Municipality of Anchorage, Alaska

Finding 2022-008 Reporting - Deadline for Federal Single Audit - Noncompliance and Material Weakness in Internal Control Over Compliance Agency/Pass-through Grantor Department of Transportation passed through the State of Alaska Department of Transportation and Public Facilities, Department of the Treasury, and Department of Health and Human Services passed through the State of Alaska Department of Health and Social Services ALN and Program Name Finding 2022-008 is applicable to all grant awards issued for the following major programs: 20.106 – Airport Improvement Program – COVID-19 20.205 – Highway Planning and Construction Cluster 20.500 & 20.507 & 20.526 - Federal Transit Cluster – COVID-19 21.023 - Emergency Rental Assistance – COVID-19 21.027 - Coronavirus State and Local Fiscal Recovery Funds – COVID-19 93.323 – COVID-19-Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) 93.575 – CCDF Cluster Criteria or Specific Requirement 2 CFR 200.512, Report Submission, establishes that the audit must be completed and the data collection form and reporting package submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 days after receipt of the auditor's report or 9 months after the end of the audit period. Condition Anchorage did not comply with the required submission date of the data collection form and reporting package to the FAC for the fiscal year ended December 31, 2022. Cause Anchorage did not have controls in place to ensure the audit was completed timely so that the reporting package could be submitted to the FAC within the required timeframe. Effect or Potential Effect Anchorage is not compliant with 2 CFR 200.512. Anchorage could be exposed to a reduction or elimination of funds by the Federal awarding agencies. Questioned Costs Not applicable. Context This is a condition identified per review of Anchorage’s compliance with the specified requirements. Identification as a Repeat finding Not a repeat finding. Recommendation We recommend Anchorage establish controls to ensure the audit is completed timely and the reporting package is submitted to the FAC within the required timeframe. Views of Responsible Officials Management concurs with this finding. Management will ensure beginning balance reconciliations and year-end adjustments are completed.

Finding 2022-009 Subrecipient Monitoring – Material Noncompliance and Material Weakness in Internal Controls Over Compliance Agency/Pass-through Grantor Department of the Treasury, Department of Health and Human Services passed through the State of Alaska Department of Health and Social Services ALN and Program Name 21.027 - Coronavirus State and Local Fiscal Recovery Funds – COVID 19 21.023 – Emergency Rental Assistance Program – COVID 19 93.323 – COVID-19-Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Award # 21.027 – 1505-0271 21.023 – ERA-2101060120 (ERA 1); ERA2-0469 (ERA 2) 93.323 – C0621-570-BB Award Year 21.027 – 2022 21.023 - 2022 93.323 – 3/15/2021-6/30/2022 Criteria or Specific Requirement 2 CFR 200.332 requires pass-through entities to ensure that subrecipients comply with the terms and conditions of 2 CFR 200.501 related to audit requirements. This includes ensuring that every subaward is (1) clearly identified to the subrecipient as a subaward; (2) includes the necessary information at the time of the subaward for subrecipient reporting on federal awards (2 CFR 200.332) and (3) includes requirement to follow 2 CFR 200.501 if expenditure thresholds are met. This also includes verifying that every subrecipient is audited as required by 2 CFR Subpart F if the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in 2 CFR 200.501. Condition During our testing of subrecipient monitoring, we noted all 18 of the subrecipient agreements tested did not include language clearly identifying the federal program from which the subaward originated, or the applicable requirements from 2 CFR 300.332 and Subpart F. We also noted for all 18 subrecipients tested that the Municipality did not verify whether subrecipients were audited in accordance with 2 CFR 200.501 where applicable. Cause The issuance of subrecipient agreements for these grants related to new funding streams in response to the COVID-19 pandemic. Significant amounts of funding were provided in a short period of time, and systems to distribute these monies were newly created and implemented. The standard award agreements were not reviewed in advance to ensure adherence to federal requirements. Staff were not fully trained on the informational requirements and monitoring responsibilities related to audit requirements. Effect or Potential Effect Subrecipients may be unaware and not in compliance with the requirements of 2 CFR Part 200. Questioned Costs Not applicable. Context For ALN 21.027 - Coronavirus State and Local Fiscal Recovery Funds, we tested a sample of 10 subawards totaling to $28,079,600 from a population of 37 totaling to $37,052,621. For ALN 21.023 - Emergency Rental Assistance Program, we tested all 3 subawards within the population totaling to $10,900,177. For ALN 93.323 – COVID-19-Epidemiology and Laboratory Capacity for Infectious Diseases (ELC), we tested all 5 subawards within the population totaling to $5,086,923. As noted in the condition, we identified exceptions for 18 subrecipient agreements tested. All samples tested were selected using nonstatistical sampling methods and were not statistically valid samples. Identification as a Repeat Finding Yes. This finding was reported as Finding 2021-002 in the prior audit. Recommendation Management should establish policies to ensure subawards contain required federal award information. In addition, procedures should be established to monitor subrecipient compliance with audit requirements of 2 CFR 200.501. Views of Responsible Officials Management concurs with the finding and will adhere to the corrective action plan included in this report. Management plans to revise policies and procedures related to subrecipient monitoring.

