CITY OF NIAGARA FALLS, NEW YORK

2022-002: Period of Performance - Timeliness Criteria - The City is required to establish and maintain an effective control environment, and monitor compliance with the period of performance requirement of this federal award, per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls and under the provisions of 24 CFR 570.902 of the Community Development Block Grant (CDBG) regulations. A grantee is considered to meet period of performance and be timely, if 60 days prior to the end of the grantee?s program year, the balance in its line-of-credit does not exceed 1.5 times the annual grant. To determine whether entitlement grantees meet timely performance, U.S. Department of Housing and Urban Development (HUD) calculates the ratio of unexpended funds to the annual grant award 60 days prior to the end of the program year. To do this HUD sums the amount of program income the grantee has on hand with the amount of funds remaining in the CDBG line of credit and divides by the amount of the annual grant award. If the ratio is less than or equal to 1.5, then the grantee has met the timely performance requirement. This requirement is monitored using the IDIS CDBG Timeliness Report (PR56 report). Condition - The City?s Department of Community Development did not have an established internal control process to appropriately monitor the timeliness requirement and ensure compliance. The City exceeded the allowable balance in its line-of-credit with a ratio of greater than 1.5, resulting in noncompliance with this period of performance requirement. Cause - The City did not have an established control process in place to appropriately monitor and ensure compliance with these requirements. Effect - The City is not in compliance with the federal program?s period of performance requirement. Noncompliance could have funding implications in the future. Repeat Finding - This is a repeat finding of 2021-002. Recommendation - We recommend the City?s Department of Community Development contact HUD to develop a plan for expending CDBG funds in order to reduce the amount of unexpended funds to a level that will fall within the required parameters. In addition, we recommend implementing a monitoring process over spending of CDBG grant funds to ensure funding is used within the specified time requirements and in compliance with the period of performance requirement. Management Response - The City is in agreement with this audit finding. Due in part to delays in finalizing both the 2021-2022 annual action plan and the 2022-2023 annual action plan, the City was delayed in being able to utilize those funds until approval was provided by HUD. The City continues to direct funds to projects that have the ability to be completed in a timely manner in order to be consistent with the CDBG regulation related to timeliness. The City is aware of the timeliness requirements and will continue to select projects that better allow the City to operate in accordance with these regulations. Estimated Completion Date - Next HUD verification date of May 1, 2024

2022-003: Reporting - Financial and Performance Reporting Criteria - The City is required to establish and maintain an effective control environment and complete timely financial and performance reports per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls to ensure compliance with reporting requirements of the federal award. The City is required to submit a Consolidated Annual Performance and Evaluation Report (CAPER). This report is required to be submitted 90 days after the end of a grantee?s program year. Condition - The City?s Department of Community Development did not establish a control environment over the preparation and submission of the CAPER. The City did not submit the CAPER within the established timeframe required by the federal agency, resulting in noncompliance with the reporting requirements. Cause - The City did not have an established control process in place to appropriately monitor and ensure compliance with these requirements. Effect - The City is not in compliance with the federal program?s financial and performance reporting requirements. Noncompliance could have funding implications in the future. Repeat Finding - This is a repeat finding of 2021-003. Recommendation - We recommend the City?s Department of Community Development establish a control environment over the preparation of their reporting requirements, and a monitoring process to ensure reporting deadlines are met. Management Response - The City is in agreement with this audit finding. While this may be a repeat finding from 202l, the delays in filing the 2022 CAPER were a result of turnover within the department resulting in delays in filing the annual CAPER. The City has procedures in place to complete the report within the guidelines of the program and anticipates completing this report within the required time frame going forward. Estimated Completion Date - Completed

