City of ClarkstonLocal Government

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Clarkston January 1, 2024 through December 31, 2024 2024-001 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 Treasury Federal Award/Contract Number: 1505-0271 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 (SLFRF) is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide government services to the extent COVID-19 caused a reduction in revenues collected, make necessary investments in water, sewer or broadband infrastructure, provide emergency relief from natural disasters or their negative economic impacts, fund projects eligible under certain programs administered by the U.S. Department of Transportation through three pathways and fund projects eligible under the programs established in Title I of the Housing and Community Development Act of 1974. In 2024, the City spent $1,522,122 in program funds for these activities. Federal regulations require recipients to establish, document and maintain effective 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 parties suspended or debarred from doing business with the federal government. Whenever the City enters into contracts, paid all or in part with federal funds, it must verify the contractors are not suspended, debarred or otherwise excluded from participating in federal programs. 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 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 more than $25,000, our audit found the City did not follow this process and did not verify the one contractor we tested was 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 The City experienced turnover among key staff, and current staff could not locate documentation to demonstrate compliance with federal suspension and debarment requirements. Effect of Condition The City did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify the contractor it paid $1,291,667 using federal funds was 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 contractor was 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 completed the process of updating the policy regarding federal procurement and suspension and debarment to ensure compliance with usage of federal funds. This was adopted with Resolution 2025-10 on June 9, 2025. The City will review the procurement policy and standards of conduct policy annually to ensure that federals standards are maintained, and adequate internal controls are in place. Auditor’s Remarks We appreciate the City’s commitment to resolve this finding and thank the City for its cooperation and assistance during the audit. We will review corrective action taken during the 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.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Clarkston January 1, 2022 through December 31, 2022 2022-002 The City did not have adequate internal controls for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 20.205 – Highway Planning and Construction Federal Grantor Name: U.S. Department of Transportation, Federal Highway Administration Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation Pass-through Award/Contract Number: LA-10124, LA-10129, LA-9593 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2020-001 Description of Condition During fiscal year 2022, the City spent $1,725,908 in federal Highway Planning and Construction program funds awarded from the Federal Highway Administration and passed through the Washington State Department of Transportation. During 2022, the City used program funding on three projects. 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 regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance federal procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive of federal, state or local procurement thresholds and methods when using federal funds. Additionally, federal regulations require recipients to maintain written standards of conduct that cover conflicts of interest and govern the actions of employees involved in selecting, awarding or administrating contracts procured with federal funds. Although the City has a written procurement policy, it does not conform to federal procurement standards and does not include all methods for procurement, such as architectural and engineering services and specific steps to follow for formally bidding public works projects. Additionally, the City’s policy does not include other required procedures for procuring transactions, such as contract cost or price analysis, bonding requirements, domestic preferences for procurement, contracting provisions, and more. Additionally, the City’s written conflict of interest policy does not conform to federal regulations because it does not include the following elements: • Officers, employees, and agents may not participate in selecting, awarding, or administrating a contract supported by a federal award if they have a real or apparent conflict of interest. • Officers, employees, and agents may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. We consider this internal control deficiency to be a significant deficiency. Cause of Condition Management did not dedicate the time and resources necessary to update the City’s procurement and standards of conduct procedures to ensure they conformed to Uniform Guidance before procuring transactions that it charged to the program. Effect of Condition Although the City’s policies did not conform to Uniform Guidance, our testing found the City complied with federal requirements for competitive solicitation of a public works contractor and architectural and engineering services. However, without updated written procurement and standards of conduct procedures, the City is at greater risk of noncompliance with the most restrictive procurement procedures and standards of conduct requirements when procuring contractors paid all or in part with federal funds.   