Finding 2022-010 Procurement and Suspension and Debarment – Noncompliance and Significant Deficiency in Internal Control Over Compliance Agency/Pass-through Grantor Department of Transportation passed through the State of Alaska Department of Transportation and Public Facilities, Department of the Treasury, Department of Health and Human Services passed through the State of Alaska Department of Health and Social Services ALN and Program Name 20.205 – Highway Planning and Construction Cluster 20.500 & 20.507 & 20.526 - Federal Transit Cluster – COVID-19 21.027 - Coronavirus State and Local Fiscal Recovery Funds – COVID-19 93.323 – COVID-19-Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Award # 20.205 – CFHY00018; CFHW00616; AMATS 2023; CFHWY00777; AMATS TSMO; AMATS 2018; CFHWY00953; CFHWY00387; AK-26-0003-01; CFHWY00529; CFHWY00097; CFHWY00604; CFHWY00555; CFHWY00710; CFHWY00825; CFHWY00521; 2020 AMATS OPER AGRMT; HPRL-HPRM- 0001(407)59764; 0001521 20.500 & 20.507 & 20.526 – AK-95-X019-00; AK-95-X015-00; AK-03-0067-01; AK-55-0004-01; AK-95-X007-04; AK-90-X070-01; AK-90-X076-02; AK-2018-005- 00; AK-2019-010-00; AK-2020-004-02; AK-2020-012-00; AK-2021-016-01; AK-2020-018-00; AK-2020-009-01; AK-2020-030-00; AK-2021-025-00; AK-2022-009-00 21.027 – 1505-0271 93.323 – C0621-570-BB Award Year 20.205 – 2018, 2019, 2020, 2021, 2022, 2022, 2022, 2018, 2015, 2019, 2012, 2020, 2020, 2020, 2021, 2019 20.500 & 20.507 & 20.526 – 2015, 2015, 2006, 2009, 2010, 2013, 2014, 2018, 2019, 2020, 2020, 2021, 2020, 2020, 2020, 2021, 2022. 21.027 - 2022 93.323 – 3/15/2021-6/30/2022 Criteria or Specific Requirement The regulations in 2 CFR Part 180 prohibits contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal programs or activities. Non-federal entities must verify that parties to covered transactions are not suspended or debarred or otherwise excluded from participating in the transaction. Condition Testing of 16 procurements and 15 sub-awards identified 27 exceptions where evidence was not retained to support the required verification of whether a contractor or subrecipient was a suspended or debarred party. Cause Anchorage’s policies over procurement and issuance of sub-awards were not designed appropriately to retain evidence of suspension and debarment review for all contracts or sub-awards funded with federal awards. Effect or Potential Effect Federal funds could be disbursed to suspended or debarred entities. Questioned costs None Context For the Highway Planning and Construction Cluster, we tested a sample of 6 procurements totaling to $2,191,006 from a population of 11 totaling to $2,428,669, and identified 3 exceptions equal to $1,048,720. For the Federal Transit Cluster, we tested a sample of 5 procurements totaling to $9,489,488 from a population of 35 procurements, and identified 4 exceptions equal to $8,489,488. For the Coronavirus State and Local Fiscal Recovery Funds, we tested a sample of 3 procurements totaling to $5,184,400 from a population of 5 procurements, as well as a sample of 10 sub-awards totaling to $28,079,600 from a population of 37 totaling to $37,052,621, and identified 13 exceptions equal to $33,264,000. For Epidemiology and Laboratory Capacity for Infectious Diseases, we tested all 2 procurements totaling to $887,745 and 5 sub awards totaling to $5,086,923 within the respective populations, and identified 7 exceptions. All samples tested were selected using nonstatistical sampling methods and were not statistically valid samples. Identification as a Repeat Finding Yes. This finding was reported as Finding 2021-003 in the prior audit. Recommendation A policy should be established and enforced to ensure that evidence of the SAM Exclusions search is retained. Procurement staff should conduct a selfreview of procurement files for contracts awarded in prior years if it is known that the contract will be funded with a federal award to ensure the SAM Exclusions search is performed prior to the expenditure of those funds and included in the procurement file. Views of Responsible Officials Management concurs with the finding and will adhere to the corrective action plan. Management plans to perform reviews of procurement contracts in place.

