City of Longview

2024-002 The City did not have adequate internal controls and did not comply with federal subrecipient monitoring, underwriting and maximum per-unit subsidy requirements. Assistance Listing Number and Title: 14.239, Home Investment Partnerships Program Federal Grantor Name: U.S. Department of Housing and Urban Development (HUD) Federal Award/Contract Number: M23-DC530203, M24-DC530203 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 objectives of the HOME Investment Partnerships (HOME) program include: (1) Expanding the supply of decent and affordable housing, particularly housing for low- and very low-income people (2) Strengthening the abilities of state and local governments to design and implement strategies for achieving adequate supplies of decent, affordable housing (3) Providing financial and technical assistance to participating jurisdictions, including the development of model programs for affordable low-income housing (4) Extending and strengthening partnerships among all levels of government and the private sector, including for-profit and nonprofit organizations, in the production and operation of affordable housing (24 CFR section 92.1) During fiscal year 2024, the City spent $1,663,981 in program funds. The City passed down $1,646,067 to subrecipient organizations to execute these arrangements. Of this amount, the City paid $1,559,449 in program funds to subrecipients for construction of new housing. 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. Subrecipient Monitoring When the City passes on federal funds to subrecipients, federal regulations require the City to evaluate every subrecipient’s risk of noncompliance with federal requirements to determine the appropriate level of subrecipient monitoring. Subrecipient monitoring requirements include ensuring compliance with program requirements, ensuring the subrecipient receives a federal single audit when required, following up and ensuring the subrecipient takes timely and appropriate action on all audit findings, and issuing a management decision as required. For this award, monitoring for program requirements would include ensuring funds were spent on allowable purposes, verifying subrecipients provided assistance to participants who met program eligibility requirements and performed inspections for Housing Quality Standards (HQS) outlined in 24 CFR sections 574.310(b)(1)-(2). Underwriting Requirements Federal regulations require the City to evaluate each housing project in accordance with guidelines that it adopts to ensure that the combination of federal assistance to the project is not any more than is necessary to provide affordable housing that is financially viable. Before the City commits HOME funds to a project, it must perform this analysis and maintain documentation demonstrating compliance with this federal requirement. Maximum Per-Unit Subsidy Federal regulations require the City to perform an analysis to ensure the per-unit investment amounts of HOME funds being provided for housing projects do not exceed the Federal Housing Administration mortgage limits in Subsection 221(d)(3) of the National Housing Act, including any area-wide high cost exceptions approved by HUD. Before the City commits HOME funds to a project, it must perform this analysis and maintain documentation demonstrating compliance with this federal requirement. Description of Condition The City’s internal controls were ineffective for ensuring compliance with the following: Subrecipient Monitoring The City did not have internal controls in place for ensuring compliance with subrecipient monitoring requirements. Specifically, the City did not have adequate controls for ensuring it completed and documented the required risk assessments. Further, the City did not monitor subrecipients’ activities to provide reasonable assurance that they administered the subaward in compliance with the subaward’s terms and conditions. Additionally, the City did not ensure subrecipients received federal single audits when required and did not review subrecipients’ audits when applicable. Underwriting Requirements The City’s internal controls were ineffective for ensuring it complied with federal underwriting requirements. Specifically, the City was unable to demonstrate it performed the required analysis. Maximum Per-Unit Subsidy The City’s internal controls were ineffective for ensuring it complied with federal maximum per-unit subsidy requirements. Specifically, the City was unable to demonstrate it performed the required analysis. We consider these internal control deficiencies to be material weaknesses that led to material noncompliance. Cause of Condition Subrecipient Monitoring Program staff did not fully understand subrecipient monitoring requirements and became aware of deficiencies with processes in 2024 because of a HUD review of the program. However, the City did not dedicate sufficient time and resources to address the deficiencies identified. Underwriting Requirements Program staff were not aware of all underwriting requirements and while they said they did perform an analysis, they did not know they needed to retain evidence to demonstrate they performed the analysis. Maximum Per-Unit Subsidy Program staff were aware of the requirement to do the