2021-002: Period of Performance - Timeliness Criteria - The City is required to establish and maintain an effective control environment, and monitor compliance with the period of performance requirement of this federal award, per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls and under the provisions of 24 CFR 570.902 of the Community Development Block Grant (CDBG) regulations. A grantee is considered to meet period of performance and be timely, if 60 days prior to the end of the grantee?s program year, the balance in its line-of-credit does not exceed 1.5 times the annual grant. To determine whether entitlement grantees meet timely performance, U.S. Department of Housing and Urban Development (HUD) calculates the ratio of unexpended funds to the annual grant award 60 days prior to the end of the program year. To do this HUD sums the amount of program income the grantee has on hand with the amount of funds remaining in the CDBG line of credit and divides by the amount of the annual grant award. If the ratio is less than or equal to 1.5, then the grantee has met the timely performance requirement. This requirement is monitored using the IDIS CDBG Timeliness Report (PR56 report). Condition - The City?s Department of Community Development did not have an established internal control process to appropriately monitor the timeliness requirement and ensure compliance. The City exceeded the allowable balance in its line-of-credit with a ratio of greater than 1.5, resulting in noncompliance with this period of performance requirement. Cause - The City did not have an established control process in place to appropriately monitor and ensure compliance with these requirements. Effect - The City is not in compliance with the federal program?s period of performance requirement. Noncompliance could have funding implications in the future. Repeat Finding - This is a repeat finding of 2020-002. Recommendation - We recommend the City?s Department of Community Development contact HUD to develop a plan for expending CDBG funds in order to reduce the amount of unexpended funds to a level that will fall within the required parameters. In addition, we recommend implementing a monitoring process over spending of CDBG grant funds to ensure funding is used within the specified time requirements and in compliance with the period of performance requirement. Management Response - The City has made an effort under this Administration to direct CDBG funds to projects that have the ability to be completed in a timely manner in order to be consistent with the CDBG regulation related to timeliness. Due in part to challenges related to the coronavirus pandemic, there were delays in finalizing the 2020-2021 annual action plan until May 2021, and finalizing the 2021-2022 annual action plan until October 2021. As a result, the City was unable to utilize those funds until formal approval was provided by HUD. The City is aware of the timeliness requirements and are actively selecting projects that better allow the City to operate in accordance with these regulations, Estimated Completion Date - Next HUD verification date of May 1,2023

2021-003: Reporting - Financial and Performance Reporting Criteria - The City is required to establish and maintain an effective control environment and complete timely financial and performance reports per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls to ensure compliance with reporting requirements of the federal award. The City is required to submit a Consolidated Annual Performance and Evaluation Report (CAPER). This report is required to be submitted 90 days after the end of a grantee?s program year. Condition - The City?s Department of Community Development did not establish a control environment over the preparation and submission of the CAPER. The City did not submit the CAPER within the established timeframe required by the federal agency, resulting in noncompliance with the reporting requirements. Cause - The City did not have an established control process in place to appropriately monitor and ensure compliance with these requirements. Effect - The City is not in compliance with the federal program?s financial and performance reporting requirements. Noncompliance could have funding implications in the future. Repeat Finding - This is a repeat finding of 2020-003. Recommendation - We recommend the City?s Department of Community Development establish a control environment over the preparation of their reporting requirements, and a monitoring process to ensure reporting deadlines are met. Management Response - The City is in agreement with this finding, however the late filing of the annual CAPER report was directly related to the delay in obtaining approval of the 2020-2021 annual action plan, and subsequent amendments to that plan. Once formal approval of the annual action plan and related amendments was provided, the annual CAPER report was completed and filed. The City has procedures in place to complete the report within the guidelines of the program and anticipates completing this report within the required time frame going forward. Estimated Completion Date - Completed

2020-001 Allowable Costs - Time and Effort Assistance Listing No.14.218 ? CDBG-Entitlement Grants Cluster 14.239 ? Home Investment Partnership Program 14.871 ? Housing Voucher Cluster Direct Award for the Year Ended December 31, 2020 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain effective internal controls that comply with cost principles identified by the Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls and Subpart E; Sections 200.430, 200.430(a) and 200.430(i) Standards for Documentation of Personnel Expenses. Condition: The City allocates payroll by employee to specific grant programs at the time of hire and/or during the annual budget process, using the expectations of what program the employee will be assigned to. However, the City does not perform monitoring activities over the actual time worked towards a specific federal program in order to ensure appropriate allocations of time worked are claimed against each applicable federal program. Cause: The City has a process in place for employees to complete timecards for overall hours worked, however these timecards do not indicate the allocation of time spent on individual federal programs. There is no process in place to provide monitoring related to the payroll allocations of time worked by employees on each federal program in order to determine the allocation of time and effort to each federal program was appropriate and updated in a timely manner. Effect or potential effect: The City allocates an employee to specific federal programs at the time of hire and/or during the annual budget process, however there are no monitoring activities being performed over the actual time worked towards a specific federal program. As a result, we were unable to determine if payroll expenditures under the major federal programs noted above were appropriately charged and allowable in order to be deemed in compliance with the Uniform Guidance. Failure to ensure compliance with the Uniform Guidance could have funding implications in the future. Questioned costs: Questioned costs cannot be reasonably determined. Context: This finding was identified through inquiries of newly appointed management and audit testing related to allowable cost activities for the major federal programs noted above. There was significant turnover in the City?s Department of Community Development, who administered the major programs noted above, during the 2019 fiscal year, which continued to impact the 2020 fiscal year. Identification as a repeat finding: This finding was reported in the fiscal year ended December 31, 2019 as item 2019-001. Recommendation: Effective for the fiscal year ending December 31, 2021, the City has established written control procedures that relate to their standards of documentation of personnel expenditures and monitoring over their time and effort certifications. These procedures will assist the City in ensuring compliance with the requirements of the Uniform Guidance, ensure time and effort certifications are maintained in a timely manner, and allow for review to verify all time and effort is being appropriately charged to the related federal programs. We recommend that the City implement and adhere to these procedures for the 2021 fiscal year. Views of Responsible Officials: An internal procedure has been created whereby hours worked are accounted for by the respective employees within their respective HUD program (Community Planning & Development or Housing Choice Voucher Program). On an annual basis the percentage of time allocated to each grant will be updated within the payroll system for each employee to better reflect the time and effort spent administering each grant award. The Community Development Finance Manager will track all hours and adjustments will be recorded within the Payroll system to more accurately reflect the percentage of time spent on each grant at least on an annual basis.