Recommendation We recommend the City strengthen internal controls by updating and maintaining its written procurement and standards of conduct policies to conform to Uniform Guidance for all procurement transactions. City’s Response The City updated the policy regarding federal procurement to ensure compliance with usage of federal funds in November 2022. This audit determined that additional levels of internal control needed to be implemented to comply with Uniform Guidance and federal regulations. The City plans to update the procurement policy and standards of conduct policy to ensure that federal standards are being maintained. The City will strengthen internal controls to ensure that procurement of goods and services will comply with Uniform Guidance, the federal regulations and the City’s procurement policy. Auditor’s Remarks We appreciate the City’s commitment to resolving this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTSCity of ClarkstonJanuary 1, 2020 through December 31, 20202020-001 The City had inadequate internal controls for ensuring compliance with federal procurement, suspension and debarment, and cash management requirements.CFDA Number and Title: 97.044 ? Assistance to Firefighters GrantFederal Grantor Name: Federal Emergency Management Agency (FEMA)Federal Award/Contract Number: EMW-2018-FO-01923EMW-2019-FO-01017EMW-2020-FO-00798Pass-through Entity Name: N/APass-through Award/Contract Number: N/AQuestioned Cost Amount: $0BackgroundThe purpose of the Assistance to Firefighters Grant (AFG) is to enhance the safety of the public and firefighters by providing direct financial assistance for critically needed resources that equip and train emergency personnel to recognized standards. During fiscal year 2020, the City spent $369,623 in AFG program funds to pay for self-contained breathing apparatus (SCBA) devices, rapid intervention team (RIT) kits, and radio equipment.Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls.ProcurementFederal regulations require award recipients to follow their own documented procurement procedures, which must reflect the most restrictive of applicable federal, state or local laws. The procedures must conform to federal procurement standards of 2 CFR 200.318-327 and ensure recipients follow the most restrictive thresholds and methods when using federal funds. Additionally, federal regulations require recipients to maintain written standards of conduct covering conflicts of interest and governing the actions of employees engaged in the selection, award, or administration of contracts procured with federal funds.When using federal funds to procure goods or services, governments must apply the more restrictive of federal requirements, state law or local policy by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. City policy and state law are most restrictive and require a formal bid process for purchases of goods and services of $15,000 or more.State and federal requirements allow local entities to bypass normal procurement laws through a process commonly referred to as ?piggybacking.? This process allows entities to purchase goods and services using contracts awarded by another government or group of governments via an interlocal agreement or cooperative. To comply with piggybacking law, the entity must enter into this interlocal agreement before it purchases services or goods from the other entity?s bid contract. If the City uses such an agreement, federal regulations require it to confirm the awarding entity followed all procurement laws and regulations applicable to the City when selecting the contractor.Suspension and debarmentFederal requirements prohibit grant recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the City contracts for goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractor is not suspended or debarred. The City can verify a contractor?s status by obtaining written certification from the contractor, or it can insert a clause into the contract stating the contractor is not suspended or debarred. Alternatively, the City can check the U.S. General Services Administration?s Excluded Parties List System (EPLS). The City must meet one of these requirements before awarding the contract or making purchases, and it must keep documentation demonstrating compliance with this federal requirement.Cash managementThe City?s grant agreements allowed it to receive award funds as cash advances or reimbursements for allowable program costs. For cash advances, federal regulations and the grant agreements require recipients to:? Maintain written procedures that minimize the time between the receipt of federal funds from the grantor and the disbursement of those funds to contractors providing goods and services. The grantor requires recipients to disburse funds within 30 days of receiving advances.? Track interest earned on cash advances and remit interest earnings exceeding $500 back to the grantor.Description of ConditionProcurementThe City?s established purchasing policy does not conform to federal procurement standards and does not include all methods for procurement, such as piggybacking. Additionally, the City?s own written conflict of interest policy does not conform to federal regulations because it does not include the following elements:? No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a federal award if they have a real or apparent conflict of interest.? The officers, employees, and agents may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts.Although the City has controls over procurement, they were ineffective for ensuring compliance with all applicable requirements. The City did not perform competitive procurement procedures or establish an interlocal agreement to piggyback on a lead awarding agency?s contract before purchasing $210,902 in RIT kits and SCBA equipment of which the City charged $207,359 to the federal program. Further, the City did not obtain a copy of the lead agency?s cost or price analysis to confirm it performed the analysis before receiving bids or proposals, as federal regulations require.We consider this internal control deficiency to be a material weakness, which led to material noncompliance.Suspension and debarmentThe City did not have effective internal controls for verifying the suspension and debarment status of contractors for purchases exceeding $25,000. The City did business with two contractors without maintaining documentation demonstrating it verified the contractors were not suspended or debarred.We consider this internal control deficiency to be a material weakness, which led to material noncompliance.Cash managementThe City did not have effective internal controls for ensuring it established written procedures over cash advances and disbursed federal funds to the contractor within 30 days, as the grantor requires. Additionally, the City did not have a process in place to track interest earned on cash advances for remittance back to the grantor when applicable.We consider this internal