maximum per-unit subsidy calculation; however, they said they were not aware they needed to retain documentation that they performed these calculations. Effect of Condition Subrecipient Monitoring The City did not perform required risk assessments for its six subrecipients. Without performing this analysis, the City cannot determine the proper level of monitoring of its subrecipients. The City did not monitor subrecipient activities to provide reasonable assurance the subrecipient administered the subaward in compliance with the subaward’s terms and conditions, including ensuring it provided assistance only to participants who met program eligibility requirements and ensuring it performed inspections for HQS inspections. Additionally, the City did not verify subrecipients received federal single audits when required, ensure subrecipients took corrective actions for any identified deficiencies, nor issue management decisions within six months of audit reports’ issuance for applicable audit findings. Since the City did not monitor its subrecipients, there is no way for it to confirm the subrecipients spent the funds for allowable purposes, provided services to eligible participants, and complied with all program requirements. Underwriting Requirements The City did not retain documentation that it performed underwriting procedures for two applicable projects to ensure it evaluated housing projects in accordance with program requirements. Maximum Per-Unit Subsidy The City did not retain documentation to support that it performed the maximum per-unit subsidy calculations for two applicable projects before it disbursed federal funds. Recommendation We recommend the City strengthen internal controls to ensure compliance with applicable federal requirements, including adequately monitoring subrecipients and performing the required underwriting and maximum per-unit subsidy analyses. In addition, the City should ensure it retains documentation to evidence compliance with federal program requirements. City’s Response The City of Longview acknowledges and understands the State Auditor’s Office finding regarding matters noted in their comprehensive review. We recognize the importance of strong internal controls and documentation to ensure compliance with federal program requirements such as subrecipient monitoring and underwriting and maximum per-unit subsidy requirements. Addressing these issues is a priority. Auditor’s Remarks We thank the City for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the City’s corrective action 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. Title 24 CFR Part 92, Uniform Guidance, section 250, requirements for maximum per-unit subsidy amount, underwriting, and subsidy layering. 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.

2024-003 The City did not have adequate internal controls and did not comply with federal reporting requirements. Assistance Listing Number and Title: 14.218, Community Development Block Grants Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: B17MC530019, B18MC530019, B19MC530019, B20MC530019, B21MC530019, B22MC530019, B23MC530019, B24MC530019 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 primary objective of the Community Development Block Grants/Entitlement Grants (CDBG) program is to help provide decent and affordable housing, particularly for people with moderate, low, and very low incomes. Funds also help recipients implement strategies for achieving an adequate supply of decent housing and providing suitable living environments and expanded economic opportunities for people with low incomes. In 2024, the City spent $844,720 for its CDBG program. Of this amount, it passed $153,815 through to subrecipients. 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. During the audit period, the Federal Funding Accountability and Transparency Act (FFATA) required direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System. The City must report subawards by the end of the month following the month in which it made the subawards. Description of Condition The City’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the City made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition City staff overseeing the program were not aware of the federal FFATA reporting requirements. Effect of Condition Failing to submit the required reports diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Transactions Tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements 3 3 N/A N/A N/A Dollar Amount of Tested Transactions Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements $ 236,184 $ 236,184 N/A N/A N/A Recommendation We recommend the City establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. City’s Response The City of Longview acknowledges and appreciates the State Auditor’s Office finding regarding concerns noted in their methodical review. We recognize the importance of strong internal controls to ensure compliance with federal program and reporting requirements, and treat this matter with grave concern. Auditor’s Remarks We thank the City for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the City’s corrective action 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 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).

