City of PhiladelphiaLocal Government

Assistance Listing 14.231 Emergency Solutions Grants Program Condition: During our testing of subrecipient expenditures, we noted that the Office of Homeless Services (OHS) failed to pay 19 out of 33 subrecipient invoices within 30 days of receiving the subrecipient’s payment request, with nine of these 19 invoices paid more than 60 days after receipt of the request. Funding for the Emergency Solutions Grants Program is received directly from the U.S. Department of Housing and Urban Development (HUD) and passed through the PA Department of Community and Economic Development. Criteria: 24 CFR 576.203(c) requires that the recipient must pay each subrecipient for allowable costs within 30 days after receiving the subrecipient's complete payment request. Effect: Failure to make timely payments to subrecipients could lead to noncompliance and affect program services at the subrecipient level. Cause: There are often significant delays between when invoices are received and when vouchers are processed in the city’s accounting system, FAMIS. Recommendation: OHS management should strengthen its policies and procedures for processing invoices to ensure that all subrecipient invoices are reviewed and paid timely. Views of the Responsible Officials and Corrective Action Plan: The Office of Homeless Services acknowledges the finding. The delays in processing invoices were due to heightened fiscal oversight implemented after it was determined that the Office had exceeded its budget allocation. As a result, all invoices for OHS-contracted services were subject to additional layers of review beyond the standard OHS and Finance approval process. These invoices were routed to the Managing Director’s Office before payment authorization, which extended the normal processing timelines. To prevent recurrence, the Office of Homeless Services will strengthen its invoice-processing policies and procedures to ensure timely review and payment of all subrecipient invoices, consistent with applicable federal requirements. Now that the enhanced review protocols are no longer in effect, OHS will reestablish standard review timelines and reinforce internal expectations for prompt processing. OHS will also provide guidance to fiscal staff on escalation procedures should future budgetary reviews impact invoice timeliness. These corrective actions will support improved compliance and reduce the likelihood of processing delays. Contact Person: Jerome Hill, Director of Compliance, OHS, 215-686-0371

Assistance Listing 14.231 Emergency Solutions Grants Program Condition: During our audit of the Emergency Solutions Grant program, we found that the Office of Homeless Services (OHS) had charged the program for ten expenditures beyond the 120 day deadline24 established for the period of performance. Funding for this program was received directly from the U.S. Department of Housing and Urban Development and through the Commonwealth of Pennsylvania Department of Community and Economic Development. Criteria: 2 CFR Part 200.344 states that the recipient must liquidate all financial obligations incurred under the federal award no later than 120 calendar days after the conclusion of the period of performance. A subrecipient must liquidate all financial obligations incurred under a subaward no later than 90 calendar days after the conclusion of the period of performance of the subaward (or an earlier date as agreed upon by the pass-through entity and subrecipient). Additionally, the recipient or subrecipient must promptly refund any unobligated funds that the federal agency or pass-through entity paid and that are not authorized to be retained. Effect: Expenditures totaling $228,594, which we consider to be questioned costs, were improperly reported in the SEFA. Additionally, the city may have to reimburse the federal agency for any expenditure that was charged to the federal grant beyond the deadline established for the period of performance. Cause: OHS did not appropriately liquidate all financial obligations by the deadline established for the period of performance. Recommendation: We recommend that OHS review all financial obligations at the end of the period of performance and timely liquidate any remaining obligations in accordance with 2 CFR 200.344. Views of the Responsible Officials and Corrective Action Plan: The Office of Homeless Services acknowledges the finding. The delay in liquidating obligations resulted from internal control procedures that appropriately identified a potential contract concern involving the Resources for Human Development. In accordance with established financial oversight protocols, the Finance Department placed a temporary hold on related payments pending further review. Once the review was concluded, the payments were released. Additionally, limitations within the FAMIS system, specifically its inability to retain original voucher creation dates after rejection and resubmission, contributed to the appearance of delayed liquidation. To prevent recurrence, the Office of Homeless Services will strengthen its closeout procedures to ensure timely review and liquidation of all obligations in accordance with 2 CFR § 200.344. The Office will also initiate earlier coordination with the Finance Department when payment holds arise and reinforce staff training on grant closeout and escalation protocols. These corrective actions will enhance compliance and reduce the likelihood of future delays. Contact Person: Jerome Hill, Director of Compliance, OHS, 215-686-0371

Assistance Listing 93.136 Injury Prevention and Control Research and State/Community Based Programs Assistance Listing 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Program Assistance Listing 93.354 Public Health Emergency Response Program Condition: The city’s Department of Public Health (DPH) acts as a pass-through entity for several of the grants it receives from the federal government. For three grants we tested, DPH could not provide evidence showing that subawards given to subrecipient entities were accurately and/or timely reported to the Federal Subaward Reporting System (FSRS)25, as required by the Federal Funding Accountability and Transparency Act (FFATA). For the Injury Prevention and Control Research and State/Community Based Program (ALN 93.136) and the Epidemiology and Lab Capacity Program (ALN 93.323), DPH could not provide evidence that sampled subawards were reported at all. For the Public Health Emergency Response Program (ALN 93.354), none of the six subawards were reported timely, with submission dates ranging from 20 months to two years after the subaward date. Information submitted for four of these entities also reported inaccurate subaward amounts. Criteria: 2 CFR Part 170 specified that recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the FSRS. Additionally, 2 CFR Part 170 – Appendix A states that the subaward information be reported no later than the end of the month following the month in which the subaward was issued. Effect: Federal grantors may not have complete and accurate information to make fiscal decisions on federal awards. Cause: DPH did not have a systematic process in place for reporting subawards into the FSRS system. Recommendation: DPH should prepare written policies and procedures to ensure that its FFATA reporting is performed accurately and submitted timely, and that the source documentation, used for reporting purposes, contains all applicable subaward information. Views of the Responsible Officials and Corrective Action Plan: ALN 93.136 – Injury Prevention and Control Research and State/Community Based Programs PDPH acknowledges that Federal Funding Accountability and Transparency Act (FFATA) reporting requirements were not consistently met during the audit period due to limited staff capacity and lack of clearly defined procedures for subaward reporting. In response, SUPHR will establish procedures to ensure timely and accurate FFATA reporting in accordance with federal requirements. These procedures include designating responsible staff, assigning appropriate SAM.gov access roles, and providing orientation and training on subaward reporting processes. Standardized documentation and retention practices will also be implemented to ensure proper recordkeeping and verification of all submissions. SUPHR is committed to maintaining compliance with FFATA requirements going forward and will continue to monitor adherence through routine oversight by the grants management team. Initial implementation of corrective measures will begin upon receipt of an approved Year 3 budget from the Centers of Disease Control. ALN 93.323 – Epidemiology and Lab Capacity Program PDPH acknowledges the error that occurred with FFATA reporting with respect to its incomplete reporting. This grant had previously been connected in the FSRS.gov system to a PDPH division that was created during the COVID pandemic that no longer exists. Although the grant was listed under the Division of Disease Control by FY24, the FFATA was overlooked and not completed. The Division of Disease Control will work toward implementing additional internal controls to support accurate and timely FFATA reporting going forward. ALN 93.354 – Public Health Emergency Response PDPH acknowledges that errors occurred with FFATA reporting with respect to both the timing of the reporting and the amounts of subawards reported. The Division of Disease Control will work toward implementing additional internal controls to support accurate and timely FFATA reporting going forward. Contact Persons: Daniel Teixeira da Silva, Director, Division of Substance Use Prevention and Harm Reduction (SUPHR), 267-760-0307 Jessica Caum, Public Health Preparedness Program Manager, Philadelphia Department of Public Health, 215-685-6731

