City of Prattville, AlabamaLocal Government

Finding 2025-005 – Procurement (Material Weakness and Noncompliance) Identification of the Federal Program: Highway Planning and Construction, ALN 20.205, Department of Transportation (Highway Planning). Criteria: 2 CFR 200.317-327 establishes procurement standards for nonfederal entities. This includes different requirements based on the amount of purchases made from the vendor during the year. Specifically, the recipient or subrecipient must maintain and use documented procedures for procurement transactions under a federal award or subaward, including for acquisition of property or services. In addition, for projects funded under ALN 20.205, the Brooks Act applies so that engineering and design‑related services must be procured using qualifications‑based selection procedures and retain sufficient procurement and contract administration documentation to demonstrate compliance with federal requirements 23 CFR Part 172. Condition: During the audit period, the City had 6 federally funded projects, 3 of which had advanced into an active construction phase. We selected two projects for procurement testing. For 1 project, the City did not provide documentation demonstrating that the engineering firm performing construction engineering and inspection services (CE&I) was procured in accordance with federal requirements. Cause: The City followed state bid law which allows exemptions for certain professional services from requiring a bid. The federal regulations only allow specific circumstances in which a vendor does not have to be competitively procured. This vendor did not meet that criteria. Effect: The City did not maintain adequate documentation to ensure that engineering and CE&I services were procured and administered in accordance with federal requirements as projects advanced into construction. Questioned Costs: $53,700 Recommendation: The City should reinforce its procurement policies to ensure that engineering and CE&I services for federally funded projects are procured using qualifications‑based selection procedures and that complete procurement and contract administration documentation is retained prior to and throughout construction. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2025-006 – Special Tests and Provisions- Prevailing Wage Rates (Material Weakness and Noncompliance) Identification of the Federal Program: Highway Planning and Construction, ALN 20.205, Department of Transportation (Highway Planning). Criteria: 2 CFR 200.318 requires non-federal entities to monitor contractors to ensure compliance with Federal requirements and terms of the contract. The contract terms included compliance with 29 CFR 5.5 requiring contractors and subcontractors to submit weekly certified payrolls to the contracting agency. Condition: We selected a sample of 5 certified payrolls covering 7 contractors and 52 pay periods to assess compliance with applicable wage classifications, rates, payroll completeness, and required certifications. The City served as the owner and recipient of federal funding for construction projects subject to prevailing wage rate requirements. The City did not provide evidence of review or other monitoring procedures during the audit period. In addition, the City was unable to provide auditors with access to certified payrolls for 2/7 subcontractors, as certified payrolls for subcontractors were not obtained or retained by the City during the audit period. Cause: The City relied on contractors to submit certified payrolls but did not establish formal procedures or assign responsibility for reviewing and documenting compliance with Prevailing Wage Rate requirements. Effect: Without documented monitoring of certified payrolls, the City did not maintain adequate documentation of assurance that contractors complied with prevailing wage requirements, increasing the risk that labor standards violations could occur and remain undetected. Questioned Costs: None Recommendation: The City should establish and implement formal procedures to obtain, review, and document certified payrolls and other monitoring activities to ensure ongoing compliance with prevailing wage requirements. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2025-007 – Internal Control over Grant Management (Significant Deficiency and Noncompliance) Identification of the Federal Program: Highway Planning and Construction, ALN 20.205, Department of Transportation (Highway Planning) and all federal programs Criteria: CFR 200.302 establishes the requirements of a financial management system adequate to ensure compliance with federal regulations. This system must include written procedures to implement requirements for payment methods and determine the allowability of costs in accordance with subpart E. Condition: The City does not have a written grant manual or other written accounting procedures that meet the financial management system requirements established in the regulations. Cause: The City has several policies in place and has processes and procedures in place to administer grant funds but written policies that meet the financial management system requirements policies. Effect: The City's current policies do not meet the requirements established in the regulations. Questioned Costs: None reported. Recommendation: We recommend the City should develop a grants manual or additional written policies to incorporate all the requirements of 2 CFR 200 and ensure compliance. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2019-004 - Reporting (Noncompliance) Identification of the federal program - Economic Adjustment Assistance - CFDA No. 11.307 Criteria - Recipients must specify whether a cash or accrual basis was used for preparing the Outlay Report and Request for Reimbursement for Construction Programs (SF-271) and the Federal Financial Report (SF-425). Financial reports should be prepared in accordance with the specified accounting basis. Condition - The City indicated the accrual basis of accounting was used to prepare the Outlay Report and Request for Reimbursement for Construction Programs (SF-271). For the reporting period ended December 31, 2018, the construction and project improvement costs improperly excluded an invoice incurred in, but paid after, the reporting period. The City indicated the cash basis of accounting was used to prepare the Federal Financial Report (SF-425). For the reporting periods ended March 31, 2019 and September 30, 2019, the Federal and recipient shares of expenditures improperly included invoices incurred in, but paid after, the reporting periods. The Federal share of the invoices should have been reported as Federal share of unliquidated obligations as required by the Federal Financial Report (SF-425) instructions, not as Federal share of expenditures. Effect - The City did not report accurate amounts on the Outlay Report and Request for Reimbursement for Construction Programs (SF-271) for the reporting period ended December 31, 2018 due to errors in compiling amounts from accounting records. Period expenditures reported were understated by approximately $76,000. The City did not report accurate amounts on the Federal Financial Reports (SF-425) due to errors in compiling amounts from accounting records. For the reporting period ended March 31, 2019, the recipient share of expenditures was overstated by approximately $129,000, the Federal share of expenditures was overstated by approximately $129,000, and the Federal share of unliquidated obligations was understated by approximately $129,000. For the reporting period ended September 30, 2019, the recipient share of expenditures was overstated by approximately $120,000, the Federal share of expenditures was overstated by approximately $120,000, and the Federal share of unliquidated obligations was understated by approximately $120,000. Cause - The City?s policies and procedures over federal award reporting were not adequate. Recommendation - The City should strengthen its policies and procedures related to federal award reporting to comply with reporting requirements. Views of responsible officials - The City agrees with the finding. The City will implement additional review procedures over grant reporting requirements, including more adequate review of reports prepared by third-party grant administrators.