2020-002 Period of Performance ? Timeliness Assistance Listing No.14.218 ? CDBG Entitlement Grants Cluster Direct Award for the Year Ended December 31, 2020 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Criteria: The City is required to establish and maintain an effective control environment, and monitor compliance with the period of performance requirement of this federal award, per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls and under the provisions of 24 CFR 570.902 of the CDBG regulations. A grantee is considered to meet period of performance and be timely, if 60 days prior to the end of the grantee's program year, the balance in its line-of-credit does not exceed 1.5 times the annual grant. To determine whether entitlement grantees meet timely performance, HUD calculates the ratio of unexpended funds to the annual grant award 60 days prior to the end of the program year. To do this HUD sums the amount of program income the grantee has on hand with the amount of funds remaining in the CDBG line of credit and divides by the amount of the annual grant award. If the ratio is less than or equal to 1.5, then the grantee has met the timely performance requirement. This requirement is monitored using the IDIS CDBG Timeliness Report (PR56 report). Condition: The City?s Department of Community Development did not have an established internal control process to appropriately monitor the timeliness requirement and ensure compliance. The City exceeded the allowable balance in its line-of-credit with a ratio of greater than 1.5, resulting in noncompliance with this period of performance requirement. Cause: The City did not have an established control process in place to appropriately monitor and ensure compliance with these requirements. Effect or potential effect: The City is not in compliance with the federal program?s period of performance requirement. Noncompliance could have funding implications in the future. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management and review of the IDIS CDBG Timeliness Report. There was significant turnover in the City?s Department of Community Development, who administered the major program noted above, during the 2019 fiscal year, which continued to impact the 2020 fiscal year. Identification as a repeat finding: This finding was reported in the fiscal year ended December 31, 2019 as item 2019-003. Recommendation: We recommend the City?s Department of Community Development contact HUD to develop a plan for expending CDBG funds in order to reduce the amount of unexpended funds to a level that will fall within the required parameters. In addition, we recommend implementing a monitoring process over spending of CDBG grant funds to ensure funding is used within the specified time requirements and in compliance with the period of performance requirement. Views of Responsible Officials: The City acknowledges that prior to 2020 there was a lack of internal control over monitoring the timeliness requirement per CDBG regulations. Over each of the past three (3) fiscal years the City has not been in compliance with this regulation, however under new leadership of the department the City has begun to make improvements to its timeliness ratio. The City has also been working with our local HUD representatives in an effort to improve our timeliness ratio so that it is in compliance with the regulation. The City approved in July 2020 the reallocation of previous year?s unspent CDBG grant awards in the amount of $1,209,882. Additionally, various projects previously awarded were ones that took multiple years to complete, resulting in the City failing the timeliness requirement. Going forward, the City will consider the timing aspect of projects (i.e. estimated start date and estimated completion date) when determining the allocation of CDBG grant awards.