Assistance Listing 97.083 Staffing for Adequate Fire and Emergency Condition: The Philadelphia Fire Department (PFD) submitted a semi-annual Federal Financial Report (FFR reported on form SF-425) that was inaccurate for federal awards received under the Staffing for Adequate Fire and Emergency Response (SAFER) program. Our review of the semi-annual SF-425 submitted for the reporting period ended June 30, 2024, disclosed that the amounts reported for “Federal share of expenditures”, “Total Federal Share”, and “Unobligated balance of Federal funds” were incorrect. The “Federal share of expenditures” was overstated by $19,237,509 which resulted in the “Total Federal share” being overstated and the “Unobligated balance of Federal funds” being understated by the same amount. Funding for this program is received from the U.S. Department of Homeland Security and administered by the Federal Emergency Management Agency (FEMA). Criteria: OMB’s Uniform Guidance, Title 2, Part 200, Subpart D, paragraph 200.302 (b)(2) specifies that the recipient must disclose accurate, current, and complete financial results. Effect: The SF-425 report tracks the status of financial data for this federal award. Failure to properly report accurate information on the SF-425 report leads to noncompliance with reporting requirements. Also, federal grantors will not have complete and accurate information to make fiscal decisions on future federal awards. Cause: The Fire Department has not provided the proper training for its staff to prepare the SF-425 report. Recommendation: PFD should ensure their staff has proper training to prepare the SF-425 report and submit a revised report to FEMA. Views of the Responsible Officials and Corrective Action Plan: This finding pertains to a single Federal Financial Report (FFR) for period ending June 30th, 2024. This was the first and only FFR for this grant that the Philadelphia Fire Department prepared independently. The report was subsequently reviewed, approved, and accepted by FEMA. All subsequent and future FFRs have been submitted through the FEMA GO portal, where FEMA pre-populates the digital worksheet with the relevant figures. It should be noted that these pre-populated amounts align with PFD reimbursement requests for each reporting period, rather than the city’s total expenditures on salaries and benefits during the same period. Upon notification of the discrepancy by the Controller’s office, PFD promptly contacted both FEMA and the City’s Grants office to seek clarification and guidance. Due to the federal government shutdown, FEMA has not yet responded. PFD will re-engage FEMA once normal operations resume, and if warranted will submit a revised FFR. PFD emphasizes that the discrepancy identified on the single FFR does not impact the available grant funding. Contact Person: Kelly Collins, Deputy Commissioner, Fire, 215-906-8976

Assistance Listing 93.136 Injury Prevention and Control Research and State/Community Based Programs Condition: The City’s Department of Public Health (DPH) did not perform risk assessments or monitor the performance of the eight subrecipients tested for this program. Specifically, DPH did not evaluate the risk of fraud and non-compliance or review the financial and performance reports for these eight entities, Funding for this program is received from the U.S. Department of Health and Human Services. Criteria: OMB’s Uniform Guidance 2 CFR Part 200.332(c) states that the pass-through entity is responsible for evaluating each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring.2 CFR Part 200.332(f)further states that depending on the pass-through entity’s assessment of the risk posed by the subrecipient, the pass-through entity may need to provide training and technical assistance on program matters, perform site visits to review program operations, or arrange for other agreed-upon procedures, to ensure compliance with program requirements and achievement of performance goals. Finally, 2 CFR Part 200.332(e) requires the pass-through entity to monitor the activities of subrecipients by reviewing the financial and performance reports of subrecipients to ensure that the entities comply with federal statutes, regulations, and the terms and conditions of their subawards. Effect: Failure to perform risk assessments and review the financial and performance reports of subrecipients resulted in noncompliance with subrecipient monitoring requirements set forth in the Uniform Guidance. Without these reviews, DPH may not adequately determine the appropriate level of monitoring needed to ensure that subrecipients comply with program requirements, federal regulations, and other requirements of their subawards. This noncompliance could also lead to the city having to pay back federal awards. Cause: DPH incurred significant staff turnover. Recommendation: DPH should strengthen its policies and procedures to ensure that risk assessments and required monitoring procedures are performed for all subrecipients. Additionally, for subrecipients determined to be high-risk, DPH should provide training and technical assistance, perform site visits, and/or apply other agreed-upon procedures to help ensure that subrecipients are properly accountable for subawards and comply with program requirements. Views of the Responsible Officials and Corrective Action Plan: The Philadelphia Department of Public Health (PDPH) acknowledges the findings of the Office of the City Controllers. PDPH confirms that risk assessments and related monitoring documentation for all subrecipients were not consistently completed or retained during the audit period, primarily due to staff turnover and limited administrative capacity within the grants management function. To address this, the Division of Substance Use Prevention and Harm Reduction (SUPHR) has initiated corrective measures to strengthen compliance with the requirements of 2 CFR 200.332. These measures include implementation of standardized tools and procedures to ensure that subrecipient risk assessments, monitoring activities, and the review of financial and performance reports are conducted in a consistent, timely, and well-documented manner. Implementation of these improvements will enhance internal controls, ensure appropriate oversight of subrecipients, and promote full compliance with federal regulations. The Department anticipates that tools and standard operating procedures will be finalized by December 19, 2025, with full implementation of corrective actions by March 3, 2026. Contact Person: Daniel Teixeira da Silva, Director, Division of Substance Use Prevention and Harm Reduction (SUPHR), 267-760-0307

Assistance Listing 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Program Condition: The city’s Department of Public Health (DPH) did not perform risk assessments or monitor the performance of three subrecipient entities tested for this program. Specifically, DPH did not evaluate the risk of fraud and non-compliance or review the financial and performance reports for these three entities. Funding for this program is received from the U.S. Department of Health and Human Services. Criteria: OMB’s Uniform Guidance 2 CFR Part 200.331(a) states that a subaward recipient may be considered a subrecipient of the pass-through agency if the recipient 1) determines who is eligible to receive federal assistance, 2) has its performance measured in relation to whether the objectives of a federal program were met, and 3) has responsibility for programmatic decision-making. OMB’s Uniform Guidance 2 CFR Part 200.332(c) states that the pass-through entity is responsible for evaluating each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring. 2 CFR Part 200.332(f) further states that depending on the pass-through entity’s assessment of the risk posed by the subrecipient, the pass-through entity may need to provide training and technical assistance on program matters, perform site visits to review program operations, or arrange for other agreed-upon procedures, to ensure compliance with program requirements and achievement of performance goals. Finally, 2 CFR Part 200.332(e) requires the pass-through entity to monitor the activities of subrecipients by reviewing the financial and performance reports of subrecipients to ensure that the entities comply with federal statutes, regulations, and the terms and conditions of their subawards. Effect: Failure to perform risk assessments and review financial and performance reports for subrecipients resulted in noncompliance with subrecipient monitoring requirements set forth in the Uniform Guidance. Without these reviews, DPH may not adequately determine the appropriate level of monitoring needed to ensure that subrecipients comply with program requirements, federal regulations, and other requirements of their subawards. This noncompliance could also lead to the city having to pay back federal awards. Cause: DPH management misclassified these three entities as contractors, rather than subrecipients. For purposes of the Epidemiology and Laboratory Capacity Program, contracts between DPH and the three entities in question specifically state that each of the entities would serve as subrecipients for grant funding awarded through the contracts. Subawards were used to hire additional staff for DPH’s COVID-19 Containment Program, for duties that included determining who is eligible to receive federal assistance, achieving the objectives established by the program, making programmatic decisions, and adhering to all applicable federal program compliance requirements. Recommendation: DPH management should reevaluate the criteria used to determine whether subaward recipients are classified as subrecipients or contractors. Additionally, management should ensure that risk assessments and required monitoring procedures are performed for all entities classified as subrecipients. Views of the Responsible Officials and Corrective Action Plan: The Philadelphia Department of Public Health (PDPH) acknowledges the Office of the City Controller’s finding. PDPH maintains a process to identify subrecipients during the contracting process. Contracts with subrecipients include federal compliance language. The three entities identified in this finding, including Concilio, Urban Affairs Coalition (UAC), and Public Health Management Corporation (PHMC), should have been classified as vendors and not subrecipients. These entities were not responsible for programmatic decision-making. This error has been corrected in subsequent contracts. Despite the misclassification, appropriate vendor monitoring was conducted, including supervision of staff hiring and monitoring and reconciliation of monthly invoice packages. Contact Person: Jessica Caum, Director, Department of Public Health, 215-685-6731 Naomi Mirowitz, Performance and Compliance Officer, Department of Public Health, 215-964-5050

Assistance Listing 93.914 HIV Emergency Relief Project Grants Condition: The Office of Health and Human Services' (HHS) Audit Unit failed to issue a management decision for audit findings related to two subrecipients of the city, who each had audit findings reported in their respective single audits. The fiscal year 2023 single audit of Bebashi and the fiscal year 2024 single audit of The Children's Hospital of Pennsylvania had a significant deficiency reported under the HIV Emergency Relief Program (ALN 93.914) in the Internal Controls over Major Programs section of the Schedule of Findings and Questioned Costs. Funding for HIV Emergency Relief program is received directly from the U.S. Department of Health and Human Services. Criteria: 2 CFR section 200.332(e) states that the pass-through entity must issue a management decision for audit findings pertaining only to the federal award provided to the subrecipient from the pass-through entity as required by 2 CFR 200.521. Effect: The management decision serves to confirm the audit findings and outline a corrective action plan for the subrecipient. Failure to issue a management decision could lead to unresolved findings at the subrecipient level. Cause: HHS incorrectly relies on the auditing firms that perform subrecipient single audits to issue a management decision per 2 CFR section 200.312(e). Recommendation: We recommend that HHS management modifies and/or strengthens its current policies and procedures to ensure that a management decision letter will be issued for audit findings relating to any federal awards that were provided to subrecipients. Views of the Responsible Officials and Corrective Action Plan: HHS acknowledges the Controller’s finding that management decision letters were not issued for specific subrecipient audit findings under ALN 93.914, as required under 2 CFR 200.332(e) and 200.521. While the formal letters were not issued, HHS did review the audit findings, obtained and evaluated the subrecipients’ corrective action plans and confirmed that no questioned costs or additional risks remained. These steps ensured that the underlying corrective actions were completed. To strengthen documentation and ensure consistency across all federal programs, HHS will adopt the following corrective measures: 1. Standard management Decision Template • HHS will adopt a simple, uniform management decision template and clear steps for documenting decisions within the required federal timelines. 2. Central Location for Documentation • HHS will store all management decision letters and related materials in one designated shared location to ensure accessibility and consistent record-keeping. 3. Brief Staff Guidance • HHS will provide concise written guidance to staff outlining: o When a management decision is required, o How to complete it using the template, and o What documentation must be retained? These corrective actions will ensure consistent compliance with federal requirements while supporting the City’s long-term goal of standardizing financial processes across departments. Contact Person: Landuleni Shipanga, Controller, City of Philadelphia Office of Children and Families, 215-683-6366

