City of Pullman

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Pullman 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: 20.509 Formula Grants for Rural Areas and Tribal Transit Program; COVID 19 – Formula Grants for Rural Areas and Tribal Transit Program 21.027 COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: Federal Transit Administration U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation N/A Pass-through Award/Contract Number:   PTD0622, PTD0623 N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-001 for 20.509       Background Formula Grants for Rural Areas and Tribal Transit Program The objectives of the Formula Grants for Rural Areas program are to initiate, improve and continue public transportation service in rural areas by providing financial assistance for operating, planning, administrative expenses, and the acquisition, construction, and improvement of facilities and equipment. The program specifically provides for the support of rural intercity bus service. In addition, the Rural Transit Assistance Program also provides additional funding for training, technical assistance, research and related support services to support rural transit service. During fiscal year 2024 the City spent $1,795,188 in Formula Grants for Rural Areas and Tribal Transit Program funds. Coronavirus State and Local Fiscal Recovery Funds 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 about $7.8 million in program funds for these activities. Suspension and Debarment 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 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 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 Formula Grants for Rural Areas and Tribal Transit Program 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 all three contractors we tested were not suspended or debarred before purchasing from them. Coronavirus State and Local Fiscal Recovery Funds 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 one of two contractors we tested was not suspended or debarred before purchasing from them. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. Cause of Condition Formula Grants for Rural Areas and Tribal Transit Program City staff responsible for managing this program were aware of the federal suspension and debarment verification requirements and normally verify this during the procurement process. However, staff were not aware they needed to perform this verification for all covered transactions and thought it only applied to capital project-related expenditures. Coronavirus State and Local Fiscal Recovery Funds City staff were aware of the federal suspension and debarment verification requirements and normally verify this during the procurement process. However, staff were not aware they needed to check suspension and debarment when entering into new project phase contracts with contractors that worked on other project phases in prior years. Effect of Condition The City did not obtain a written certification from the contractors, insert clauses into the contracts or check for exclusion records at SAM.gov to verify the contractors it paid $210,192 using federal funds for the Formula Grants for Rural Areas and Tribal Transit Program and $770,493 using federal funds for SLFRF were 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. We subsequently verified the contractors were 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. City’s Response City staff was not fully aware of the need to complete suspension and debarment verification on all transactions meeting the federal threshold including subsequent project phases and city-wide operational procurements. As noted by the Washington State Auditor’s Office, the contractor continued to remain free of suspension or debarment during the period and resulted in zero dollars in questioned costs. The city has refined its processes and training to include a verification that is compliant with usage of federal funds. 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 Pullman January 1, 2023 through December 31, 2023 2023-001 The City did not have adequate internal controls and did not comply with federal suspension and debarment requirements. Assistance Listing Number and Title: 20.509, COVID – 19 Formula Grants for Rural Areas and Tribal Transit Program Formula Grants for Rural Areas and Tribal Transit Program Federal Grantor Name: Federal Transit Administration Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation Pass-through Award/Contract Number: PTD0237, PTD0246, PTD0247, PTD0508, PTD0622, PTD0623 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2023 the City spent $2,045,018 in Formula Grants for Rural Areas and Tribal Transit Program. The objectives of the Formula Grants for Rural Areas program are to initiate, improve and continue public transportation service in rural areas by providing financial assistance for operating, planning, administrative expenses, and the acquisition, construction, and improvement of facilities and equipment. The program specifically provides for the support of rural intercity bus service. In addition, the Rural Transit Assistance Program also provides additional funding for training, technical assistance, research and related support services to support rural transit service. 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 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 one of two contractors were 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 City staff were aware of the federal suspension and debarment verification requirements and normally verify this during the procurement process. However, when the City renewed its contract, it did not intend to pay for it with federal funds, so staff did not verify the contractor’s status. 