City of PascoLocal Government

2023-002 The City did not have adequate controls for ensuring compliance 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: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A 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 fiscal year 2023, the City spent $6,447,025 to administer the program. 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 and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that the contractors are no 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. Our audit found the City did not have adequate controls in place to verify three 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. Cause of Condition The City purchased from two contractors using other governments’ contracts in a process commonly referred to as “piggybacking.” City staff did not know they must verify the contractors are not suspended or debarred before piggybacking. Also, staff responsible for monitoring part of the program did not have adequate training and did not have a clear understanding of the suspension and debarment requirements for one contractor. 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 three contractors it paid $292,013 using federal funds were not suspended or debarred before contracting. Without adequate internal controls, the City cannot ensure the contractors it paid with federal funds were eligible to participate in federal programs. Any program funds the City used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover the funds. Because we subsequently verified the contractors were not suspended or debarred, we are not questioning costs. Recommendation We recommend the City provide staff with training on the suspension and debarment requirement and strengthen internal controls to ensure all contractors it pays $25,000 or more, all or part with federal funds, are not suspended or debarred from participating in federal programs before contracting with them. City’s Response Expertise in Federal procurement requirements is primarily held by individuals who regularly manage federal grants. The instances noted in the audit involve activities conducted by personnel who are not typically involved with federal grants. The City acknowledges the need for enhanced safeguards to ensure that such infrequent activities are correctly identified as grant-funded, and that appropriate procedures are followed. Further, the City received a similar finding for fiscal year 2021. It is important to note that two of the three instances identified were either procured in 2021, but not included in the 2021 finding or were procured in 2022 before the 2021 audit finding was issued. While the 2023 audit identified instances related to 2023 payments, the opportunity to address any issues after 2021 has already passed. 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 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 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

The City lacked adequate internal controls for ensuring compliance with federal procurement and suspension and debarment requirements. CFDA Number and Title: 93.323 COVID19 ? Epidemiology and Laboratory Capacity for Infectious Diseases Federal Grantor Name: U.S. Department of Health and Human Services Federal Award/Contract Number: HSDCOP202000 Pass-through Entity Name: Benton-Franklin Health District Pass-through Award/Contract Number: N/A Questioned Cost Amount: $ 0 Description of Condition The objective of the Epidemiology and Laboratory Capacity for Infectious Diseases program is to protect the public?s health and safety by enhancing the capacity of public health agencies to effectively detect, respond, prevent and control known and emerging (or reemerging) infectious diseases. During fiscal year 2021, the City spent $558,591 in federal program funding to operate a COVID-19 testing site. 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. Procurement of personal services Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR ? 200.318-327. The procedures must reflect the most restrictive of applicable federal requirements, state laws or local policies. When using federal funds to procure goods and services, governments must apply the more restrictive requirements by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Competitive bidding requirements may be waived in certain circumstances, including an emergency, if the process of waiving the requirements is documented in the City?s policies and followed accordingly. The City must prepare and keep documentation supporting the applicable circumstance and rationale for noncompetitive procurement. Although the City has controls over procurement, it was unable to provide documentation showing how it met noncompetitive procurement criteria for one of four personal service contracts it entered into during the audit period. Suspension and debarment Federal regulations prohibit recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the City contracts for goods or services expected to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractor is not suspended, debarred or otherwise excluded. The City can verify a contractor?s status by checking for exclusion records in the System for Award Management (SAM.gov), obtaining a written certification from the contractor, or inserting a clause or condition into the contract stating the contractor is not suspended or debarred. The City must perform this verification before entering into the contract, and keep documentation demonstrating compliance with this federal requirement. The City does not have an adequate process in place to verify that all parties receiving $25,000 or more in federal funds are not suspended or debarred. Our audit found the District did not obtain a written certification, include a clause in the contract, or check SAM.gov to verify that all four of its contractors were not suspended or debarred. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition Procurement of personal services The City searched but was unable to find documentation supporting the noncompetitive procurement. Suspension and debarment The City staff responsible for monitoring this program did not have adequate training, and did not have a clear understanding of the requirements for suspension and debarment. Effect of Condition Procurement of personal services The City awarded four contracts under this federal program totaling $525,730. The City was unable to provide documentation showing how it met noncompetitive procurement criteria for one contractor it paid $67,000. Suspension and debarment The City did not obtain written certifications, insert a clause into the contracts, or check SAM.gov to verify four 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 were able to verify the contractors were not suspended or debarred. Therefore, we are not questioning costs for these payments. Recommendation We recommend the City retain all documentation to support its use of noncompetitive bidding. We further recommend the City develop processes and procedures to ensure staff verify contractors? suspension and debarment status before contracting with them City?s Response The City respectfully disagrees with the statement that City staff does not have adequate training or understanding of suspension and debarment. From 2015 to 2020, the City has averaged 27 federal grants totaling an average of $4.2 million. Further, the City has complied with procurement requirements including suspension and debarment during that period. This situation was not a result of lack of training or lack of policies, rather the result the City promptly responding to a pandemic and associated emergency declaration for the region. The effort to provide necessary emergency services on a large scale was led by the City?s Fire Department due to their extensive experience in dealing with emergency response. This experience includes providing emergency services on federal land, thus federally funded. Due to the delay in the publication of grant requirements and guidance, the department applied allowed practices customary during similar emergencies such as combating wildfires on federal land. In wildfire situations individuals are contracted to provide emergency response services for the public safety for entire South Eastern Washington region without the need to check suspension and debarment status. The expectation was that this similar emergency response allowed the same standard of contractor engagement. Further, the contractors were knowledgeable and experienced emergency response individuals who were willing to assist in the public safety efforts. They are not established businesses nor regularly contracted for such services, therefore the risk of these individuals being suspended or debarred is extremely unlikely. 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 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 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 nonfederal entities.