Assistance Listing 14.231 Emergency Solutions Grants Program Assistance Listing 93.224 & 93.527 Health Center Program & Grants for New and Expanded Services under the Health Center Program Assistance Listing 93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Assistance Listing 93.667 Social Services Block Grant Assistance Listing 93.914 HIV Emergency Relief Project Grants Condition: In our review of the fiscal year (FY) 2024 SEFA, we noted that GAAU improperly reported prior period expenditures for six grant programs in the current year SEFA. Specifically, we noted expenditures for the programs in Table 5 below, occurred in FY 2023, but were not included in the year end accounts payable accrual or reported in the FY 2023 SEFA. Instead, GAAU inappropriately reported those expenditures in the FY 2024 SEFA. Criteria: OMB’s Uniform Guidance, Title 2, Part 200, Subpart F, paragraph 200.510(b) specifies that the grantee must prepare a SEFA for the period covered by the financial statements which must include the total federal awards expended as determined in accordance with 200.502 Basis for Determining federal awards expended. OMB’s Uniform Guidance, Title 2, Part 200, Subpart F, paragraph 200.502(a) specifies that the determination of when a federal award is expended must be based on when the activity related to the federal award occurs. Additionally, the city’s financial statements are prepared on the modified accrual basis and follow Generally Accepted Accounting Principles (GAAP). GAAP requires that governments report a liability in the period in which it is incurred. Accordingly, governmental entities should record expenditures when a liability is incurred, or when the activity related to a federal award occurs and not based on when the invoice is received. Effect: Failure to report grant expenditures on the SEFA during the correct fiscal year is a departure from GAAP and caused inaccurate reporting of federal expenditures. Cause: Finance provides the departments with a list of payables and a list of open encumbrances with a cut-off date of September. The departments are required to review any pending invoices, open encumbrances, and payables for any payables that need to be recorded. During the audit, the departments did not perform a thorough review of their pending invoices and open encumbrances, so Finance was unable to detect significant payables. Recommendation: Finance should improve its accounts payable process by following GAAP and the accrual basis of accounting by recording expenditures in the fiscal year they occur. All other city departments should review pending invoices and unliquidated encumbrances and follow up with contractors and subrecipients to ensure that the invoices are processed within the cut-off date for accounts payable. Views of the Responsible Officials and Corrective Action Plan: Although we acknowledge that certain prior-year expenditures were recorded in the FY24 SEFA, we do not believe these errors were material to the basic financial statements. In addition, we do not believe that including these expenditures affected the determination of major programs or our compliance with any federal grant requirements. We confirm that our financial statements are prepared in accordance with Generally Accepted Accounting Principles and that, as presented, they are materially accurate. For FY 2025, we expanded our search for unrecorded liabilities to include activity through seven months after year-end. Because the risk of unrecorded liabilities declines as we move further from fiscal year-end, we focused our review on transactions that could reasonably have a material impact on the financial statements. We will work closely with all departments to ensure that any outstanding obligations that have not yet been vouchered are identified and addressed. Contact Person: Shantae Thorpe, Accounting Manager, Finance, 215-686-5629

Assistance Listing 14.239 Home Investment Partnerships Program Assistance Listing 93.569 Community Services Block Grant Condition: The Office of Homeless Services (OHS) contracted with one subrecipient to provide services for both the Home Investment Partnerships Program (HOME) and Community Services Block Grant (CSBG). OHS did not perform a risk assessment to determine the appropriate monitoring of this subrecipient as required under 2 CFR §200.331(b). Funding for HOME is received from the U.S. Department of Housing and Urban Development. Funding for CSBG is received from the U.S. Department of Health and Human Services and passed through the PA Department of Community and Economic Development. Criteria: OMB’s Uniform Guidance 2 CFR §200.331(b) states that all pass-through entities must evaluate each subrecipient’s risk of noncompliance with federal statutes, regulations and the terms and conditions of the subaward for the purpose of determining the appropriate subrecipient monitoring to ensure proper accountability and compliance with program requirements. Effect:Without a risk assessment, OHS may not know how to properly plan subrecipient monitoring. They may over-monitor a subrecipient that should be considered low risk or under-monitor a subrecipient that should be considered high risk. Cause: OHS had not implemented policies and procedures to ensure the performance of risk assessments for all subrecipients. Recommendation: OHS should implement policies and procedures to ensure the performance of risk assessments for all subrecipients to determine the appropriate level of subrecipient monitoring. Views of the Responsible Officials and Corrective Action Plan: OHS is in the process of finalizing a risk assessment and a RA policy and procedure to ensure that the RAs are completed timely and inform our monitoring plan. Both will be in compliance with OMB’s Uniform Guidance 2 CFR §200.331(b). PHMC will be the first subrecipient that will be tested. We will provide that risk assessment to your office and our partners at DHCD when it is completed. It is the goal to have this RA finalized and all grant funded program providers assessed for risk by 12/31/2024. Contact Person: Jerome R. Hill, Director of Compliance, Office of Homeless Services, 215-686-0371, 215-520-3556

Assistance Listing 14.267 Continuum of Care Program Condition: For one out of six grant agreements tested, the Office of Homeless Services (OHS) was unable to provide complete supporting documentation for matching amounts. The grant agreement was passed through to subrecipients via six grant allocations, and OHS could not provide the supporting documentation for matching amounts for two out of the six grant allocations. Funding for this program is received from the U.S. Department of Housing and Urban Development. Criteria: Per 24 CFR 578.73(a) and (c)(3), the recipient or subrecipient must match all grant funds, except for leasing funds, with no less than 25 percent of funds or in-kind contributions from other sources. Before grant execution, services to be provided by a third party must be documented by a memorandum of understanding (MOU) between the recipient or subrecipient and the third party that will provide the services. Effect: Failing to properly maintain matching documentation could result in OHS being non-compliant with federal regulations. Cause: OHS did not have written policies and procedures in place for the maintenance of matching documentation. Recommendation: We recommend that OHS create written policies and procedures for the maintenance of matching documentation and ensure they are implemented. Views of the Responsible Officials and Corrective Action Plan: OHS acknowledges the finding and agrees with the need to develop a corrective action plan. Given that this will require collaboration across multiple units, we are unable to provide a specific timeline for a comprehensive and accurate response at this moment. However, I will take immediate steps to initiate the necessary discussions. It is important to note that the prevailing, though incorrect, understanding within our team was that when a match involves cash, the primary source of verification occurs during the filing of the Annual Performance Report (APR). Contact Person: Jerome R. Hill, Director of Compliance, Office of Homeless Services, 215-686-0371, 215-520-3556

Assistance Listing 14.267 Continuum of Care Program Condition: For three out of 25 sampled units receiving rental assistance, the Office of Homeless Services (OHS) did not ensure that contract rents being paid were comparable with those paid for unassisted units. For these three units, OHS only included Continuum of Care (CoC) Program assisted units in their rental comparability analyses. Funding for this program is received from the U.S. Department of Housing and Urban Development. Criteria: Per 24 CFR 578.51(g), the recipient must determine whether the rent charged for the unit receiving rental assistance is reasonable in relation to rents being charged for comparable unassisted units, taking into account the location, size, type, quality, amenities, facilities, and management and maintenance of each unit. Reasonable rent must not exceed rents currently being charged by the same owner for comparable unassisted units. Effect: OHS is not in compliance with 24 CFR 578.51(g). Additionally, by relying solely on assisted units, they may have established rent rates that do not accurately reflect the broader market. Cause: OHS does not have written policies and procedures in place that clearly communicate the rent reasonableness requirements internally or to their providers. Recommendation: We recommend that OHS create written policies and procedures that clearly communicate rent reasonableness requirements internally and to their providers. Views of the Responsible Officials and Corrective Action Plan: OHS will make the needed changes to all Rent Reasonable policies, standard operating procedures, housing standards, scopes of service, and monitoring tools to reflect the requirement above. Additionally, this will be communicated to internal staff and the provider community, especially those that have been allowed to complete their own rent reasonable assessments. It is also a possibility that we will no longer allow the Providers to conduct the rent reasonable verification themselves. This has yet to be determined. Contact Person: Jerome R. Hill, Director of Compliance, Office of Homeless Services, 215-686-037, 215-520-3556

