City of Hamilton, Texas

Significant deficiency in internal controls over compliance. Major Program: Coronavirus State and Local Fiscal Recovery Funds - 21.027. Criteria: Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. "Covered transactions" include contracts for goods and services awarded under a non-procurement transaction (e.g. grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. All non-procurement transactions entered into by a passthrough entity, irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties Listing System (EPLS) maintained by the General Services Administration (GSA) and available at SAM.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). Condition: The City does not have adequate internal control procedures in place to monitor compliance with suspension and debarment requirements for contracts. Cause: The City could not provide documentation to verify that it followed the appropriate suspension and debarment requirements. Effect: Payments of program funds to a contractor that has been suspended or debarred would be unallowable and subject to recovery by the grantor. We were able to verify that the vendors were not suspended or debarred or otherwise excluded from participating in the transaction. Repeat Finding: No. Recommendation: The City should update procedures to ensure that a vendor's status is checked in SAM.gov prior to contracting with a vendor. Additionally, the City should update contracts to include a suspension and debarment paragraph to verify status with every renewal or collecting certification from the proposed entity. Management's Response: The City will update procedures to ensure that a vendor's status is checked prior to contracting. The City will update contracts to include a suspension and debarment paragraph to verify the status with every renewal or will collect certification from the proposed entity.

Compliance and significant deficiency in compliance and internal controls over compliance. Major Program: Federally Assisted Airport Development Grant - 20.106. Criteria: All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality for the project (prevailing wage rates) by the Department of Labor and this requirement must be included in the related contracts. Condition: The requirement that contractors and subcontractors that work on construction contracts submit weekly certified payrolls to the non-federal entity (grantee) and a statement of compliance to ensure that the prevailing wage rates are paid could not be verified. Cause: The City did not have processes or procedures in place to verify that the prevailing wage rate clause was included in construction contracts or to verify based on review of certified payroll reports from the contractor. Because of this, the required language was not included in the contracts, and the wage rates could not be verified. Effect: Department of Transportation could disallow expenditures of future grants. Repeat Finding: No. Recommendation: The City should design process and procedures to verify that all required elements are included in relevant contracts. In addition, a City staff member or designated representative should ensure that the necessary certified payrolls are received and appropriately reviewed. Management's Response: The City will implement policies and procedures to verify that all required elements are included in relevant contracts. The City staff will ensure that all necessary certified payrolls are received and reviewed.