Finding 2022-011 Equipment and Real Property Management - Material Noncompliance and Material Weakness in Internal Controls Over Compliance Agency/Passthrough Grantor Department of Health and Human Services passed through the State of Alaska Department of Health and Social Services ALN and Program Name 93.323 – COVID-19-Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Award # C0621-570-BB Award Year 3/15/2021-6/30/2022 Criteria or Specific Requirement The regulations in 2 CFR 200.313(d)(1) notes equipment and real property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. Condition We reviewed a sample of 6 items owned by the Municipality and noted 1 instance in which managements internal controls were not functioning as designed, and in which equipment records were not properly maintained. Cause Controls to review and track equipment and real property funded by federal awards are not properly maintained by program personnel. In addition, there is no reconciliation from the program equipment and real property lists to the general ledger detail to ensure all equipment and/or real property is being recorded and properly capitalized, if applicable. Effect or Potential Effect The Municipality was not in compliance with Equipment and Real Property requirements outlined in 2 CRF 200.313. The Municipality could be exposed to a reduction or elimination of funds by the Federal awarding agency. Questioned costs Not applicable Context For Epidemiology and Laboratory Capacity for Infectious Diseases we selected a sample of 6 items of equipment with a book value of $848,963 from a population of 41 items with a total book value of $886,733 and noted 1 exception with a book value of $843,569. The sample tested was selected using nonstatistical sampling methods and was not a statistically valid sample. Identification as a repeat finding Not a repeat finding. Recommendation We recommend an inventory is completed at least annually to compare items purchased with federal funds to counts and the values recorded in the general ledger. Views of Responsible Officials Management agrees with this finding. Staff will perform regular reconciliations for the equipment and real property listing to ensure that its accuracy is maintained.

Finding 2022-012 Equipment and Real Property Management - Noncompliance and Significant Deficiency in Internal Control Over Compliance Agency/Passthrough Grantor Department of Transportation passed through the State of Alaska Department of Transportation and Public Facilities ALN and Program Name 20.205 – Highway Planning and Construction Cluster Award # AMATS 2023, AK-26-0003-01 Award Year 2022, 2015 Criteria or Specific Requirement The regulations in 2 CFR 200.313(d) includes the following provisions: (1) equipment and real property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. (2) A Physical Inventory of the property must be taken and the results reconciled with the property records at least once every two years (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Condition We reviewed a sample of 4 items owned by the Municipality and noted 3 instances in which management’s internal controls were not functioning as designed, and in which equipment records were not properly maintained. Furthermore, there was no documentation of a physical inventory being performed that was subsequently reconciled to the property records. Cause Controls to review, inventory, and track equipment and real property funded by federal awards are not properly maintained by program personnel. In addition, there is no reconciliation from the program equipment and real property lists to the general ledger detail to ensure all equipment and/or real property is being recorded and properly capitalized, if applicable. Effect or Potential Effect The Municipality was not in compliance with Equipment and Real Property requirements outlined in 2 CRF 200.313. The Municipality could be exposed to a reduction or elimination of funds by the Federal awarding agency. Questioned Costs Not applicable. Context For the Highway Planning and Construction Cluster we selected a sample of 4 items of equipment with a book value of $9,382 from a population of 27 items with a total book value of $132,626 and noted 4 exceptions with a book value of $9,382. The sample tested was selected using nonstatistical sampling methods and was not a statistically valid sample. Identification as a Repeat Finding Not a repeat finding. Recommendation We recommend an inventory is completed at least annually to compare items purchased with federal funds to counts and the values recorded in the general ledger. Views of Responsible Officials Management agrees with this finding. Staff will perform regular reconciliations for the equipment and real property listing to ensure that its accuracy is maintained.

Finding 2022-013 Equipment and Real Property Management - Noncompliance and Significant Deficiency in Internal Control Over Compliance Agency/Passthrough Grantor Department of Transportation passed through the State of Alaska Department of Transportation and Public Facilities, Department of Health and Human Services passed through the State of Alaska Department of Health and Social Services ALN and Program Name 20.205 – Highway Planning and Construction Cluster 93.323 – COVID-19-Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Award # 93.323 – C0621-570-BB 20.205 – AMATS 2023, AK-26-0003-01 Award Year 93.323 - 3/15/2021-6/30/2022 20.205 – 2022, 2015 Criteria or Specific Requirement The regulations in 2 CFR 200.313(d)(1) notes equipment and real property records must be maintained that include disposition data including the date of disposal and sales price of property. Condition Testing of a sample of 5 items that were disposed of during the year identified 5 instances in which management’s internal controls were not functioning as designed and equipment disposals were not properly reflected in the property records. Cause Management did not have in place sufficient controls over the disposal of equipment to ensure proper recording of disposals of equipment. Equipment records are not reviewed by individuals with necessary skills, knowledge, and experience to ensure records are updated properly. Effect or Potential Effect Anchorage was not in compliance with Equipment and Real Property requirements outlined in 2 CRF Sections 200.313. Anchorage could be exposed to a reduction or elimination of funds by the Federal awarding agency. Questioned Costs Not applicable. Context For the Highway Planning and Construction Cluster, we selected all 4 items of equipment identified as being disposed during the year which totaled $18,537 and noted 4 exceptions where assets were recorded as disposed which were still in service. For Epidemiology and Laboratory Capacity for Infectious Diseases, we selected the 1 item of equipment disposed which was $2,910 and noted 1 exception where management did not approve of the disposed equipment. Identification as a Repeat Finding Not a repeat finding. Recommendation We recommend an inventory is completed at least annually to compare items purchased with federal funds to counts and the values recorded in the general ledger. Views of Responsible Officials Management agrees with this finding will enhance controls over the review and disposal of equipment and real property and enhance supervisory reviews over this accounting function.