Assistance Listing 14.267 Continuum of Care Program Condition: For two out of 51 tested transactions, the Office of Homeless Services (OHS) charged to the grant a total of $63,816 in expenditures that were incurred after the established period of performance. Also, an additional three expenditure transactions were not liquidated within 120 calendar days after the end date of the period of performance; however, we are not questioning costs related to these transactions, as they are otherwise in compliance with period of performance regulations. Funding for this program is received from the U.S. Department of Housing and Urban Development. Criteria: Per 2 CFR section 200.403(h), costs must be incurred during the approved budget period. Also, per 2 CFR section 200.344(b), unless the federal awarding agency or pass-through entity authorizes an extension, a non-federal entity must liquidate all financial obligations incurred under the federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the federal award. Effect: Failure to incur expenditures and liquidate financial obligations within the required time period can result in noncompliance for the program as well as questioned costs and repayment obligations. Total expenditures of $63,816 incurred after the period of performance are considered to be known questioned costs. Cause: For most of the transactions noted in the condition, period of performance issues were the result of the timing of vendor invoice submissions. Additionally, OHS expenditure review procedures did not detect the noncompliance. Recommendation:We recommend that OHS improve the efficiency of communications with their vendors to stress the importance of timely invoice submissions. OHS should also strengthen expenditure review procedures to detect future noncompliance. Views of the Responsible Officials and Corrective Action Plan: OHS agrees with the issues outlined, which stem from the delayed processing of invoices and untimely payments. These challenges are largely the result of longstanding issues with over-allocations and the need to catch up on processing a backlog of documents. We appreciate you bringing this to our attention, as it provides an opportunity to refine our procedures and put in place measures to prevent these issues from recurring in the future. This feedback will be valuable as we work to improve our processes and enhance our ability to manage workloads more effectively. Contact Person: Jerome R. Hill, Director of Compliance, Office of Homeless Services, 215-686-0371, 215-520-3556

Assistance Listing 93.268 Immunization Cooperative Agreements Assistance Listing 93.940 HIV Prevention Activities Health Department Based Condition: The city’s Department of Public Health (DPH) submitted special reports for the Federal Funding Accountability and Transparency Act (FFATA) that were inaccurate for both the Immunization Cooperative Agreements (Assistance Listing 93.268) and the HIV Prevention Activities Health Department Based (Assistance Listing 93.940) programs. This condition was reported as finding number 2021-010 in the prior year report. Please see Tables 3 and 4 below for details. Criteria: 2 CFR Part 170 specifies that recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Effect: Federal grantors may not have complete and accurate information to make fiscal decisions on federal awards. The public will not have the information on federal awards (federal financial assistance and expenditures). Cause: DPH did not have a systematic process in place to report subawards made under the federal program in accordance with FFATA. Consequently, the responsible employees were not properly trained in how to complete the FFATA reports. Also, DPH management indicated that the source documentation used to prepare the reports did not contain all applicable subaward information. Recommendation: DPH should strengthen its procedures to ensure that its FFATA reports are accurate and timely submitted, and that the source documentation used in the preparation of the reports contains all applicable subaward information. Views of the Responsible Officials and Corrective Action Plan: The Department of Public Health will strengthen procedures to ensure the accuracy and submission of FFATA reports. The Division of Disease Control (DDC) acknowledges the discrepancy within the submitted FFATA report for Immunization Cooperative Agreements Grant Program (ALN 93.268). DDC will implement appropriate review and preparation for all FFATA reporting by querying the necessary systems to gather and identify all pertinent information regarding contracts and amounts. The Division of HIV Health’s FFATA reports were late due to employee turnover and attempts to obtain information from providers. The Division of HIV Health is researching the fact that expenditure information for the FFATA reports included only six month of awards and not the full twelve months, as well as the fact that a subaward was not included in the source document used in preparation of the FFATA report. Contact Person(s): Ryan Taylor, Chief Operating Officer and Deputy Commissioner, Philadelphia Department of Public Health, 215-686-5207 Kathleen Brady, Director/ Medical Director, Division of HIV Health, Philadelphia Department of Public Health, 215-685-4778

Assistance Listing 93.558 Temporary Assistance for Needy Families Condition: Two out of two subrecipients selected for testing did not have one or more required elements defined in §2CFR 200.332 (a)(1) & (2) in their subrecipient agreements with the Mayor’s Office of Community Empowerment and Opportunity. For one subrecipient, the contract did not contain specific language indicating the Federal assistance listing number or title. For the other subrecipient, the contract did not have the federal compliance language to ensure subrecipient’s compliance with federal statutes, regulations, and the terms of the federal award. The funding source for this program is the PA Department of Human Services. Criteria: §2CFR 200.332 (a)(1) & (2) state that the pass-through entity must ensure every subaward is clearly identified to the subrecipient by including assistance listing numbers and titles, and the requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award. Effect: Failure to provide all the required subaward information may result in noncompliance at the subrecipient level. Cause: The Mayor’s Office of Community Empowerment and Opportunity failed to include the required elements in the subrecipient agreements. Recommendation: We recommend that management modify and/or strengthen its current policies and procedures to ensure that all required award information and applicable requirements are communicated to subrecipients at the time of subaward. Views of the Responsible Officials and Corrective Action Plan: Management agrees with the finding and recommendation. Starting from FY2024, MOCEO will include a Notice of Award document for all subrecipients contracts. This document will contain the necessary OMB required information to clearly identify award details for the subrecipient. Contact Person: Allison Elliott, Director of Finance, Mayor’s Office of Community Empowerment and Opportunity, 215-685-3626

Children and Youth Programs Assistance Listing 93.558 Temporary Assistance for Needy Families Assistance Listing 93.658 Foster Care – Title IV-E Act 148 Pennsylvania Department of Human Services Condition: For all 32 sampled Department of Human Services (DHS) subrecipients, the subaward letters sent by DHS to its subrecipients did not identify either the federal program names or the assistance listing numbers. The programs are funded through the Pennsylvania Department of Human Services. Criteria: Per the OMB’s Uniform Guidance 2 CFR section 200.332 (a)(1), the pass-through entity must ensure every subaward is clearly identified to the subrecipient as a subaward and includes certain required information at the time of the subaward. Required information includes the federal award identification, such as the assistance listing number and title, to ensure that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Failure to provide all required subaward information to subrecipients may result in noncompliance at the subrecipient level. Cause: DHS failed to include the required elements in the subaward letters sent to subrecipients. Recommendation: DHS management should modify the subaward letters sent to subrecipients to include the federal program names and assistance listing numbers so that all required award information is communicated to subrecipients at the time of subaward. Views of the Responsible Officials and Corrective Action Plan: Effective 10/13/23, DHS has been preparing FY24 funding allocation letters that will be sent to provider agencies immediately. Going forward, the funding allocation letters will go out at the beginning of the contract fiscal year. Contact Person: Landuleni Shipanga, Controller, Department of Human Services, 215-683-6366.

