CITY OF NORTH POLELocal Government

2024-002 Significant Deficiency in Internal Controls over Compliance and Compliance – Procurement – Suspension and Debarment Agency: U.S. Department of the Treasury Program(s) and Federal Award Listing Number(s): COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 FAIN: None New or Repeat: New Criteria: The regulations in 2 CFR part 180 restrict making subawards and contracts with certain parties that are debarred, suspended, or otherwise excluded from receiving or participating in Federal awards. Management is responsible for ensuring it has designed and implemented internal controls over compliance for this requirement as it applies to its federally funded programs. Condition: Upon request the City was unable to provide documentation to support whether the required suspended/debarred certification was completed within a timely manner or was received from the vendor when the contract was signed. Although the City, upon our request, checked and found there to be no issues, there was no documentation to indicate a suspended/disbarred verification check was completed prior to entering the contract with the sole vendor used for this program. Cause: Inconsistent implementation of documentation retention controls and staff turnover contributed to the inability to retrieve or verify the required suspended/debarred verification was completed in a timely manner for the contract. Context: Only one vendor was paid by contract and subject to the suspended/debarred procurement requirement in this program. Effect: Lack of consistent implementation of documentation retention controls is considered a control weakness and is reportable as a significant deficiency. As the required verification was completed, although not timely, the noncompliance is considered not material to the program and therefore is reported as an other matter. Recommendation: Management should ensure controls over retaining documentation of compliance with procurement requirements are followed consistently. This should include maintaining evidence of required approvals or reviews and assigning responsibility for recordkeeping, especially during periods of staff transition. View of responsible officials: Management concurs with this finding, see corrective action plan.

SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS U.S. Department of Defense Cooperative Agreement -Water Supply and Distribution Design, Moose Creek, Alaska, and Cooperative Agreement-Remedial Action Construction Phase One North Loop Supply and Distribution System, Moose Creek, Alaska 2022-003 Grant reports were not filed timely or reconciled to the general ledger: Condition: Several monthly reports were not filed on a timely basis, and the December total project costs were less than balances reported in the general ledger. Criteria: Task 1.3 of the Cooperative Agreement requires monthly status reports that include funds expended during the reporting period and cumulative to date. Context: The City had personnel changes during the year, affecting the management of the public works department, which caused reporting issues. Cause: The lapse in reporting was due to change in personnel. Effect: The reports for the year ended December 31, 2022 do not reconcile with the yearend general ledger. Recommendation: We recommend the reports be reviewed and reconciled with the general ledger. Adjustments to cumulative cost to date in the report should then be made. Grantee response: See corrective action plan.

SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) INTERNAL CONTROL WEAKNESSES U.S. Department of Defense Cooperative Agreement -Water Supply and Distribution Design, Moose Creek, Alaska, and Cooperative Agreement-Remedial Action Construction Phase One North Loop Supply and Distribution System, Moose Creek, Alaska U.S. Department of Treasury Passed through Program from: Alaska Department of Commerce, Community and Economic Development Coronavirus State and Local Fiscal Recovery Fund 2022-004 Inadequate staff to monitor compliance with grant requirements: Condition: Cooperative Agreements with the U.S, Department of Defense: several monthly reports were not filed on a timely basis, and the December total project costs for the construction grant was $28,352 less than balances reported in the general ledger, and the water supply and distribution design grant was $5,760 less than balances reported in the general ledger. Also, management did not appear to be familiar with the federal regulations which defined eligible use of the Coronavirus State and Local Fiscal Recovery Fund. Criteria: Adequate internal controls over the management of federal grants are required the U.S, Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Context: The City did not appear to have available staff to monitor grant compliance to include complying with reporting standards. Cause: Insufficient staffing levels. Effect: The reports for the year ended December 31, 2022 were not filed on a timely basis and did not reconcile with the yearend general ledger. Recommendation: We recommend the City evaluate its staffing levels and positions and develop a process where stronger monitoring occurs over the administration of grants. Grantee response: See corrective action plan.