Finding 2019-005 - Reporting (Noncompliance) Identification of the federal program - Economic Adjustment Assistance - CFDA No. 11.307 Criteria - Amounts reported on the Federal Financial Report (SF-425) should be compiled using underlying accounting records and agreement to such records should be verified to determine reports are accurate and complete. Condition - The City reported amounts for the Federal and recipient shares of expenditures on the Federal Financial Report (SF-425) for the reporting period ended March 31, 2019 that varied from the supporting accounting records. Effect - The City did not report accurate amounts on the Federal Financial Report (SF-425) due to errors in compiling amounts from accounting records. The Federal and recipient shares of expenditures were understated by approximately $59,000 each, for a total understatement of approximately $118,000. The amounts were subsequently corrected on the report for the period ended September 30, 2019. Cause - The City?s policies and procedures over federal award reporting were not adequate. Recommendation - The City should strengthen its policies and procedures related to federal award reporting to comply with reporting requirements. Views of responsible officials - The City agrees with the finding. The City will implement additional review procedures over grant reporting requirements, including more adequate review of reports prepared by third-party grant administrators.

Finding 2019-006 - Reporting (Noncompliance) Identification of the federal program - Economic Adjustment Assistance - CFDA No. 11.307 Criteria - Financial reports are required to be submitted on a semiannual basis for the periods ending March 31 and September 30 and are due no later than 30 calendar days following the end of each reporting period. Project progress reports are due on a quarterly basis no later than January 31, April 30, July 31, and October 31 for the immediate previous quarter. Condition - The City entered into a professional services contract with a grant administrator, the scope of which included preparation and submission of all reporting as required by the project. The grant administrator failed to timely and accurately submit, on behalf of the City, certain financial and performance reports. Effect - The semiannual Federal Financial Reports (SF-425) for the periods ended March 31, 2019 and September 30, 2019 were submitted on June 28, 2019 and May 22, 2020, respectively, which is more than 30 days following the end of each reporting period. The quarterly project progress reports for the periods ended December 31, 2018, March 31, 2019, and September 30, 2019 were submitted on February 19, 2019, July 8, 2019, and February 10, 2020, respectively, which are past the due dates identified above. The project progress report that should have covered the period from October 1, 2018 through December 31, 2018 covered the period through February 2, 2019. Cause - The City?s policies and procedures over federal award reporting were not adequate and too much reliance was put on the external grant administrator. Recommendation - The City should strengthen its policies and procedures related to federal award reporting to comply with reporting requirements. Views of responsible officials - The City agrees with the finding. The City will implement additional oversight over the timely preparation and submittal of required grant reporting documents.

Finding 2019-007 - Reporting (Material Weakness) Identification of the federal program - Economic Adjustment Assistance - CFDA No. 11.307 Criteria - 2 CFR 200.303, Internal Controls, requires that recipients establish and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Condition - In certain instances, instructions attached to the Federal Financial Report (SF-425) and Outlay Report and Request for Reimbursement for Construction Programs (SF-271) were not properly followed. In addition, the City failed to comply with certain reporting requirements included in the U.S. Department of Commerce - Economic Development Administration Standard Terms and Conditions for Construction Projects. Effect - Several financial and nonfinancial items included in the federal award financial and performance reports were inaccurately reported, the most significant of which are included in the previous findings. Cause - The City?s internal controls over federal award reporting were not adequate. There is a lack of monitoring and appropriate review by the City of the reports prepared by the external grant administrator. Recommendation - The City should strengthen its internal controls related to federal award reporting and should implement policies and procedures to monitor and review all reports prepared and submitted by the external grant administrator on behalf of the City. Views of responsible officials - The City agrees with the finding. The City will implement additional review procedures for all grant reporting and the Finance Director will facility timely review of these reports.