Finding 2021-002 Subrecipient Monitoring ? Material Noncompliance and Material Weakness in Internal Controls over Compliance Agency Department of the Treasury, Department of Health and Human Services ALN and Program Name 21.027 - Coronavirus State and Local Fiscal Recovery Funds 21.023 ? Emergency Rental Assistance Program 93.323 ? Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Criteria If subrecipient awards are given, pass-through entities must follow 2 CFR 200.332 related to subrecipient monitoring and are responsible to ensure that subrecipients comply with the terms and conditions of 2 CFR 200.501 related to audit requirements. This includes ensuring that every subaward is (1) clearly identified to the subrecipient as a subaward; (2) includes the necessary information at the time of the subaward for subrecipient reporting on federal awards (2 CFR 200.332) and (3) includes requirement to follow 2 CFR 200.501 if expenditure thresholds are met. This also includes verifying that every subrecipient is audited as required by 2 CFR 200.501 if the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold. Condition Subrecipient agreements did not include the required federal award identification or applicability of audit requirements. No action was taken to ensure the subrecipients were audited in accordance with 2 CFR 200.501 if applicable. Cause The issuance of subrecipient agreements for these grants related to new funding streams in response to the COVID-19 pandemic. Significant amounts of funding were provided in a short period of time, and systems to distribute these monies were newly created and implemented. The standard award agreements were not reviewed in advance to ensure adherence to federal requirements. Staff were not fully trained on the informational requirements and monitoring responsibilities related to audit requirements. Effect or Potential Effect Subrecipients may be unaware and not in compliance with the requirements of 2 CFR Part 200. Questioned costs None Context Subrecipient monitoring testing identified 17 out of 17 subawards that did not contain appropriate language to inform subrecipients of the applicability of 2 CFR Part 200, Subpart F. Furthermore, all subawards tested lacked support to verify notification and monitoring of subrecipient compliance with the aforementioned federal regulations. Identification as a repeat finding No Recommendation Management should establish policies to ensure subawards contain required federal award information. In addition, procedures should be established to monitor subrecipient compliance with audit requirements of 2 CFR 200.501. Views of Responsible Officials Management concurs with the finding and will adhere to the corrective action plan included in this report. Management plans to revise policies and procedures related to subrecipient monitoring.

Finding 2021-003 Procurement Suspension and Debarment ? Internal Control Over Compliance ? Significant Deficiency Agency Department of the Transportation ALN and Program Name 20.823 ? Port Infrastructure Development Program 20.933 ? National Infrastructure Investments Criteria The regulations in 2 CFR Part 180 restrict contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal programs or activities. Procurement policies should be established to ensure documentation is retained to verify a check was done of the Governmentwide System for Award Management Exclusions (SAM Exclusions) prior to awarding of contracts that will be funded with federal awards. Condition Evidence was not retained in procurement documentation to support confirmation of contractor status in SAM Exclusions as an entity not subject to suspension or debarment. Cause The Municipality?s policies over procurement were not designed appropriately to retain evidence of SAM Exclusions search suspension and debarment review for all contracts funded with federal awards. Effect or Potential Effect Federal funds could be disbursed to suspended or debarred entities. Questioned costs None Context Procurement testing identified 2 out of 3 contracts that did not have support that the SAM Exclusions search was conducted. The related contracts were initially awarded in 2013 and 2017. A contemporaneous search of SAM Exclusions did not identify these contracts as excluded. Identification as a repeat finding No Recommendation A policy should be established and enforced to ensure that evidence of the SAM Exclusions search is retained. Procurement staff should conduct a self-review of procurement files for contracts awarded in prior years if it is known that the contract will be funded with a federal award to ensure the SAM Exclusions search is performed prior to the expenditure of those funds and included in the procurement file. Views of Responsible Officials Management concurs with the finding and will adhere to the corrective action plan. Management plans to perform reviews of procurement contracts in place.

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