City of NewportLocal Government

21.027 Coronavirus State and Local Fiscal Recovery Funds Noncompliance with Procurement, Suspension and Debarment and Significant Deficiency in Internal Controls Criteria: 2 CFR Part 200.214 indicates “the regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. Condition: The City did not maintain documentation or have appropriate processes and procedures in place to ensure that prior to awarding contracts to outside parties the suspended or debarred list was checked to ensure the potential awardee was not prohibited from receiving federal funds. Cause: The City did not have policies and procedures in place to ensure the suspended and debarred list was checked consistently nor did they retain documentation of the list being checked prior to contracts being awarded to awardees. Effect: The City could award contracts to suspended or debarred parties. Questioned Costs: None Recommendations: We recommend the City implement processes and procedures to ensure the suspended and debarred listing is checked prior to awarding contracts to outside parties. In addition, we recommend the City maintain documentation of this check being performed. Views of responsible officials: Fiscal year 2022-23 was a challenging year for the City of Newport due to staff turnover and vacancies for key positions in Engineering, Public Works and Finance. Processes were in place to ensure that vendors were not on the suspended or debarred list prior to awarding contracts. However, due to key staff turnover, the documentation was not available to verify that the process was followed. The Finance Department and Engineering will work on a checklist to make sure all adequate written documentation is centrally kept with the awarded contract before awarding the contract.

Criteria: Proper oversight, review procedures and controls should be established to ensure the amounts reported on the Schedule of Expenditures of Federal Awards (SEFA) are accurate and adequately supported. Condition: Amounts reported on the original SEFA were incomplete and did not include all year end accruals. Cause: There was a lack of review of the SEFA and supporting documentation resulting in errors in the original SEFA. Effect: Corrections were required to revise the amounts reported on the SEFA. A lack of controls can result in errors not being caught in a timely manner. Identification as a Repeat Finding: This finding was reported in the prior year as finding 2021-002. Recommendations: The City should establish oversight and review procedures to ensure the amounts reported on the SEFA are accurate and adequately support. Views of responsible officials: The Finance Department experienced a number of vacancies caused by an unfilled vacant position, a position on family leave (currently Capital Grants Accountant), and retirements. Once key positions are filled, the process will be to have another person review the SEFA report and supporting documentation to reduce the risk of errors.

Criteria: Proper oversight, review procedures and controls should be established to ensure the reports submitted are accurate. Condition: Amounts reported on the Request for Advance or Reimbursement and Federal Financial Report submitted for AIP29, project #17023, were incorrect. Cause: The review process was ineffective, and errors were not identified prior to submission of the reports. Effect: The City corrected the reports after the original submission but ineffectively designed internal controls resulted in errors not being caught in a timely manner. Questioned Costs: None Recommendations: The City should establish oversight and review procedures to ensure the amounts reported on the reports are accurate and adequately support. Views of responsible officials: The Airport Director will initially review all Request for Advance or Reimbursement and supporting documentation by the contracted supervisor of the project. The Capital Projects Accountant will then also review the Request for Advance or Reimbursement and supporting documentation before submission for reimbursement.

Criteria: Proper oversight, review procedures and controls should be established to ensure the amounts reported on the Schedule of Expenditures of Federal Awards (SEFA) are accurate and adequately supported. Condition: Amounts reported on the original SEFA were not adequately supported and listed under the wrong grant number which has different applicable compliance requirements. Effect: Corrections were required to revise the amounts reported on the SEFA. A lack of controls can result in errors not being caught in a timely manner. Improper identification of grants can result in the City not performing the proper compliance requirements applicable for the grant agreement and its related expenditures. Failure to adequately support the amounts reported on the SEFA could result in sanctions and/or withdrawal of grant funding from the awarding agency. Cause: Poor communication between departments resulted in the incorrect grant number being reported on the SEFA. Additionally, lack of sufficient review of the supporting documentation caused the error to not be caught in a timely manner. Recommendation: Merina+Co recommends additional oversight and review over SEFA reporting processes to prevent errors. Additional training for staff working on grants and on the preparation of the SEFA should be done to ensure a detailed review of the SEFA and supporting documentation is performed so that all amounts are adequately supported by accounting records and reported under the appropriate grant agreement. Views of Responsible Officials: We understand this issue, there was a communication disconnect between Finance and the Airport Director. The monies for the AIP 27 project was available in September 2020 but they were accounted for in AIP 25 that fiscal year. The City Finance staff found out about this in early July 2021, which was too late to complete a supplemental budget to separate the project. This also messed up the initial SEFA. Going forward, Finance will monitor the communications between the Airport and the contracted FAA manager more closely.

Criteria: Proper oversight, review procedures and controls should be established to ensure the expenditures charged to the program are accurate and adequately supported. Condition: Several pay rates used to calculate expenditures were not adequately supported and data entry errors for hours reported caused the amounts charged to the program to be immaterially misstated. The City has a lack of controls over the retention of records and the review of supporting spreadsheets. Internal controls help prevent or detect and correct misstatements in a timely manner. Effect: A lack of controls can result in errors not being caught in a timely manner. The lack of internal controls results in a material weakness. Failure to adequately support the amounts charged to the program could result in sanctions and/or withdrawal of grant funding from the awarding agency. Cause: The City calculated rates based on budgeted pay rates; however some employees had midyear pay rate changes and there were new employees that were not budgeted for. The City did not retain the records supporting the pay rates used to charge payroll expenditures to the program for these employees. Also, hours were manually entered into the spreadsheet used to track and calculate expenditures charged to the program. This resulted in data entry errors. Recommendation: Merina+Co recommends additional oversight and review over tracking, recording and maintaining support for expenditures charged to the program to prevent errors. Proper review should be performed to ensure all amounts are adequately supported and data entry is appropriate, with the utilization of formulas rather than hard entering data amounts into spreadsheets, to prevent errors.

GSA_MIGRATION

GSA_MIGRATION