2024-004 The City did not have adequate internal controls and did not comply with federal procurement 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: N/A Pass-through Entity Name: Washington Department of Commerce Pass-through Award/Contract Number: 24-4619D105 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program 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 2024, the City spent $735,630 in program funds to contract out the operation of its homeless shelter. 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. Procurement federal regulations require recipients to follow their own documented procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR § 200.318-327. When using federal funds to procure goods and services, governments must apply the most restrictive federal requirements, state law or local policies by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. Description of Condition Our audit found the City’s internal controls were ineffective for ensuring the City complied with federal program requirements. The City did not follow its policy or federal requirements to obtain bids for the operation of its homeless shelter before entering into a contract. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition City staff are aware of federal procurement requirements; however, procurement activity is decentralized and performed at the department level. The City experienced turnover in positions responsible for reviewing contracts and ensuring procurement requirements were met. Effect of Condition The City did not perform a competitive process for selecting a contractor it paid $735,630 with federal funds. Without effective internal controls, the City cannot demonstrate it complied with federal procurement requirements, allowed for full and open competition, and received the best price. Recommendation We recommend the City strengthen internal controls to ensure it complies with applicable procurement requirements for purchased services. City’s Response The City of Longview appreciates the thorough review provided by the State Auditor’s Office and the finding regarding issues noted. We take these matters seriously and recognize the importance of strong internal controls and following procurement policy for demonstrating compliance with federal procurement requirements and ensuring the city receives the best price for purchased services. Auditor’s Remarks We thank the City for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the City’s corrective action 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 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal 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.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Longview January 1, 2023 through December 31, 2023 2023-001 The City’s internal controls were inadequate 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: N/A Pass-through Entity Name: WA Department of Commerce Pass-through Award/Contract Number: 24-4619D-105 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2022-001 Description of Condition During fiscal year 2023, the City spent $6,495,663 in federal funding from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program. This program gives funding 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. 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 have not been 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 one contractor it paid more than $25,000 in federal funds was 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 City staff were aware of the federal suspension and debarment verification requirements and normally verify this during the procurement process. However, the City did not intend to pay for this contract with federal funds when it entered into this contract, 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 one contractor it paid $469,583 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the City cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the City used to pay the contractors that have been suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the contractor was not suspended or debarred, we are not questioning costs. Recommendation We recommend the City strengthen internal controls to ensure 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 before contracting with or purchasing from them. City’s Response The City of Longview takes its responsibility over internal controls with the highest regard. Management is committed to ensuring the City has strong internal controls and appropriate procedures that demonstrate compliance with federal grant programs. The City appreciates the Auditor’s recognition and credit listed above under Cause of Condition and also appreciates the Auditor’s acknowledgment that funds paid to the contractor were allowable and appropriate. Auditor’s Remarks We appreciate the City’s response and commitment to resolving this finding. We thank it 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.

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Longview January 1, 2023 through December 31, 2023 2023-002 The City overcharged costs to the federal program and had inadequate internal controls for ensuring compliance with federal equipment and suspension and debarment requirements. Assistance Listing Number and Title: 20.513 – Enhanced Mobility of Seniors and Individuals with Disabilities Federal Grantor Name: Federal Transit Administration Federal Award/Contract Number: N/A Pass-through Entity Name: WA Department of Transportation Pass-through Award/Contract Number: GCB2622, PDT0619, PDT0308, PDT0004 Known Questioned Cost Amount: $35,031 Prior Year Audit Finding: N/A Background During fiscal year 2023, the City spent $1,298,447 in federal funding from the Enhanced Mobility of Seniors and Individuals with Disabilities program. The objective of this program is to enhance mobility for seniors and people with disabilities by providing funds for programs that serve the special needs of transit-dependent populations beyond traditional public transportation services and Americans with Disabilities Act complementary paratransit 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.   Description of Condition Allowable activities and costs The Washington State Department of Transportation operates the Enhanced Mobility of Seniors and Individuals with Disabilities program on a reimbursement basis, meaning the City must incur eligible costs before requesting reimbursement. While the City had adequate internal controls for ensuring it materially complied with the program’s allowable activities and allowable costs requirements, it submitted a claim for reimbursement for $35,031 in costs that the granting agency had already reimbursed. Equipment management Federal regulations require recipients to maintain proper records for equipment it purchased with federal funds. During the audit period, the City purchased seven buses that it partially paid for with federal funds. The City did not have adequate internal controls to track equipment it purchased with federal funds in accordance with federal program requirements. Specifically, the property records the City maintained did not include all of the elements it was required to track. Additionally, the City did not have a process to ensure it performed a physical inventory of the equipment it purchased and reconciled