2020-003 Reporting ? Financial and Performance Reporting Assistance Listing No.14.218 ? CDBG Entitlement Grants Cluster Direct Award for the Year Ended December 31, 2020 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain an effective control environment and complete timely financial and performance reports per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls to ensure compliance with reporting requirements of the federal award. The City is required to submit a Consolidated Annual Performance and Evaluation Report (CAPER) and the HUD 60002, Section 3 Summary Report, Economic Opportunities for Low- and Very Low-Income Persons (OMB No. 2529-0043). These reports are required to be submitted 90 days after the end of a grantee?s program year. Additionally, the City is required to submit a SF-425, Federal Financial Report each quarter, within 30 days after the quarter end. Condition: The City?s Department of Community Development did not establish a control environment over the preparation and submission of the CAPER, the Section 3 Summary Report, and the SF-425. The City did not submit the CAPER, Section 3 Summary Reports and the SF-425 Financial Report within the established timeframe required by the federal agency, resulting in noncompliance with the reporting requirements. Cause: The City did not have an established control process in place to appropriately monitor and ensure compliance with these requirements. Effect or potential effect: The City is not in compliance with the reporting requirements of the federal program. Noncompliance could have funding implications in the future. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management and testing performed over the preparation and submission of reporting requirements. There was significant turnover in the City?s Department of Community Development, who administered the major program noted above, during the 2019 fiscal year, which continued to impact the 2020 fiscal year. Identification as a repeat finding: This finding was reported in the fiscal year ended December 31, 2019 as item 2019-004. Recommendation: Effective for the fiscal year ending December 31, 2021, the City?s Department of Community Development has established a control environment over the preparation of their reporting requirements, and a monitoring process to ensure reporting deadlines are met. We recommend that the City implement and adhere to these procedures for the 2021 fiscal year. Views of Responsible Officials: A new procedure was created in 2020 to assist in the preparation and submission of the annual CAPER and Section 3 summary Report.

2020-004 Eligibility Determination Assistance Listing No.14.871 ? Housing Voucher Cluster Direct Award for the Year Ended December 31, 2020 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain an effective control environment, per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls to ensure compliance with the eligibility requirements of the federal award. Condition: The City?s Department of Community Development has not conducted supervisory reviews over eligibility determinations for those participating in the Housing Voucher grant program. Cause: The City has not established a control process for supervisory review over eligibility determinations. Effect or potential effect: The lack of a supervisory review process over eligibility determinations could result in noncompliance with the eligibility requirements under the federal award and unallowable costs being charged to the program. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management and testing performed over the City?s eligibility determinations. There was significant turnover in the City?s Department of Community Development, who administered the major program noted above, during the 2019 fiscal year, which continued to impact the 2020 fiscal year. Identification as a repeat finding: This finding was reported in the fiscal year ended December 31, 2019 as item 2019-006. Recommendation: We recommend the City?s Department of Community Development develop and implement a written process to ensure an individual independent of the eligibility determination is performing a review over the determination, prior to disbursing funds to the grant applicant. Views of Responsible Officials: Quality assurance reviews of supervisory Section 8 eligibility determinations get conducted during the month of January and February each year. This corresponds with the HUD required HUD SEMAP certification. HUD SEMAP Indicator #3 mandates Section 8 Programs review a SEMAP sample of participant files to determine income eligibility was calculated correctly prior to the SEMAP submission. Due to COVID-19, HUD has waived the submission of the HUD SEMAP certification for the 2020-2022 program years. No additional supervisory reviews are needed for eligibility determinations.

2020-005 Reporting ? Financial and Special Reporting Assistance Listing No.14.871 ? Housing Voucher Cluster Direct Award for the Year Ended December 31, 2020 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain effective internal controls surrounding the reporting program requirements provided by the federal agency within the Compliance Supplement, per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls. The City is required to submit the HUD52681-B, Voucher for Payment of Annual Contributions and Operating Statement, Financial Reports (Financial Assessment Sub-system, FASS-PH) and the HUD-50058, Family Report. The information within the financial and special reporting requirements is relied upon by HUD for use in funding determinations, monitoring of program activity and for Section 8 Management Assessment Program (SEMAP) related decisions. Condition: The City?s Department of Community Development did not have controls in place surrounding the preparation and submission of the HUD52681-B, Voucher for Payment of Annual Contributions and Operating Statement, Financial Reports and the HUD-50058, Family Report. Cause: The City did not have an established control process in place to appropriately monitor the preparation and filing of the required reports noted above. Effect or potential effect: Without effective internal controls, the City could report inaccurate information to HUD, or neglect to file reports, which could lead to noncompliance under the program requirements. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of management and testing performed over the preparation and submission of reporting requirements. There was significant turnover in the City?s Department of Community Development during the 2019 fiscal year, which has had a continued impact on the 2020 fiscal year. Identification as a repeat finding: This finding was reported in the fiscal year ended December 31, 2019 as item 2019-007. Recommendation: We recommend the City?s Department of Community Development implement monitoring controls over the preparation and submission of the required reporting. Views of Responsible Officials: There is no requirement in 24 CFR Part 982 that requires a Section 8 Housing Choice Voucher Program implement internal controls surrounding the submission of HUD 52681 -B or HUD 50058 data in HUD PIC. On a monthly basis, HUD Financial Management staff notifies the Director of Community Development if there are any changes in the Voucher Management Systems (VMS) data over/under 10% of the previous month's VMS submission. If there are any, a review of the VMS submission by HUD and a response from the PHA would be required. As it relates to the HUD 50058 entries, HUD REAC (PIC) system utilizes a Delinquency Reporting Rate system that cross checks any HUD 50058 submission errors for accuracy. Leased Housing reviews the Department's MTCS Delinquency Reporting Rate monthly for errors and makes the appropriate corrections monthly. No additional supervisory reviews are needed related to the HUD 52681-B submission or the HUD 50058 submissions.

