City of PendletonLocal Government

Condition and criteria: There were contracting issues with some of the contractors performing barracks improvements and none of the contracts were performed under prevailing wage provisions, as required. The costs appear to be allowable costs and activities, but approximately $118k should have been performed under prevailing wage standards, which is material to the program. Cause: There were contracting issues with the contractors, and it appears the City was not effectively monitoring this requirement. Context and Effect: The costs appear to be allowable costs and activities, but approximately $118k should have been performed under prevailing wage standards, which is material to the program. Auditor?s recommendation: We recommend that additional reviews and procedures be put in place to ensure that all contracts with prevailing wage requirements are performed accordingly. Management?s response: Economic Development & Airport Director has clearly instructed new Airport Manager on City?s purchasing procedures and stressed the importance of abiding by them.

Condition and criteria: The airport is allowed to submit payroll costs for reimbursement as part of the CARES Act program. There has not been a secondary review process on this portion of the expenses claimed and there were errors found in the amounts claimed for January, February and April claims. The overall amount claimed was less than the amount that was available and the funding level had been reached by year end. Cause: The Airport was attempting to maintain the privacy of employee payroll records and excluded these costs from the normal review process. Context and Effect: The overall amount claimed was less than the amount that was available and the funding level had been reached by year end. Auditor?s recommendation: This is an ongoing finding and we continue to recommend a secondary review and double checks of amounts claimed in the future. Management?s response: Economic Development & Airport Director believes that the double checking (of the calculations) was clearly instructed to previous airport manager, however, the step was apparently not followed last year. It is unlikely that any additional payroll will be reimbursed through CARES Act, but the new Airport Manager has been clearly instructed that all calculations must be doubled checked before submission. Note: This was a somewhat insignificant amount of money related to a part-time worker?s pay. It was also a minor under-collection (less than the City could have collected), which should have been double-checked, but may have possibly been intentional. Staff is unaware of any amount of payroll for which it was required to ask for reimbursement on, so this finding seems subjective and immaterial.

Condition and criteria: The Airport claimed costs under the CARES Act that were originally determined to be deferred maintenance and not requiring an addendum for a development agreement. However, the taxi lanes and portions of the terminal rehabilitation projects are now required to go through a development addendum, which the FAA had not approved at the time of the audit. Cause: Guidance related to CARES Act dollars has changed several times since inception of the program. Context and Effect: Costs of $32,091 were disallowed by the FAA and adjustments were required to correct revenue reported on the SEFA since the addendum and $9.6 million grants were not yet approved. Auditor?s recommendation: We recommend that additional procedures and reviews be put in place to monitor projects that may require development addendums and that the addendums be obtained prior to performing the project. Management?s response: Economic Development & Airport Director believes very strongly that there is no way that Airport Staff could have foreseen the FAA procedural change as it relates to addendums being required for CARES Act projects. Staff understands the seriousness of the cash flow challenges this FAA procedural change created for the City, but still does not see any way it could have been avoided. If anything, someone on the FAA?s side made a serious mistake in telling Airport Staff that our projects did not require addendum agreements.

US DEPARTMENT OF COMMERCE Investments for Public Works and Economic Development Significant Deficiency 2021-005 Condition and criteria: The City is required to file semi-annual Federal Financial Reports for the Economic Development Administration grant and the reports are due within 30 days of the end of the period. The report for the period ended March 3, 2021 was filed June 14, 2021 and past the April 30, 2021 deadline. In addition, the reports filed did not include the expenditures incurred during the period. Cause: This is a new program at the City and the City hired a contract administrator to assist on the program, who is still working through some of the requirements with the EDA. It also appears that reviews performed by management were not adequate to catch the errors. Context and Effect: There were two SF425 Federal Financial Reports related to the project for the current fiscal year and we performed tests of 100% of the reports and support. One report was filed on time and the other was filed about 2 months late. In addition, costs had been incurred and paid but there were no expenditures to date included in the reports. Auditor?s recommendation: We recommend that additional reviews and procedures be put in place to make sure reports are filed timely and with complete information. Reconciliation to the accounting system should also be performed along with each report. Management?s response: The City will be in constant communication with GEODC and meet on a quarterly basis with all grant administrators to ensure reporting is being done timely and accurately. Any discrepancies found will be addressed prior to reporting deadlines.

US DEPARTMENT OF TRANSPORTATION Airport Improvement Program ? CARES Act Significant Deficiency 2021-006 Condition and criteria: Internal control procedures should be in place to identify allowable costs for reimbursement, which include secondary review processes to verify the costs and reporting procedures. The airport is allowed to submit payroll costs for reimbursement as part of the CARES Act program. To maintain privacy, there has not been a secondary review process on this portion of the expenses claimed and there were errors found in the amounts claimed for April 2021 and January 2021. In addition, the claims excluded payroll taxes and benefits for the first four months of the fiscal year. Cause: The Airport was attempting to maintain privacy of employee payroll records and excluded these costs from the normal review process. Context and Effect: We reviewed the support and reconciliation for all twelve months claimed for reimbursement and found minor errors in January and April and additional allowable costs in other months, which management chose not to claim for reimbursement. Auditor?s recommendation: We recommend a secondary review and double checks of amounts claimed in the future. Management?s response: City has instituted additional reviews and procedures for reimbursement requests related to the CARES Act program. Prior to submission for reimbursement, Finance will review requests. Prior, the department created the requests and submitted without review from Finance. Any discrepancies found during review will be addressed prior to submittal for reimbursement.

Condition and criteria: The City must have control processes in place to properly identify and report allowable costs for the Safe Drinking Water Revolving Loan Fund (SDWRLF) program. The process requesting reimbursements did not include reconciliation to the general ledger and was based mainly on submitted invoices, which included some costs not eligible for reimbursement. The main difference is due to contractor credits for materials on hand paid for early on in the project, which were not properly applied against the invoices when requesting reimbursement. There were also claims for retainage and materials on hand, which should not have been claimed until they were used/paid. However, they were used/paid by year end and other than how the credits were applied resulted in mainly a timing difference. For the SDWRLF it was found that there was $134,207 in loan funds requested in excess of allowable costs, of which, $87,916 related to the federal portion of the program. Cause: There were changes in personnel on the project and a consultant was hired to perform construction engineering management and to submit the requests for reimbursement to the State. It also appears that there was a lack of communication with finance and that reviews performed by management were not adequate to catch the errors. Context and Effect: There were 13 draw down requests related to the project for the current fiscal year and we performed tests of 100% of the requests and related support. There were errors in allowable costs related to the contractor credits for two requests, stored materials and retainage requested on several requests, and other minor items on three other claims for reimbursement. Costs of $134,207 were determined to be questioned costs, of which, $87,916 related to the federal portion of the project. Auditor?s recommendation: We recommend that additional reviews and procedures be put in place to ensure costs are properly requested for reimbursement. These procedures should include reconciliation to the expenditures recorded in the accounting system, explanations and consultation for unusual items, preparation of a detailed list of items claimed for each reimbursement request, additional training on reimbursable costs, and enhanced reviews by management. Management?s response: City has instituted review of disbursement requests and invoicing by Public Works Director and Finance Director prior to submittal to state or federal agency staff. Any discrepancies found on monthly or quarterly disbursement requests will be addressed prior to submittal for reimbursement. All non-bid related items will be executed by change order with full description of the need and summary of charges.

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