awards. Condition – During the course of our engagement, we noted that the City has no formal review process for the allocation of payroll costs to federal awards, which could result in a material misstatement of the City’s schedule of expenditures of federal awards. Cause – The City does not have an internal control system designed to review the allocation of payroll costs to federal awards. Effect – This deficiency could result in a misstatement to the financial statements and noncompliance with federal awards that would not be prevented or detected. Questioned Costs – None reported. Context/Sampling – A non‐statistical sample of 60 transactions out of a population over 250 total transactions were selected for testing, which accounted for $2,217,102 of $2,774,746 of federal program expenditures. Repeat Finding from Prior Year(s) – No. Recommendation – A thorough review and reconciliation of the allocation of payroll costs to federal awards should take place prior to the beginning of the audit. This review should be done at both the accounting staff and accounting supervisor levels. Views of Responsible Officials – There is no disagreement with the audit finding.

Department of the Treasury, Passed through North Dakota Office of Management and Budget Federal Financial Assistance Listing 21.027 COVID‐19 – Coronavirus State and Local Fiscal Recovery Funds Procurement, Suspension, and Debarment Material Weakness in Internal Control Over Compliance Criteria – Uniform Guidance and 2 CFR sections 200.318 through 200.326 set forth the procurement standards non‐federal entities other than states must follow when operating federal programs and the procurement procedures required. Condition – In our testing of procurement, suspension, and debarment it was identified that the City did not have a written policy on procurement that satisfied the requirements of 2 CFR sections 200.318 through 200.326. Cause – Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, and controls were not adequately designed to ensure compliance with all of these requirements. Effect – A lack of compliant policies increases the overall risk of non‐compliance. Questioned Costs – None reported. Context/Sampling – Overall procurement policy. Repeat Finding from Prior Years – Yes, prior year finding 2021‐003. Recommendation – We recommend that management establish a written policy that is in compliance with all of the procurement requirements for federal programs as identified in 2 CFR sections 200.318 through 200.326 and maintain adequate supporting documentation and records to document history and methods of procurement and the procedures performed to comply with these CFR sections. Views of Responsible Officials – There is no disagreement with the audit finding.

Department of the Treasury, Passed through North Dakota Office of Management and Budget Federal Financial Assistance Listing 21.027 COVID‐19 – Coronavirus State and Local Fiscal Recovery Funds Reporting Material Weakness in Internal Control over Compliance Criteria –Recipients of federal financial assistance through the Coronavirus State and Local Fiscal Recovery Funds program were required to submit an annual Project and Expenditure Report showing amounts expended in the current period and the cumulative expenditures for the award. Condition – The amounts reported as expended in the current period and cumulative expenditures for the award did not agree with the amounts supported by the City’s accounting records. Cause – The City does not have an internal control system designed to provide for the accurate completion and review of the Project and Expenditure Report. Effect – The Project and Expenditure Report that was submitted does not accurately report the amounts expended during the current period and cumulative expenditures under the award. Questioned Costs – None reported. Context/Sampling – The entire population of 1 report was selected for testing. Repeat Finding from Prior Year(s) – No. Recommendation – The City should review its internal control over compliance processes surrounding the reporting function to ensure that reports are accurately prepared and reviewed for agreement with the accounting records before they are submitted. Views of Responsible Officials – There is no disagreement with the audit finding.

2021-003 Department of Transportation, passed through State of North Dakota Department of Transportation Federal Financial Assistance Listing/CFDA Number 20.205, Contract 38181296 Fiscal Year 2021 Highway Planning and Construction Procurement, Suspension and Debarment Significant Deficiency in Internal Control Over Compliance Criteria ? Uniform Guidance and 2 CFR sections 200.318 through 200.326 set forth the procurement standards non-federal entities other than states must follow when operating federal programs and the procurement procedures required. Condition ? In our testing of procurement, suspension and debarment it was identified that the City did not have a written policy on procurement that satisfied the requirements of 2 CFR sections 200.318 through 200.326. Cause ? Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, and controls were not adequately designed to ensure compliance with all of these requirements. Effect ? A lack of compliant policies increases the overall risk of non-compliance. Questioned Costs ? None reported Context/Sampling ? Overall procurement policy. Repeat Finding from Prior Years ? No Recommendation ? We recommend that management establish a written policy that is in compliance with all of the procurement requirements for federal programs as identified in 2 CFR sections 200.318 through 200.326 and maintain adequate supporting documentation and records to document history and methods of procurement and the procedures performed to comply with these CFR sections. Views of Responsible Officials ? There is no disagreement with the audit finding.