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 $42,362 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. We 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. City’s Response The city had an ongoing relationship with a vendor for the purchase of services at a city wide level. At the time of annual renewal of services, it was not anticipated that a portion of the services would be paid with federal operating funds, thus a suspension and debarment verification was not completed at that time. As noted by the Washington State Auditor’s Office, the contractor continued to remain free of suspension or debarment during the period and resulted in zero dollars in questioned costs. The city has refined its process to include a verification for existing vendors prior to assignment of federal fund allocation. 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 status of the City’s corrective action 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 Pullman January 1, 2022 through December 31, 2022 2022-001 The City did not have adequate internal 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 the 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 Description of Condition The purpose of the Coronavirus State and Local Fiscal Recovery funds 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 2022, the City spent $1,138,619 in program funds for these activities. 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 control programs. 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 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 or purchasing goods and services, and must maintain documentation demonstrating compliance with this federal requirement. The City has a process to verify the suspension and debarment status of contractors that it pays $25,000 or more, paid all or in part with federal funds. However, the City’s controls were ineffective for ensuring compliance with this requirement. Specifically, the City entered into three new contracts with two contractors in 2022, paid them more than $25,000 for an infrastructure project and did not maintain documentation demonstrating it verified they were not suspended or debarred from participating in federal programs before contracting. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The City experienced turnover in the position responsible for performing suspension and debarment verifications for public works projects and current staff could not locate documentation showing the City performed verification before entering into contracts. Effect of Condition The City could not demonstrate it checked for exclusion records at SAM.gov and did not include a clause in the contracts or obtain written certifications from the contractors. The City paid these contractors $1,138,619 in 2022. Without adequate internal controls, 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 were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the contractors were not suspended or debarred, we are not questioning costs. Recommendation We recommend the City strengthen internal controls to verify all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them. We also recommend the City maintain documentation demonstrating compliance with this requirement. City’s Response Although the City could not demonstrate that exclusion records at SAM.gov were reviewed prior to entering into each of the three agreements with two contractors, • The City of Pullman is a founding member of the newly created Downtown Pullman Association while having a City Councilmember serve on the Executive Board of the organization and was fundamentally aware of activities and operations. The Downtown Pullman Association was in fact newly founded and did not have activities that would create disqualification under suspension or disbarment as proven after notification from the Washington State Auditor’s Office. • The City of Pullman did complete a suspension and disbarment check on the engineering contractor for Project Downtown in October of 2021 prior to entering into the initial agreement for services on November 16, 2021. The City entered into additional agreements for revised scope of work on January 12, 2022 then again on September 13, 2022. As noted by the Washington State Auditor’s Office, the contractor continued to remain free of suspension or disbarment during the period in question. As stated by the Washington State Auditor’s Office - the potential effect of this finding was the federal awarding agency could potentially recover funds from contractors that were suspended or debarred and the Known Questioned Cost Amount is zero dollars. After additional discussions city staff has taken the advice of the Washington State Auditor’s Office and created a new set of internal controls to assure that this type of finding does not occur in the future. 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 180, OMB Guidelines on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

The City’s internal controls were inadequate for ensuring compliance with federal subrecipient monitoring requirements. Assistance Listing Number and Title: 21.019 – COVID-19 – Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Commerce Pass-through Award/Contract Number: 20-6541C-329 Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the Coronavirus Relief Fund program is to provide payments to state, territorial, tribal and certain eligible local governments to cover necessary expenditures incurred because of the COVID-19 pandemic. During 2020, the City spent $1,555,200 in program funds. The City passed through $444,000 of its award from the Washington State Department of Commerce to a subrecipient to administer COVID-19 assistance programs to the City’s small businesses and residents. 