2022-013 SPECIAL TESTS – COMPLIANCE FINDING Children and Youth Programs Assistance Listing 93.090 Guardianship Assistance Assistance Listing 93.645 Stephanie Tubbs Jones Child Welfare Services Program Assistance Listing 93.658 Foster Care Title IV-E Assistance Listing 93.659 Adoption Assistance Assistance Listing 93.778 Medical Assistance Program Assistance Listing 93.556 MaryLee Allen Promoting Safe and Stable Families Program Act 148 Pennsylvania Department of Human Services Condition: The Department of Human Services (DHS) reported salaries and benefits costs that exceeded maximum allowable amounts by $1,721,868 on its fiscal 2022 County Children and Youth Social Service Programs’ Fiscal Summary. The programs are funded through the Pennsylvania Department of Human Services (PA DHS). Criteria: The PA Code, Title 55, Chapter 3170, section 3170.41 through 3170.43 provides for PA DHS to reimburse salaries up to the limit of the county civil service personnel compensation plan, or where applicable up to the limit of Commonwealth compensation levels. The Commonwealth will not participate in costs which exceed the maximum salary levels. Effect: The fiscal 2022 County Children and Youth Social Services Programs’ Fiscal Summary included ineligible expenditures of $1,721,868. Because DHS is reimbursed a percentage of the expenditures it reports to PA DHS, we determined that ineligible costs had resulted in excess reimbursement of $1,375,744. This amount represents questioned costs distributed to the following programs listed in the Table 5 below: Cause: DHS does not have adequate procedures in place to ensure that salaries and benefits requested for reimbursement do not exceed the maximum allowable amount per the Commonwealth Compensation Plan. Recommendation: DHS should revise its procedures to ensure that amounts requested for reimbursement do not exceed the maximum allowable amount per the Commonwealth Compensation Plan. Views of the Responsible Officials and Corrective Action Plan: After a recent discussion with the [PA] Office of Children, Youth, and Families (OCYF), DHS was informed that compensation plans for FY21 and FY22 were on file and under review. However, approval was pending. OCYF explained that the State reviews plans on a calendar-year basis. However, city pay plans change during a July-June fiscal year. Therefore, the possibility of overages can occur because of salary increases or other personnel changes. The process is that once the new compensation plan is received, the reviewing authority would flag any items that are in excess of the existing approved rates. At that time, DHS would be permitted to submit a waiver for the items in question. Contact Person: Landuleni Shipanga, Controller, Department of Human Services, 215-683-6366.

Assistance Listing 21.023 Emergency Rental Assistance Program (ERAP) Condition: The Department of Planning and Development’s Division of Housing and Community Development (DHCD) and the Office of the Director of Finance’s Grants Office (Grants Office) were unable to provide documentation to support expenditure amounts reported on the state January 2022 ERAP1 and ERAP2 monthly reports. Specifically, the January 2022 ERAP1 and ERAP2 reports included total unsupported expenditures of $199,813 and $272,135, respectively. See Tables 6 and 7 below for a breakdown by reporting category. The funding source for this program is the U.S. Department of the Treasury (Treasury) and the Pennsylvania Department of Human Services. Criteria: Per the Treasury’s ERAP1 and ERAP2 grantee award terms, recipients shall maintain records and financial documents sufficient to support compliance with applicable guidance regarding the eligible uses of funds. Additionally, per the Treasury’s ERAP Reporting Guidance, ERAP recipients should gather and maintain required information such as amounts paid directly or indirectly to tenants, landlords, and utility/home energy providers; amounts obligated to subrecipients and contractors; and administrative expenses. Recipients should also gather required information from their subrecipients and contractors, as applicable. In preparing monthly reports, ERAP recipients must review the information entered or submitted to the online reporting forms for errors and completeness. Effect: Failure to properly reconcile and support reported expenditures can result in questioned costs and noncompliance for the program. The total unsupported expenditures of $471,948 are considered to be known questioned costs. Also, federal grantors will not have complete and accurate information to make fiscal decisions on future federal awards. Cause: DHCD and the Grants Office did not maintain sufficient supporting records for certain expenditure amounts included in the state January 2022 ERAP1 and ERAP2 monthly reports. Recommendation: DHCD and the Grants Office should properly maintain records and financial documents and ensure all reported expenditures are fully reconciled to supporting records as part of their reporting process. Views of the Responsible Officials and Corrective Action Plan: We disagree with the finding regarding spending reported to the Commonwealth of Pennsylvania. Prior to April 2022, reporting to the state was generated from a reporting dashboard within the Quickbase database. Internal controls checking these reports against raw data revealed an issue with the programming of the dashboard, and beginning in April 2022, reports were generated using raw data downloaded from the portal. Once this issue was detected and resolved, PHDC and the City sent updated and corrected reporting to the Commonwealth, along with a statement detailing our shift in methodology. This shift, and the corrected reports, were accepted by the Commonwealth, as shown in the email chains that were provided to the Controller’s Office. The data underlying the original ERA1 and ERA2 January 2022 reports cited in the finding cannot be re-created since the errors have now been permanently corrected. Auditor’s Comments on Agency’s Response: Regarding the corrected reports provided via email chains with the Commonwealth to our office, we have the following comment: Only one email chain provided had an attached “updated historical check” for ERAP1, submitted to the Commonwealth in July 2022. The historical check included a line item for the month in question, January 2022, but was still reporting the amounts of $173,807 and $22,042 for the Administrative Paid categories (See Table 6). These amounts remain unsubstantiated per our audit testing. Additionally, no corrected reports or updated historical checks were provided via these email chains to address the discrepancies noted for ERAP2 (See Table 7). Contact Person: Dan Gasiewski, Chief Grants Compliance Officer, Grants Office, Office of the Director of Finance

Condition: For the two subawards selected for testing, we noted that an evaluation of each subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring was not performed. Additionally, there was no subrecipient monitoring performed. The funding source for this program is the U.S. Department of Treasury and the Pennsylvania Department of Human Services. Criteria: 2 CFR section 200.332(b) states that a pass-through entity (the city) must evaluate each subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. In addition, 2 CFR section 200.332(d) states that a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward; and that the subaward performance goals are achieved. Furthermore, 2 CFR section 200.332(e) states that the pass-through entity, depending upon the risk assessment conducted in accordance with 2 CFR section 200.332(b), should ensure proper accountability and compliance with program requirements and achievement of performance goals. Effect: Failure to perform risk assessments, monitoring plans, and program monitoring increases the risk of noncompliance with federal statutes, regulations, and/or the terms and conditions of the federal award. Subawards may not have been used for authorized purposes or performance goals may have not been achieved, which can lead to payback of federal awards. Cause: The Department of Planning & Development?s (DPD?s) Division of Housing and Community Development (DHCD) appropriated ERAP funding in response to the COVID-19 pandemic and due to the emergent nature of spending, the DPD?s DHCD failed in the operation of effectively designed controls over subrecipient monitoring. Recommendations: We recommend that management ensure that evaluations of each subrecipient?s risk of noncompliance be performed prior to a subaward, and a monitoring plan be executed in a timely manner. In addition, documentation to support the subrecipient monitoring activities should be maintained.

Condition: The city?s Department Public Health (DPH) submitted special reports for the Federal Funding Accountability and Transparency Act (FFATA) that were inaccurate for both the Immunization Cooperative Agreements Grant Program (Assistance Listing 93.268) and the HIV Prevention Activities (Assistance Listing 93.940). Please see Tables 4 and 5 below for details: Criteria: 2 CFR Part 170 specifies that recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Effect: Federal grantors may not have complete and accurate information to make fiscal decisions on federal awards. The public will not have the information on federal awards (federal financial assistance and expenditures). Cause: DPH did not have a systematic process in place to report subawards made under the federal program in accordance with FFATA. Consequently, the responsible employees were not properly trained how to complete the FFATA reports. Recommendation: DPH should ensure that registration is completed as soon as possible, that written policies and procedures are developed so all the required filings are completed as required, and that its staff has proper training to prepare the FFATA reports.

Condition: The city?s DPH failed to provide oversight of program enrolled providers to ensure that proper control and accountability was maintained for vaccines, vaccines were properly safeguarded, and Vaccine for Children (VFC) program-eligibility screening was conducted for FY 2021. The funding for this program is U.S. Department of Health and Human Services. Criteria: Per 2 CFR Part 200, Appendix XI Compliance Supplement, Assistance listing 93.268 Immunization Cooperative Agreements, specified effective control and accountability must be maintained for all vaccine under the VFC program. Vaccine must be adequately safeguarded and used solely for authorized purposes (42 USC 1396s). This includes administration only to VFC program-eligible children, as defined in 42 USC 1396s(b)(2)(A)(i) through (A)(iv), regardless of the child?s parent?s ability to pay (42 USC 1396s(c)(2)(C)(iii)). A record of vaccine administered shall be made in each person?s permanent medical record (or in a permanent office log or file to which a legal representative shall have access upon request) (42 USC 300aa-25). Effect: Vaccines can be improperly safeguarded and wasted. Additionally, inappropriate records of vaccines administered can result in health issues to vaccine recipients. Cause: According to DPH personnel, some doctor?s offices were closed, or would not allow outsiders in due to the Covid pandemic, and virtual visits were not available soon enough to conduct the mandated monitoring. Additionally, Licensed nurses were pulled from their normal daily activities to administer the COVID 19 vaccine around the city of Philadelphia at locations such as the Philadelphia Convention Center and Esperanza Community Vaccination Center. Recommendation: We recommend that DPH develops alternate methods to ensure program compliance or request a waiver from the grantor should a similar event occur in the future.