2020-006 Special Tests and Provisions ? Reasonable Rent, Housing Assistance Payment, and Rolling Forward Equity Balances Assistance Listing No.14.871 ? Housing Voucher Cluster Direct Award for the Year Ended December 31, 2020 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain an effective control environment, per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls to ensure compliance with the special tests requirements provided by the federal agency. The federal awarding agency has identified additional requirements under this award, per the Code of Federal Regulations (CFR), related to reasonable rent, housing assistance payment and rolling forward of equity balances. Condition: The City was unable to provide documentation to verify the control process existed surrounding the independent review of the rent comparisons prepared by the caseworker and maintained in the case file, or documentation to verify the control process existed over the independent review of payments processed to owners. The City did not have established controls over the reconciliation of equity balances, accounting for the appropriate HAP and administrative fee equity on an annual basis. Cause: The City did not have an established control process in place to appropriately monitor and ensure compliance with these requirements. Effect or potential effect: Insufficient internal control processes could result in noncompliance related to the requirements noted above. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management, as well as control and compliance testing over the requirements identified above. There was significant turnover in the City?s Department of Community Development, who administered the major program noted above, during the 2019 fiscal year, which continued to impact to the 2020 fiscal year. Identification as a repeat finding: This finding was reported in the fiscal year ended December 31, 2019 as item 2019-008. The prior year finding related to depository agreements was not noted as a repeat finding in the current year. Recommendation: We recommend the City?s Department of Community Development develop a written control process to ensure these requirements are appropriately monitored through independent review, sufficient documentation retained, and reconciliations performed on a consistent basis to ensure the City?s compliance with program requirements. Views of Responsible Officials: Section 8 Leased Housing does not create the rent comparable data. The software provider utilized by the staff provides our office with the "rent comparable" data. The Section 8 Leased Housing division utilized an outside Accountant to assist in reviewing and submitting the 2019 FDS for Section 8. The 2019 unaudited FDS (REAC) filing was approved by HUD.

2019-001 Allowable Costs - Time and Effort CFDA No. 14.218 ? CDBG Entitlement Grants Cluster 14.239 ? Home Investment Partnership Program 14.871 ? Housing Voucher Cluster Direct Award for the Year Ended December 31, 2019 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain effective internal controls that comply with cost principles identified by the Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls and Subpart E; Sections 200.430, 200.430(a) and 200.430(i) Standards for Documentation of Personnel Expenses. Condition: The City allocates payroll by employee to specific grant programs at the time of hire and/or during the annual budget process, using the expectations of what program the employee will be assigned to. However, the City does not perform monitoring activities over the actual time worked towards a specific federal program in order to ensure appropriate allocations of time worked are claimed against each applicable federal program. Cause: The City has a process in place for employees to complete timecards for overall hours worked, however these timecards do not indicate the allocation of time spent on individual federal programs. There is no process in place to provide monitoring related to the payroll allocations of time worked by employees on each federal program in order to determine the allocation of time and effort to each federal programs was appropriate and updated in a timely manner. Effect or potential effect: The City allocates an employee to specific federal programs at the time of hire and/or during the annual budget process, however there are no monitoring activities being performed over the actual time worked towards a specific federal program. As a result, we were unable to determine if payroll expenditures under the major federal programs noted above were appropriately charged and allowable in order to be deemed in compliance with the Uniform Guidance. Failure to ensure compliance with the Uniform Guidance could have funding implications in the future. Questioned costs: Questioned costs cannot be reasonably determined. Context: This finding was identified through inquiries of newly appointed management and audit testing related to allowable cost activities for the major federal programs noted above. There was significant turnover in the City?s Department of Community Development, who administered the major programs noted above, during the 2019 fiscal year. Recommendation: We recommend that the City review and establish written control procedures related to their standards of documentation of personnel expenditures to ensure that the City is in compliance with the requirements of the Uniform Guidance. In particular, we recommend the City establish monitoring procedures over their time and effort certifications to confirm they are being completed and maintained in a timely manner, and to verify all time and effort is being appropriately charged to the related federal programs. Views of Responsible Officials: The City agrees with this finding and going forward all Community Development Department and Section 8 Leased Housing employees will account on their respective time sheets the number of hours per day they work on each of the respective grant awards received by their office. An internal procedure will be created whereby these hours are accounted for by the respective employees within their respective HUD program (Community Planning & Development or Housing Choice Voucher Program). On an annual basis the percentage of time allocated to each grant will be updated within the payroll system for each employee to better reflect the time and effort spent administering each grant award. The CD Finance Manager will track all hours and adjustments will be recorded within the Payroll system to more accurately reflect the percentage of time spent on each grant at least on an annual basis. This process will begin no later than January 1, 2021.

