City of Tukwila

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Tukwila January 1, 2024 through December 31, 2024 2024-002 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 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 Background 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 2024, the City spent $1,727,545 in program funds for these activities. 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 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 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 it 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 $25,000 or more, our audit found the City did not follow this process and did not verify three of four 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 entered into the contracts, it did not intend to pay for them with federal funds, so staff did not verify the contractors’ status. Effect of Condition 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 contractors it paid $368,520 using federal funds 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. The City 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 and maintain documentation demonstrating compliance with this requirement. City’s Response The City appreciates the efforts of the Auditors office in its thorough review of this matter, meeting several times attempt to work through resolving this matter. As is stated in the Cause of Condition, prior to the City entering into the contracts with the contractors in question and incurring the expenses, other dollars were budgeted to pay for those expenses. Subsequently, to ensure all remaining SLFRF funding was expended during 2024, the City re-appropriated its SLFRF funding to these projects. As result, the contractors in question were not reviewed to ensure they complied with suspension and debarment requirements. The City will take this issue into consideration when receiving and appropriating federal grant funding in the future and looks forward to continued collaboration with the Auditor’s office. Auditor’s Remarks We thank the City for its cooperation and assistance during the audit. We will follow up on the condition during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303 Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

City of Tukwila January 1, 2021 through December 31, 2021 2021-001 The City?s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements. CFDA 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 Questioned Cost Amount: $0 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 premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer, or broadband infrastructure. In 2021, the City spent $817,307 in program funds for the provision of government services. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the City enters into contracts or purchases 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 contractors have not been suspended or debarred or otherwise excluded. The City may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the System for Award Management (SAM.gov). The City must perform this verification before entering into the contract or paying the contractor more than $25,000, and it must maintain documentation demonstrating compliance with this federal requirement. Additionally, 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 agreement or cooperative. When the City piggybacks off another agency?s contract, it must independently verify the contractor is not suspended or debarred before contracting. The City cannot rely on or use the lead agency?s verification of the contractor?s status. Description of Condition Our audit found the City?s internal controls were inadequate for ensuring staff verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. In 2021, the City did not verify two contractors were not suspended or debarred from participating in federal programs before paying them a total of $81,229. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. The issue was not reported as a finding in the prior audit. Cause of Condition The City has a decentralized purchasing model. City staff did not know that suspension and debarment verification applied to suppliers, vendors, and contractors alike. The City?s normal process is to include suspension and debarment language in contracts. However, the City did not have a process in place to verify the status of contractors for purchases made without a contract. Management and staff also did not know that the City needed to independently verify a contractor?s status when piggybacking off another entity?s contract. Effect of Condition The City did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify two 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 subsequently verified the contractors were not suspended and debarred. Therefore, we are not questioning costs. Recommendation We recommend the City strengthen its internal controls to verify all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before contracting with them. This should include ensuring staff verify the suspension and debarment status of contractors when using the piggybacking method. We also recommend staff responsible for ensuring compliance with federal procurement requirements receive adequate training. City?s Response The City?s failure to verify the suspension and debarment status of two contractors was in an isolated incident. The City paid $27,610.97 to Western Systems, Inc. and $46,682.00 to Traffic Logix Corporation for the purchase of street signage and traffic calming materials. These two entities are reputable vendors with a long-standing business relationship with the City. The City previously purchased materials from vendors on multiple occasions, and Western System Inc. is a preferred vendor of the Washington State Department of Transportation. When the transactions with Western Systems, Inc. and Traffic Logix Corporation were negotiated and executed, the City did not conduct its suspension and debarment protocol because City staff believed that these purchases from entities on its vendor list were considered purchases from ?vendors? ? not ?contractors? ? and, therefore, staff did not need to verify their suspension and debarment status. However, the Auditor can be assured that this was an isolated incidence. Since this mistake occurred, City staff has been properly trained to ensure that all purchases from ?contractors? will be subject to the City?s suspension and debarment protocol. 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 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.

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