control deficiency to be a significant deficiency.These issues were not reported as findings in the prior audit.Cause of ConditionProcurementCity employees were aware the purchasing and conflict of interest policies needed updating to conform to federal procurement standards. However, the City did not prioritize updating the policies before procuring contracts with federal funds. City employees thought they followed piggybacking procedures, but they were unaware the City did not enter into an interlocal agreement with the lead agency that procured and awarded the contracts. Further, the City had copies of the lead agency?s procurement documentation, but could not locate the cost or price analysis and did not perform its own analysis before making the purchase.Suspension and debarmentThe Clerk Treasurer said the Fire Chiefs, who are no longer with the City, provided verbal confirmation that they verified the contractors? suspension and debarment status. However, the City did not keep documentation demonstrating it verified contractors were not suspended or debarred from participating in federal programs before entering into contracts.Cash managementCity employees were not aware the City was required to establish written procedures for cash advances. They also said they did not track interest earned from cash advances because the amount of time that elapses between receiving and disbursing federal funds is typically less than 30 days and they keep all federal funds received in a noninterest-bearing account. The City intended to spend the cash advance in a timely manner, but did not receive the contractor?s invoice to allow for payment until about four months after it delivered the goods. Further, the City did not document its efforts to obtain the contractor?s invoice or to notify the grantor of the delay in disbursing funds.Effect of ConditionProcurementWithout updated written procedures, the City is at greater risk of noncompliance with following the most restrictive procurement methods and standards of conduct requirements when procuring contractors paid all or in part with federal funds.Additionally, because the City did not enter into an interlocal agreement with the lead agency, state law would have required it to competitively procure the equipment purchases. Without effective internal controls that ensure it followed procurement or piggybacking procedures, the City cannot demonstrate it complied with applicable federal procurement requirements and received the best price when purchasing equipment. However, since the purchase was allowable under the federal program, we are not questioning costs.Suspension and debarmentThe City paid two contractors $369,264 in federal funds during fiscal year 2020, and it did not obtain written certifications, insert clauses into contracts, or check the EPLS to verify the contractors were not suspended or debarred before contracting.Without effective internal controls and maintaining documentation, the City cannot ensure the contractors it paid with federal funds are eligible to participate in federal programs. Any program funds the City used to pay contractors that have been suspended or debarred would be unallowable, and the federal grantor could potentially recover them. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs.Cash managementWe tested 12 invoices and found the City did not disburse payment for one invoice, totaling $2,309, until 125 days after receipt of the cash advance. Because the City held the cash advance in a noninterest-bearing account, it was not required to remit any interest earnings to the grantor.RecommendationWe recommend the City:? Update and maintain its written procurement and standards of conduct policies and procedures and ensure they conform to federal standards for all procurement transactions? Strengthen internal controls to ensure it procures goods and services in accordance with federal regulations and the City?s own procurement policies and procedures? Strengthen internal controls to maintain documentation demonstrating it verified contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred? Establish and follow written policies and procedures for cash advances that ensure it minimizes the time between receiving and disbursing federal funds and tracks interest earned on cash advancesCity?s ResponseThe City is in the process of modifying the policy regarding federal procurement, suspension and debarment, and cash management to ensure compliance with usage of federal funds.The City plans to update the procurement policy and standards of conduct policy to ensure that federal standards are being maintained.The City will strengthen internal controls to ensure that procurement of goods and services will comply with federal regulations and the City?s procurement policy.The City will ensure that suspension and debarment documentation will be retained for purchases of $25,000 or more to any contractor paid all or in part with federal funds.The City will establish written cash management policy to minimize time between receiving and disbursing federal funds and to ensure compliance with the policy.Auditor?s RemarksWe appreciate the City?s commitment to resolve this finding and thank the City for its cooperation and professionalism during the audit. We will review the corrective action taken during our next regular audit.Applicable Laws and RegulationsThe 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 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.Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures and requirements for maintaining records sufficient to detail the history of procurement.Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by non-federal entities.Title 2 CFR Part 180, OMB Guidelines on Agencies on Government Wide Department and Suspension (Nonprocurement) establishes non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.Title 2 CFR Part 200, Uniform Guidance, section 305, Payment, establishes requirements for the method of reimbursement and disbursement of Federal funds by non-Federal entities.Department of Homeland Security (DHS) Notice of Funding Opportunity (NOFO), section VIII, Payments and Amendments, specifies recipients shall be paid in advance, provided they maintain, or demonstrate the willingness and ability to maintain procedures to minimize the time elapsing between the transfer of funds and its disbursement by the recipient (not to exceed 30 days).