2019-002 Program Income CFDA No. 14.218 ? CDBG Entitlement Grants Cluster 14.239 ? Home Investment Partnership Program Direct Award for the Year Ended December 31, 2019 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain effective internal controls that comply with program income requirements Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.307 Program Income and Subpart D; Section 200.303 Internal Controls. Condition: The City?s Department of Community Development receives program income continuously throughout the year as a result of federal program activity. Upon receipt of program income a departmental collection report is prepared and submitted for review, a journal entry is recorded to account for the activity within the City?s general ledger and the program income is recorded into the required Integrated Disbursement and Information System (IDIS) maintained by the U.S. Department of Housing and Urban Development (HUD). During our testing we obtained and reviewed a sample of the departmental collection reports and related journal entries and noted there was no supervisory review performed over this activity. Cause: The City has established procedures over program income, however the City is not currently following those procedures as there is no supervisory review taking place. Effect or potential effect: The City could record and report program income in error under a federal program if controls are not established and operating effectively, which could result in noncompliance with program requirements and could have funding implications in the future. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management and test of controls over the City?s receipt, recording and reporting of program income for the major federal programs noted above. There was significant turnover in the City?s Department of Community Development, who administered the major programs noted above, during the 2019 fiscal year. Recommendation: We recommend the City?s Department of Community Development implement and adhere to a control process over the receipt, recording and reporting of program income that is documented and can be verified. We recommend that an individual independent of the receipt, recording and reporting of program income denote their review by initialing and dating the receipt upon completion of their review. Views of Responsible Officials: The City agrees with this finding and the Compliance Officer will create an internal procedure segregating the duties involved with the receipt, recording, and reporting of program income. It is anticipated that a formal procedure will be created no later than January 1, 2021.

2019-003 Period of Performance ? Timeliness CFDA No. 14.218 ? CDBG Entitlement Grants Cluster Direct Award for the Year Ended December 31, 2019 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain an effective control environment, and monitor compliance with the period of performance requirement of this federal award, per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls and under the provisions of 24 CFR 570.902 of the CDBG regulations. A grantee is considered to meet period of performance and be timely, if 60 days prior to the end of the grantee's program year, the balance in its line-of-credit does not exceed 1.5 times the annual grant. To determine whether entitlement grantees meet timely performance, HUD calculates the ratio of unexpended funds to the annual grant award 60 days prior to the end of the program year. To do this HUD sums the amount of program income the grantee has on hand with the amount of funds remaining in the CDBG line of credit and divides by the amount of the annual grant award. If the ratio is less than or equal to 1.5, then the grantee has met the timely performance requirement. This requirement is monitored using the IDIS CDBG Timeliness Report (PR56 report). Condition: The City?s Department of Community Development did not have an established internal control process to appropriately monitor the timeliness requirement and ensure compliance. The City exceeded the allowable balance in its line-of-credit with a ratio of greater than 1.5, resulting in noncompliance with this period of performance requirement. Cause: The City did not have an established control process in place to appropriately monitor and ensure compliance with these requirements. Effect or potential effect: The City is not in compliance with the federal program?s period of performance requirement. Noncompliance could have funding implications in the future. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management and review of the IDIS CDBG Timeliness Report. There was significant turnover in the City?s Department of Community Development, who administered the major program noted above, during the 2019 fiscal year. Recommendation: We recommend the City?s Department of Community Development contact HUD to develop a plan for expending CDBG funds in order to reduce the amount of unexpended funds to a level that will fall within the required parameters. In addition, we recommend implementing a monitoring process over spending of CDBG grant funds to ensure funding is used within the specified time requirements and in compliance with the period of performance requirement. Views of Responsible Officials: The City acknowledges its lack of an internal control over monitoring the timeliness requirement per CDBG regulations. Over each of the past three (3) fiscal years the City has not been in compliance with this regulation, however under new leadership of the department the City has begun to make improvements to its timeliness ratio. The City has also been working with our local HUD representatives in an effort to improve our timeliness ratio so that it is in compliance with the regulation. The City has already approved in July 2020 the reallocation of previous year?s unspent CDBG grant awards in the amount of $1,209,882. Additionally, various projects previously awarded were ones that took multiple years to complete, resulting in the City failing the timeliness requirement. Going forward, the City may consider the timing aspect of projects (i.e. estimated start date and estimated completion date) when determining the allocation of CDBG grant awards.

