City of Aberdeen

City of Aberdeen January 1, 2021 through December 31, 2021 2021-001 The City lacked adequate internal controls for ensuring compliance with federal suspension and debarment requirements. CFDA Number and Title: 21.027 ? COVID-19 Coronavirus State and Local Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: ARPA ? 1505 - 0271 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Description of Condition 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 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 2021, the City spent $2,338,702 in program funds to provide public health services. Federal regulations require recipients to establish and maintain 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 the contractors have not been suspended or debarred or otherwise excluded. The City may accomplish this verification by collecting 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 perform this verification before entering into the contract or paying the contractor more than $25,000, and it must keep documentation demonstrating compliance with this federal requirement. Our audit found the City did not have adequate controls and did not verify that the two contractors 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. The issue was not reported as a finding in the prior audit. Cause of Condition The City did not intend to pay one of the two contractors with federal funding when procuring the services, so staff did not verify the contractor?s status before entering into an agreement or after determining federal funds would be used. For the second contractor, City staff responsible for this program did not have a clear understanding of $25,000 being the threshold for suspension and debarment requirements, and did not verify the contractor was not suspended or debarred before making the purchase. Effect of Condition The City did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify both contractors were not suspended or debarred. Without this verification, the City increases its risk of providing 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 federal grantor could potentially recover them. We verified both contractors were not suspended or debarred. Therefore, we are not questioning costs for these payments. Recommendation We recommend the City improve its internal controls and develop procedures to ensure staff understand suspension and debarment requirements and verify contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before contracting with them. City?s Response City will ensure training occurs on Federal Grant compliance and especially ensure we do suspension and debarment training to comply with that requirement. Auditor?s Remarks We appreciate the steps the City is taking to resolve this issue. 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 on Agencies on Governmentwide Department and Suspension (Nonprocurement) establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

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