Condition: The Office of Homeless Services (OHS) did not have an internal control system in place to track grant payroll distributions. During our testing of payroll expenditures, we noted that one of the two sampled employees worked on multiple programs, however, their entire fiscal year 2021 salary was charged to the Emergency Solutions Grant (ESG). OHS could only estimate the amount of time the employee may have worked on non-ESG program activities, resulting in questioned costs of $66,516. This funding was received from the Department of Housing and Urban Development. Criteria: 2 CFR 200.430(i)(1)(i) & (vii) state that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; and support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one federal award, or a federal award and non-federal award. Effect: Failure to adequately track grant payroll distributions can result in overstatement of payroll related expenditures and noncompliance with federal guidelines. Because of the lack of control procedures to accurately track grant payroll distributions, the employee?s payroll charged to the grant could not be substantiated and resulted in questioned costs of $66,516. Cause: OHS normally has staff work solely on their assigned grant. However, due to a decrease in funding in other grants, they had staff split time between their original assignments and the Emergency Solutions Grant and did not document the payroll distribution among the various activities. Recommendations: We recommend that OHS design and implement a process to adequately document payroll distributions when employees are working on more than one grant.

Condition: In our testing of the sampled expenditure population, we noted that the Office of Homeless Services (OHS) failed to pay 34 out of 53 subrecipient invoices within the required 30-day period. The funding for this program was received from the US Department of Housing and Urban Development and the PA Department of Community and Economic Development. Criteria: 24 CFR 576.203(c) requires that the recipient pay each subrecipient for allowable costs within 30 days after receiving the subrecipient's complete payment request. Effect: Failure to make timely payments to subrecipients could lead to noncompliance and affect program services at the subrecipient level. Cause: Due to the pandemic and shift to remote work, OHS utilized their Mainstay system to receive payment requests from subrecipients during fiscal year 2021. Some subrecipients who were not yet utilizing the system to submit invoices were submitting them through email or the postal service. The combination of the shift in working environment, new procedures, and various methods of invoice receipt led to untimely payments. Recommendations: We recommend that OHS management strengthen its current policies and procedures for processing the invoices to ensure that all subrecipient invoices are reviewed and paid timely. Views of the Responsible Officials and Corrective Action Plan: Now that the response to the pandemic has become more stable in regard to staff levels and work conditions and with subrecipient participation in our new Mainstay invoicing system at nearly 99%, we will see a natural decline in late payments. In addition, OHS is creating an internal tracking system with reports to further mitigate late payments.

Condition: GAAU did not accurately disclose the total payments to subrecipients in the preliminary SEFA provided for audit. Our review of records indicated that subrecipient expenditures for the major programs listed below in Table 6 were understated by $12.2 million. GAAU concurred with our findings and corrected the amounts reported for subrecipient expenditures. This condition was reported as finding number 2020-013 in the prior year report. Criteria: OMB?s Uniform Guidance, Title 2, Part 200, Subpart F, paragraph .510(b)(4) requires the total amount provided to subrecipients from each federal program to be included in the SEFA. Effect: Failure to completely and accurately report subrecipient expenditures can result in noncompliance with terms and conditions of federal awards. It could, for example, lead to the city not correctly identifying subrecipients for audits and monitoring. In addition, grantors will not have accurate information relating to the total amount of federal awards that were expended by subrecipients. Cause: Departments responsible for the grants do not always provide timely and accurate subrecipient expenditure information to GAAU or informed them when expenditures are denoted with the incorrect document prefix. Additionally, GAAU?s review of the subrecipient expenditures reported in the draft of the SEFA did not identify discrepancies between amounts reported and the city?s accounting records. Recommendations: We recommend that GAAU reinforce with departments the need to provide complete and accurate information to assist in reporting the correct amounts for total payments to subrecipients, and to inform GAAU when expenditures are denoted by the incorrect document prefix. Additionally, GAAU should strengthen its SEFA preparation procedures to ensure that all payments to subrecipients are reported as subrecipient expenditures on the SEFA.

Condition: For the three subawards selected for testing, we noted that the information required by 2 CFR section 200.332(a) was not provided to subrecipients at the time of the subaward, and applicable federal regulations were not identified. Additionally, an evaluation of each subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring was not performed. The funding source for this program is the U.S. Department of Treasury. Criteria: 2 CFR section 200.332(a) states that a pass-through entity (the city) must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the required award information so that the federal award is used in accordance with federal statutes, regulations and the terms and conditions of the federal award. In addition, 2 CFR section 200.332(b) states that pass-through entities must evaluate each subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. Effect: Failure to identify subrecipient awards, as federal, and the applicable compliance requirements, could lead to noncompliance at the subrecipient level. Failure to perform risk assessments increases the risk of noncompliance with subrecipient monitoring requirements as set forth in the U.S. Office of Management and Budget Compliance Supplement, which could lead to the city?s payback of federal awards. Cause: The city appropriated CARES Act monies in response to the public health emergency due to COVID- 19. Due to the emergent nature of the spending, the city?s existing internal control system did not operate effectively. Recommendations: We recommend management modify and/or strengthen its current policies and procedures to ensure that all required award information and applicable requirements are communicated to subrecipients at the time of subaward. Also, we recommend that management ensure that evaluations of each subrecipient?s risk of noncompliance is performed prior to a subaward.

Condition: The Procurement Department failed to perform cost or price analyses before receiving bids or proposals for two out of four sampled contracts (170674, 1920133) and failed to negotiate profit for one sole source contract (208774). Funding for this program is from U.S. Department of Health and Human Services. Criteria: Uniform Guidance 2CFR ?200.324 states that, (a) the non-federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications, and the non-federal entity must make independent estimates before receiving bids or proposals, and (b) The non-federal entity must negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed. Effect: Failure to perform the required costs analyses and profit negotiations could lead to noncompliance with post award procurement requirements and could result in the inefficient use of grant funds. Cause: Procurement requirements may not be properly communicated to the employees responsible for performing them. Recommendation: We recommend that management ensure that all procurement requirements are communicated to responsible employees so that cost or price analyses and profit negotiations are performed before receiving bids or proposals.

Condition: In our review of the fiscal year (FY) 2021 SEFA, we noted that GAAU improperly reported prior period expenditures for four grant programs in the current year SEFA. Specifically, we noted expenditures for the programs in Table 7 below, occurred in FY 2020, but were not included in the year end accounts payable accrual or reported in the FY 2020 SEFA. Instead, GAAU inappropriately reported those expenditures in the FY 2021 SEFA. The funding for those programs is received from the U.S. Department of Health and Human Services. Criteria: OMB?s Uniform Guidance, Title 2, Part 200, Subpart F, paragraph 200.510(b) specifies that the grantee must prepare a SEFA for the period covered by the financial statements which must include the total federal awards expended as determined in accordance with ?200.502 Basis for Determining federal awards expended. OMB?s Uniform Guidance, Title 2, Part 200, Subpart F, paragraph 200.502(a) specifies that the determination of when a federal award is expended must be based on when the activity related to the federal award occurs. Additionally, the city?s financial statements are prepared on the modified accrual basis and follow Generally Accepted Accounting Principles (GAAP). GAAP requires that governments report a liability in the period in which it is incurred. Accordingly, governmental entities should record expenditures when a liability is incurred, or when the activity related to a federal award occurs, and not based on when the invoice is received. Effect: Failure to report grant expenditures on the SEFA during the correct fiscal year is a departure from GAAP and caused inaccurate reporting of federal expenditures. Cause: In our FY 2021 audit of the city?s ACFR, we noted that the city?s Finance Office (Finance) procedures for computing year-end accounts payable balances included weaknesses that increased the risk for unrecorded payables. Specifically, our review noted that Finance requested departments to provide them with a list of fiscal year 2021 invoices not yet vouchered or submitted for processing as of September 3, 2021. Based upon the results of our testing, it appears that Finance?s early-September cut-off date for the review and identification of payables was too early to detect all significant accounts payable. This condition also caused GAAU to improperly include expenditures for services provided in FY 2020 in the FY 2021 SEFA. Recommendation: Finance should improve its accounts payable process by following GAAP and the accrual basis of accounting by recording expenditures in the fiscal year they occur.

Condition: In our testing of the sampled expenditure population, we noted that five out of 115 invoices prepared by the Office of Recovery Grants inappropriately charged subcontractor markups (or cost-plus- percentage-of-cost) to the grant, totaling $83,240. While the other goods and services on these invoices were allowable, the subcontractor markups are explicitly unallowable per FEMA guidance. The dollar amounts of the subcontractor markups as they relate to the city?s project worksheets are summarized in Table 8 below. The funding for this program was received from the Department of Homeland Security. Criteria: The FEMA Policy FP 104-009-2 states that FEMA does not reimburse the increased cost associated with the percentage on a cost-plus-percentage-of-cost calculation. This is based on 2 CFR 200.323(d), which states that cost plus a percentage of cost method of contracting must not be used. Effect: The Office of Recovery Grants is out of compliance with FEMA guidelines and regulations. The oversight also resulted in questioned costs of $83,240 being reported on the SEFA. Cause: Expenditures charged to the grant, in most cases, originated from the Coronavirus Relief Fund and were later transferred when FEMA funding became available. Subcontractor mark-up charges were allowable under the Coronavirus Relief Fund, therefore, the Office of Recovery and Grants had to begin conducting reviews of the original invoices to detect unallowable costs after these expenditures were transferred. This is still an ongoing process. Recommendations: We recommend that the Office of Recovery Grants improve their process for reviewing invoices in order to detect unallowable costs in a more timely manner.