2019-004 Reporting ? Financial and Performance Reporting CFDA No. 14.218 ? CDBG Entitlement Grants Cluster Direct Award for the Year Ended December 31, 2019 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain an effective control environment and complete timely financial and performance reports per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls to ensure compliance with reporting requirements of the federal award. The City is required to submit a Consolidated Annual Performance and Evaluation Report (CAPER) and the HUD 60002, Section 3 Summary Report, Economic Opportunities for Low- and Very Low-Income Persons (OMB No. 2529-0043). These reports are required to be submitted 90 days after the end of a grantee?s program year. Condition: The City?s Department of Community Development did not establish a control environment over the preparation and submission of the CAPER and the Section 3 Summary Report. The City did not submit the CAPER and Section 3 Summary Reports within the established timeframe required by the federal agency, resulting in noncompliance with the reporting requirements. Cause: The City did not have an established control process in place to appropriately monitor and ensure compliance with these requirements. Effect or potential effect: The City is not in compliance with the reporting requirements of the federal program. Noncompliance could have funding implications in the future. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management and testing performed over the preparation and submission of reporting requirements. There was significant turnover in the City?s Department of Community Development, who administered the major program noted above, during the 2019 fiscal year. Recommendation: We recommend the City?s Department of Community Development establish a control environment over the preparation of their reporting requirements, and a monitoring process to ensure reporting deadlines are met. Views of Responsible Officials: The City agrees with this finding and the Compliance Officer will improve our internal control documentation to include additional procedures related to the preparation and submission of the annual CAPER and Section 3 Summary Report. It should be noted that for purposes of the 2019-2020 CAPER submission, an extension to December 31, 2020 has been approved and will be filed by the CD Financial Manager within the extended deadline. It is anticipated that a formal procedure will be created no later than January 1, 2021.

2019-005 Subrecipient Monitoring CFDA No. 14.239 ? Home Investment Partnership Program Direct Award for the Year Ended December 31, 2019 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain an effective control environment over the monitoring and evaluation of subrecipients for risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward, in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Sections 200.331 and 200.331(b), Requirements for pass-through entities, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls. Condition: The City?s Department of Community Development has not established supervisory controls to ensure performance of risk assessments over subrecipients. We noted there were no ongoing monitoring activities performed, as required, in accordance with the criteria noted above. Cause: The City did not have established control processes in place to perform risk assessments and ongoing monitoring activities over subrecipients. Effect or potential effect: The City was not in compliance with subrecipient monitoring requirements per the Uniform Guidance. Noncompliance could have funding implications in the future. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management and testing performed over the City?s subrecipient monitoring and management. There was significant turnover in the City?s Department of Community Development, who administered the major program noted above, during the 2019 fiscal year. Recommendation: We recommend the City?s Department of Community Development develop and implement a written process regarding the performance of risk assessments over all subrecipients for use in developing appropriate monitoring activities. In addition, we recommend the review of subrecipient contracts to ensure all monitoring activities stated in the contracts between the City and subrecipient are being performed. Views of Responsible Officials: The Compliance Officer will review our current internal procedures related to subrecipient monitoring and amend current procedures and/or develop and implement new procedures to address necessary steps in our subrecipient monitoring process. It is anticipated that any formal procedure updates will be completed no later than January 31, 2021.