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. Whenever the City passes on federal funding to subrecipients, federal regulations require the City to clearly identify the subawards as federal awards and include all applicable program requirements. Further, the City must monitor its subrecipients to ensure they comply with the terms and conditions of the federal award. To determine the appropriate level of monitoring, the City must evaluate each subrecipient’s risk of noncompliance with federal requirements. For awards dependent on participant eligibility, monitoring would include verifying the subrecipients only provided assistance to participants who met program eligibility requirements. The amount of verification would depend on each subrecipient’s risk of noncompliance. Description of Condition The City provided funds to one subrecipient to administer COVID-19 assistance programs to City residents and businesses. Our audit found the City did not perform a risk assessment for the subaward and did not sufficiently monitor the subrecipient, as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition With the effects of COVID-19, it was urgent for the City to disburse funds to the subrecipient quickly in order to assist with public health needs and provide rental assistance and other services. City staff responsible for managing the federal program were not aware of the requirements to perform a risk assessment specific to the subaward, nor did they know about the requirements for subrecipient monitoring for awards dependent on participant eligibility. Effect of Condition The City did not complete a risk assessment for the subaward. Without conducting a risk assessment, the City risks not adequately monitoring its subrecipient to ensure it complies with program requirements and uses federal funds appropriately. Since the City did not monitor its subrecipient, there was no way for it to confirm the assistance was paid to eligible recipients. Recommendation We recommend the City perform sufficient risk assessments over its subrecipients and monitor them accordingly to verify they are complying with the terms and conditions of the award and only providing funds to eligible participants. City’s Response In order to promptly and efficiently distribute funds to local business in critical need of support, the City worked with a non-profit subrecipient that had a long history of properly managing grants and awards. The City’s process for evaluating the Subrecipient’s risk for noncompliance and monitoring included the following actions: • The Subrecipient was determined to have experience with the same or similar awards as demonstrated by active agreements other local government entities for management of the same COVID-19 awards. Evaluation included discussion with other PTE’s including Whitman County and a review of contract requirements and processes that were provided related to an existing agreement with Asotin County. • Review of the history and first hand knowledge that the Subrecipient demonstrated a consistent structure with staffing and systems including confirmation of the organization’s 35+ years of managing both state and federal grant funds in the region. For decades, including at this time, a member of the Pullman City Council served on the Board of Director for the Subrecipient and was familar with the operations, risks, and history of the organization. • In addition to confirmation of the Subrecipient’s work administering the same subaward for other agencies, the City confirmed that the Subrecipient had a long track record of properly monitoring federal awards. During the establishment of the Subrecipient Agreement between the City and Subrecipient, processes were established to ensure the ability to monitor Subrecipient activities and ensure compliance with the terms and conditions of the subawards as required. These monitoring factors were addressed through the following actions: • The agreement established between the City and Subrecipient outlines the expectations and requirements including the Subrecipient’s requirement and requirements of the award. These requirements for Subrecipient included providing all information to the City and/or State Auditor’s Office. • As required by agreement, the Subrecipient supplied the City details of amounts, awardees, and fund use details for review prior to funds being distributed. 100% of subrecipient awards to individual busineses were reviewed by City staff for appropriateness and compliance prior to submitting for reimbursement and prior to payment of the funds to the Subreceipient. • The City was directly involved in the distribution of funds from the subrecipient to individual businesses receiving the funds. The City selected a long standing regional non-profit that had already been confirmed by several other local entities as the best option to manage these subrecipient funds. Selecting this Subrecipient allowed the funds to be promptly and efficiently disbtributed to those businesses that were in desperate need of support due to the negative economic impacts caused by the worldwide pandemic of COVID-19. Prior to the disbtribution of any monies, risk factors were evaluated by the City and the award process was monitored and reviewed. All funds were appropriately and efficiently distributed in a manner consistent with compliance requirements, eligibility requirements, and resulted in no question in amount or use of any of the funds. All funds were properly accounted and no monies were missing in the process. Auditor’s Remarks It’s incumbent upon the City to document a formal risk assessment of subrecipients to meet their federal requirements. During our audit we requested all documentation from the City for any risk assessments completed; however, the City informed us that they had not completed a formal, documented risk assessment. Without a documented assessment, the City cannot demonstrate it complied with federal requirements. We reaffirm our finding and will review the status of these issues 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. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes subrecipient monitoring and management requirements for pass-through entities. 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.