Condition: One of two Department of Public Health (DPH) subrecipients sampled, did not have language in its contract that identified the award as a subaward nor did the contract specify the federal compliance requirements to ensure the subrecipient?s compliance with federal statutes, regulations, and the terms of the federal award. Funding for this program is from the U.S. Department of Health & Human Services. Criteria: Per the OMB?s Uniform Guidance, the pass-through entity must clearly identify to the subrecipient the award as a subaward at the time of subaward (or subsequent subaward modification by providing the information described in 2 CFR section 200.332(a)(1), all requirements imposed by the pass-through entity on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award and any additional requirements that the pass-through entity imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award. Effect: Subrecipient was not informed of its subaward leading to inaccurate reporting of federal expenditures by the subrecipient. In addition, there was a greater risk of non-compliance with the statutes, regulations, terms, and conditions of the federal award with the services performed by the subrecipient. Cause: Failure to identify vendors as subrecipients during the procurement process. Recommendations: As vendors are procured for a federal grant award, there should be an in-depth analysis to determine whether they are a subrecipient. Once designated as a subrecipient, the department should then ensure that the necessary federal compliance requirements are included in the subrecipient?s agreement.

Condition: During our test for compliance with the Federal Funding Accountability and Transparency Act (FFATA), we noted that the city?s DPH did not have a process in place to report subawards made under the federal programs in accordance with the Federal Funding Accountability and Transparency Act (FFATA). Consequently, auditors could not test for reporting compliance for these grant programs. Funding for these programs is from the Department of health and Human Services. Criteria: Per the OMB?s Uniform Guidance 2 CFR Part 170, the prime recipient of a federal award must report information regarding first-tier subawards of $30,000 or more utilizing the FFATA Subaward Reporting System (FSRS), and states that the subawards reporting requirement applies to all types of first tier subawards. Effect: Federal grantors may not have complete and accurate information to make fiscal decisions on federal awards. Additionally, there could be a lack of transparency and accountability to the public on how federal dollars are spent. Cause: DPH did not have a systematic process in place to report subawards made under the Federal program in accordance with FFATA. Specifically, FFATA reports are not yet being submitted by Ambulatory Health Services (AHS). The unit is currently coordinating with the fiscal unit to register a designee under the Unique Entity ID number in FFATA to complete the yearly reporting for any qualifying awards. Recommendation: DPH should ensure that registration is completed as soon as possible, that written policies and procedures are developed so all the required filings are completed as required, and that its staff has proper training to prepare the FFATA report.

Condition: The Department of Public Health (DPH) failed to provide documentation evidencing program monitoring of its subrecipient agencies during fiscal year 2021. During the audit we obtained evidence that DPH identified the subaward and applicable requirements in the scope of work section of the contracts including requirements for quarterly narrative reports. However, no evidence of subrecipient monitoring was provided. This program is funded by the U.S. Department of Health and Human Services. Criteria: Per 2 CFR section 200.332(d) of the OMB?s Uniform Guidance, the pass-through entity must monitor the activities of the subrecipient to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward and the subaward performance goals are achieved. Pass -through entity monitoring must include: 1) Reviewing financial and performance reports required by the pass-through entity. 2) Following up and ensuring that the subrecipient takes timely and appropriate actions on all deficiencies pertaining to the federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means. Effect: DPH, as a pass-through entity, is responsible for oversight of subrecipient operations to assure that performance expectations are being achieved. The lack of monitoring of its subawards may result in subrecipients failing to comply with program requirements or meet performance goals without being detected. Cause: DPH management did not respond to the auditor?s multiple requests for monitoring reports. Recommendations: We recommend that DPH management ensure that subrecipients are properly monitored and records are maintained and made available for audit.

Condition: The Philadelphia Police Department (PPD) was unable to provide for audit, copies of the quarterly Federal Financial Reports (SF-425s), the Quarterly Performance Metrics, and Semi-annual Progress Reports for the Edward Byrne Memorial Justice Assistance Grant Program. Direct funding for this program is received from the U.S. Department of Justice and additional funding is passed-through the PA Commission on Crime and Delinquency. Criteria: OMB?s Uniform Guidance, Title 2, Part 200, Subpart D, paragraph 200.302(b)(2) specifies that the recipient must disclose accurate, current, and complete financial results. OMB?s Uniform Guidance, Title 2, Part 200, Subpart D, paragraph 200.301 specifies that performance measurement progress must be both measured and reported. OMB?s Uniform Guidance, Title 2, Part 200, Subpart D, paragraph 200.333 specifies that financial records, supporting documents, statistical records, and all other non-federal entity records pertinent to a federal award must be retained for a period of three years from the date of submission of the final expenditure report, as reported to the federal awarding agency or pass-through entity in the case of a subrecipient. Effect: Auditor was unable to audit compliance with reporting requirements. Also, federal grantors may not have complete and accurate information to make fiscal decisions on future federal awards. Cause: According to management, in November 2020 the PPD had a change in the personnel responsible for the maintenance of the above reports. That employee would have had knowledge of the location of the hard copies of those reports. However, that information was not shared with other office employees, and no one was able to locate the hard copies. Additionally, management stated that the electronic report files were archived in the Federal Grants Management System that has been sunsetted, and the reports were not migrated into the new Just Grants System. Consequently, the PPD also could not obtain access to electronic copies of the reports. Recommendation: When personnel changes occur, the PPD should have a plan in place to ensure the proper transfer of responsibility and access to the reports and information required to be retained and available for audit. Additionally, we recommend that the PPD maintain proper records of SF-425s and performance reports.

Condition: In our review of the fiscal year (FY) 2020 SEFA, we found GAAU improperly reported prior period expenditures for two grant programs in the current year SEFA. Specifically, we noted expenditures for the Emergency Solutions Grants Program (CFDA #14.231) and the Choice Neighborhoods Implementation Grants (CFDA#14.889) totaling $462,391 and $1,372,835 respectively, occurred in FY 2019, but were not included in the year end accounts payable or reported in the FY 2019 SEFA. Instead, Finance reported those expenditures in the FY 2020 SEFA. The funding for those programs is received from the U.S. Department of Housing & Urban Development. Criteria: OMB?s Uniform Guidance, Title 2, Part 200, Subpart F, paragraph 200.510(b) specifies that the grantee must prepare a SEFA for the period covered by the financial statements which must include the total federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. OMB?s Uniform Guidance, Title 2, Part 200, Subpart F, paragraph 200.502(a) specifies that the determination of when a federal award is expended must be based on when the activity related to the Federal award occurs. Additionally, the City?s financial statements are prepared on the modified accrual basis and follow Generally Accepted Accounting Principles (GAAP). GAAP requires that governments report a liability in the period in which it is incurred. Accordingly, governmental entities should record expenditures when a liability is incurred, or when the activity related to a federal award occurs, and not based on when the invoice is received. Effect: Failure to report grant expenditures on the SEFA during the correct fiscal year is a departure from GAAP and caused inaccurate reporting of Federal expenditures. Cause: In our FY 2020 audit of the city?s ACFR, we noted that the city?s Finance Office procedures for computing year-end accounts payable balances disclosed weaknesses that increased the risk for unrecorded payables. Specifically, our review disclosed that the Finance Office requested departments to provide them with a list of fiscal year 2020 invoices not yet vouchered or submitted for processing as of August 16, 2020. Based upon our testing results, it was clear that the Finance Office?s mid-August cut-off date for the review and identification of payables was too early to detect all significant accounts payable. This also caused the GAAU unit to improperly include expenditures for services provided in FY 2019 in the FY 2020 SEFA. Recommendation: Finance should improve its accounts payable process by following GAAP and the accrual basis of accounting by recording expenditures in the FY they occur.