2019-006 Eligibility Determination CFDA No. 14.871 ? Housing Voucher Cluster Direct Award for the Year Ended December 31, 2019 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain an effective control environment, per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls to ensure compliance with the eligibility requirements of the federal award. Condition: The City?s Department of Community Development has not conducted supervisory reviews over eligibility determinations for those participating in the Housing Voucher grant program. Cause: The City has not established a control process for supervisory review over eligibility determinations. Effect or potential effect: The lack of a supervisory review process over eligibility determinations could result in noncompliance with the eligibility requirements under the federal award and unallowable costs being charged to the program. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management and testing performed over the City?s eligibility determinations. There was significant turnover in the City?s Department of Community Development, who administered the major program noted above, during the 2019 fiscal year. Recommendation: We recommend the City?s Department of Community Development develop and implement a written process to ensure an individual independent of the eligibility determination is performing a review over the determination, prior to disbursing funds to the grant applicant. Views of Responsible Officials: The Compliance Officer will create an internal process whereby a supervisory review will be performed at least annually on eligibility determinations provided by staff. It is anticipated that any formal procedure updates will be completed no later than January 31, 2021.

2019-007 Reporting ? Financial and Special Reporting CFDA No. 14.871 ? Housing Voucher Cluster Direct Award for the Year Ended December 31, 2019 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain effective internal controls surrounding the reporting program requirements provided by the federal agency within the Compliance Supplement, per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls. The City is required to submit the HUD52681-B, Voucher for Payment of Annual Contributions and Operating Statement, Financial Reports (Financial Assessment Sub-system, FASS-PH) and the HUD-50058, Family Report. The information within the financial and special reporting requirements is relied upon by HUD for use in funding determinations, monitoring of program activity and for Section 8 Management Assessment Program (SEMAP) related decisions. Condition: The City?s Department of Community Development has not established controls over preparation and submission of the HUD52681-B, Voucher for Payment of Annual Contributions and Operating Statement, Financial Reports (FASS-PH) and the HUD-50058, Family Report. In addition, the City did not submit the annual FASS-PH report for the fiscal year ended December 31, 2019. Cause: The City did not have an established control process in place to appropriately monitor the preparation and filing of the required reports noted above. Effect or potential effect: Without effective internal controls, the City could report inaccurate information to HUD, or neglect to file reports, which could lead to noncompliance under the program requirements. In addition, the City did not submit the FASS-PH for the fiscal year ended December 31, 2019 and is not in compliance with the federal program. Noncompliance could have funding implications in the future. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management and testing performed over the preparation, review and submission of reporting requirements. There was significant turnover in the City?s Department of Community Development, who administered the major program noted above, during the 2019 fiscal year. Recommendation: We recommend the City?s Department of Community Development implement monitoring controls over the preparation and submission of the required reporting. Views of Responsible Officials: The City will create an internal process whereby a supervisory review will be performed of the various reporting requirements submitted by the City. A calendar of reporting deadlines has already been created and will be reviewed at least monthly to ensure compliance. It is anticipated that any formal procedure updates will be completed no later than January 31, 2021.

2019-008 Special Tests and Provisions ? Reasonable Rent, Housing Assistance Payment, Depository Agreements and Rolling Forward Equity Balances CFDA No. 14.871 ? Housing Voucher Cluster Direct Award for the Year Ended December 31, 2019 Federal Agency: U.S. Department of Housing and Urban Development Criteria: The City is required to establish and maintain an effective control environment, per Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D; Section 200.303 Internal Controls to ensure compliance with the special tests requirements provided by the federal agency. The federal awarding agency has identified additional requirements under this award, per the Code of Federal Regulations (CFR), related to reasonable rent, housing assistance payment, depository agreements and rolling forward of equity balances. Condition: The City did not establish a review process over the above requirements. In addition, the City was unaware of the depository agreements and rolling forward of equity balances requirements. Cause: The City did not have an established control process in place to appropriately monitor and ensure compliance with these requirements. Effect or potential effect: Insufficient internal control processes could result in noncompliance related to the requirements noted above. Specifically, the City was not in compliance with the depository agreements and rolling forward of equity balances requirements. Questioned costs: No questioned costs identified. Context: This finding was identified through inquiries of newly appointed management, as well as control and compliance testing over the requirements identified above. There was significant turnover in the City?s Department of Community Development, who administered the major program noted above, during the 2019 fiscal year. Recommendation: We recommend the City?s Department of Community Development develop a written control process to ensure these requirements are appropriately monitored through independent review, sufficient documentation retained, and reconciliations performed on a consistent basis to ensure the City?s compliance with program requirements. Views of Responsible Officials: The Compliance Officer will create an internal process whereby a supervisory review will be performed of the various reporting requirements and special tests to ensure compliance with the respective requirement. A calendar of reporting deadlines has been created and will be reviewed at least monthly to ensure compliance with program requirements. Additionally, the City is working with our banking partner to finalize the required depository agreements in accordance with HUD regulations and should have a formal agreement by December 31, 2020.

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