the inventory with its property records at least once every two years. Suspension and debarment 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 were 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. Our audit found the City did not have adequate internal controls to verify that two contractors it paid more than $25,000 in federal funds were not suspended or debarred from participating in federal programs. We consider these deficiencies in equipment management and suspension and debarment internal controls to be material weaknesses that led to material noncompliance. Cause of Condition Allowable activities and costs The City changed who was responsible for submitting reimbursement requests during the year and in doing so, did not detect that it had already charged the costs to the program. Equipment management City staff responsible for tracking equipment did not know all the required elements the City needed to include in its property records to track equipment it purchased with federal funds and inventory requirements. Suspension and debarment City staff were aware of the federal suspension and debarment verification requirements and normally verify this during the procurement process. However, staff were unaware that the requirement applies to service contracts, including contract extensions, so they did not verify the contractors’ status for two service contract extensions. Effect of Condition and Questioned Costs Allowable activities and costs The City charged $35,031 in costs to the program that were unallowable because the granting agency had already reimbursed the City for these costs. Therefore, we are questioning these costs. Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the City does not have adequate documentation to support expenditures. Equipment management Without adequate internal controls, the City cannot ensure it complied with federal equipment management requirements. The City’s property inventory records did not include all required information, such as the funding source, the federal award identification number (FAIN) and the percentage of federal participation. Because of the missing information, the City would not be able to determine which buses it purchased with federal funds and which federal funding source it used. Additionally, the City must meet federal requirements when disposing of equipment, and without the required federal information, it could dispose of equipment in an unallowable manner. Our audit found the City could account for the equipment it acquired under this program during the audit period and it was using the equipment for purposes allowable under the program. Suspension and debarment The City did not obtain a written certification from the contractors, insert a clause into the contracts or check for exclusion records at SAM.gov to verify that two contractors it paid with federal funds were not suspended or debarred before contracting with them. 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 the 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 ensure it claims only allowable costs for reimbursement and that the claims do not include costs it previously submitted. The City should work with the granting agency to determine audit resolution for the questioned costs. Additionally, we recommend the City establish internal controls to ensure it complies with federal requirements for equipment management and suspension and debarment. Specifically, the City should: • Update property inventory records to contain all required elements to track equipment it purchased with federal funds • Ensure it conducts a physical inventory once every two years • Ensure 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 before contracting with or purchasing from them City’s Response The City of Longview takes its responsibility over internal controls with the highest regard. Management is committed to ensuring the City has strong internal controls and appropriate procedures that demonstrate compliance with federal grant programs. In this regard, the City appreciates the Auditor’s review of the activities surrounding this federal program and will collaborate with appropriate staff to ensure a workable plan that addresses the recommendations in this schedule. Auditor’s Remarks We appreciate the City’s response and commitment to resolving this finding. We thank it 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. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs. 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. Title 2 CFR Part 200, Uniform Guidance, section 313, Equipment, establishes requirements for equipment purchased with Federal funds by non-Federal entities

City of Longview January 1, 2022 through December 31, 2022 2022-001 The City’s internal controls were inadequate 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: 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 During fiscal year 2022, the City spent $2,086,004 in federal funding from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF). This program gives funding 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. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal requirements prohibit grant 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 that the contractors have not been suspended, debarred, or otherwise excluded. The City may accomplish this verification 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 perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Our audit found the City’s controls were ineffective for ensuring that it verified all parties receiving $25,000 or more in federal funds were not suspended or debarred. Specifically, the City did not verify that one of the seven contractors we tested was not suspended and debarred from participating in federal programs before entering into contracts with them. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. Cause of Condition City staff were aware of the federal suspension and debarment verification requirements, and they normally verify this information during the procurement process. However, when this contract was entered into, the City did not intend to pay for it with federal funds, so staff did not verify the contractor’s status. Effect of Condition 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 federal agency could potentially recover them. The City subsequently verified the contractor was not suspended or debarred, so we are not questioning costs. Recommendation We recommend the City strengthen internal controls to ensure that all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them. The City should also maintain documentation demonstrating compliance with this federal requirement.   City’s Response The City of Longview takes its responsibility over internal controls with the highest regard. Management is committed to ensuring the City has strong internal controls and appropriate procedures that demonstrate compliance with federal grant programs. The City appreciates the Auditor’s recognition and credit of the events listed above under Cause and Condition, and appreciates the Auditor’s acknowledgement that the funds paid to the contractor were allowable and appropriate. Auditor’s Remarks We appreciate the City’s response and commitment to resolving this finding. We thank it 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.

GSA_MIGRATION