Condition: The Philadelphia Fire Department (PFD) submitted semi-annual Federal Financial Reports (FFR, or SF-425s) that were inaccurate for Federal awards received under the Staffing for Adequate Fire and Emergency Response (SAFER) program. Our review of two SF-425s submitted in fiscal year 2020 disclosed that amounts reported for ?Federal share of expenditures? and ?Recipient share of expenditures? were incorrect. The ?Federal share of expenditures? was overstated by $456,573 and $1,549,285 for reporting periods ended December 31, 2019, and June 30, 2020, respectively. Additionally, the ?Recipient share of expenditures? was overstated by $152,191 and $516,428 for reporting periods ended December 31, 2019, and June 30, 2020, respectively. As a result, all line items on the SF-425s that were calculated using those amounts were incorrect. The PFD provided documentation that the grantor informed them that they do not need to submit revised SF-425s but should correct the errors in their subsequent report. Funding for this program is received from the U.S. Department of Homeland Security and administered by the Federal Emergency Management Agency (FEMA). Criteria: OMB?s Uniform Guidance, Title 2, Part 200, Subpart D, paragraph 200.302 (b)(2) specifies that the recipient must disclose accurate, current, and complete financial results. Effect: The SF-425 report tracks the status of financial data for this Federal award. Failure to properly report accurate information on the SF-425 report leads to noncompliance with reporting requirements. Also, federal grantors will not have complete and accurate information to make fiscal decisions on future Federal awards. Cause: Difficulties obtaining, analyzing, and reviewing payroll and benefits data from the newly implemented OnePhilly payroll system caused PFD to not have completed information available at the time of submission of the FFR. Recommendation: PFD should ensure their staff has proper training to prepare the SF-425 report and should correct the above noted errors in their subsequent report as advised by the grantor agency.

Condition: GAAU did not accurately disclose the total payments to subrecipients in the preliminary SEFA provided for audit. Our review of records indicated that subrecipient expenditures for the major programs listed below in Table 1 were understated by $18.3 million. GAAU concurred with our findings and corrected the amounts reported for subrecipient expenditures. This condition was reported as finding number 2019-011 in the prior year report. Table 1: Summary of the Subrecipient Expenditure Variances by Major Program CFDA # Amount Per Auditee ($) Amount Per Auditor ($) Difference Overstated/ (Understated) ($) Emergency Solutions Grant Program 14.231 4,547,636 4,246,669 300,967 Home Investment Partnerships Program 14.239 9,005,189 8,716,939 288,250 Choice Neighborhoods Implementation Grants 14.889 0 10,632,907 (10,632,907) Community Services Block Grant 93.569 2,338,989 2,592,803 (253,814) Block Grants for Prevention and Treatment of Substance Abuse 93.959 3,308,915 11,337,526 (8,028,611) Total 19,200,729 37,526,844 (18,326,115) Source: Office of the Controller Criteria: OMB?s Uniform Guidance, Title 2, Part 200, Subpart F, paragraph .510(b)(4) requires the total amount provided to subrecipients from each federal program to be included in the SEFA. Effect: Failure to completely and accurately report subrecipient expenditures could result in noncompliance with terms and conditions of Federal awards. It could, for example, lead to the city not correctly identifying subrecipients for audits and monitoring. In addition, grantors will not have accurate information relating to the total amount of federal awards that were expended by subrecipients. Cause: Departments responsible for the grants do not always provide timely and accurate subrecipient expenditure information to GAAU or informed them when expenditures are denoted with the incorrect document prefix. Additionally, GAAU?s review of the subrecipient expenditures reported in the draft of the SEFA did not identify discrepancies between amounts reported and the city?s accounting records. Recommendations: We recommend that GAAU reinforce with departments the need to provide complete and accurate information to assist in reporting the correct amounts for total payments to subrecipients, and to inform them when expenditures are denoted by the incorrect document prefix. Additionally, GAAU should strengthen its SEFA preparation procedures to ensure that all payments to subrecipients are reported as subrecipient expenditures on the SEFA.

Condition: For the three subawards selected for testing, we noted that the information required in accordance with 2 CFR section 200.331(a) was not provided at the time of the subaward. Additionally, an evaluation of each subrecipient?s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring was not performed. Furthermore, the agreements for two of the subrecipients did not describe applicable compliance requirements, or the for-profit subrecipients? compliance responsibilities. The funding source for this program is received from the U.S. Department of Treasury. Criteria: 2 CFR section 200.331(a) states that a pass-through entity (the city) must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the required award information so that it is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award. In addition, 2 CFR section 200.331(b) states that pass-through entities must evaluate each subrecipient?s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. Furthermore, 2 CFR section 200.501(f&h) states that for-profit subrecipient agreements describe applicable compliance requirements and the for-profit subrecipient?s compliance responsibility. Effect: Failure to identify subrecipient awards, as Federal, and the applicable compliance requirements, could lead to noncompliance at the subrecipient level. Failure to perform risk assessments increases the risk of noncompliance with subrecipient monitoring requirements as set forth in the U.S. Office of Management and Budget Compliance Supplement, which could lead to the city?s loss of Federal awards. Cause: The city appropriated CARES Act monies in response to the public health emergency due to COVID-19. Due to the emergent nature of the spending, the city?s existing internal control system did not operate effectively. Recommendations: We recommend management modify and/or strengthen its current policies and procedures to ensure that all required award information and applicable requirements are communicated to subrecipients at the time of the subaward. Also, we recommend that management ensure that evaluations of each subrecipient?s risk of noncompliance is performed prior to a subaward.

Condition: The Mayor?s Office of Community Empowerment and Opportunity (CEO) did not perform a risk assessment to plan the during-the-award monitoring of their subrecipients. Funding for this program is received from the U.S. Department of Health & Human Services and administered by the PA Department of Community and Economic Development (DCED). Criteria: OMB?s Uniform Guidance, Title 2, Part 200, Subpart D, paragraph 200.331(b) specifies that all pass-through entity must evaluate each subrecipient?s risk of noncompliance with Federal statutes, regulations and the terms and conditions of the subaward for the purpose of determining the appropriate subrecipient monitoring to ensure proper accountability and compliance with program requirements. Effect: Without a risk assessment, CEO may not know how to properly plan subrecipient monitoring. They may over-monitor a subrecipient that should be considered low risk or under-monitor a subrecipient that should be considered high risk. Cause: CEO did not have a subrecipient risk assessment tool in place to pre-identify areas in which problems might arise with providers. Recommendation: CEO should perform a risk assessment to evaluate each subrecipient?s risk of noncompliance with Federal statutes, regulations and the terms and conditions of the subaward.

Condition: GAAU did not accurately disclose the total payments to subrecipients in the preliminary SEFA provided for audit. Our testing indicated that subrecipient expenditures for the major programs listed below in Table 1 were understated by $5.3 million. GAAU concurred with our findings and corrected the amounts reported for subrecipient expenditures. This condition was reported as finding number 2018-013 in the prior year report. Criteria: OMB?s Uniform Guidance, Title 2, Part 200, Subpart F, paragraph .510(b)(4) requires the total amount provided to subrecipients from each federal program to be included in the SEFA."See Schedule of Findings and Questioned Costs for chart/table" Effect: Failure to completely and accurately report subrecipient expenditures can result in noncompliance with terms and conditions of federal awards. It could, for example, lead to the city not correctly identifying subrecipients for audits and monitoring. In addition, grantors will not have accurate information relating to the total amount of federal awards that were expended by subrecipients. Cause: For the TANF program, GAAU did not accurately report accounts payable related to subrecipients. For the MH/ID/EI, programs the Philadelphia Department of Behavioral Health Services (DBHIDS) did not timely respond to GAAU?s request for departments to identify subrecipient expenditures. Additionally, the DBHIDS did not timely provide GAAU with the required expenditure reconciliations. Recommendations: We recommend that GAAU reinforce with departments the need to provide complete and accurate information to assist in reporting the correct amounts for total payments to subrecipients. Also, GAAU should work with departments to ensure that expenditure reconciliations are received on timely basis. Additionally, GAAU should strengthen its SEFA preparation procedures to ensure that all payments to subrecipients are properly reported as subrecipient expenditures. Views of the Responsible Officials: We agree the Departments must perform all expenditure reconciliations of federal funding between the amount recorded in the FAMIS accounting system with the amount reported to the Grantor. This will result in improved reporting of payments to subrecipients. Over the past several years GAAU has reinforced with Departments the need to comply with prescribed municipal policies to complete an expenditure reconciliation each time expenditures are reported to the Grantor during the award period. Contact Person: Leon Minka, Accounting Manager, Finance (215) 686-6172 74 "See Schedule of Findings and Questioned Costs for footnote"

Condition: The Department of Human Services (DHS) reported salaries and benefits costs that exceeded maximum allowable amounts by $457,716 on its fiscal 2019 County Children and Youth Social Service Programs? Fiscal Summary. The programs are funded through the Pennsylvania Department of Human Services (PaDHS). Criteria: The PA Code, Title 55, Chapter 3170, section 3170.41 through 3170.43 provides for PaDHS to reimburse salaries up to the limit of the county civil service personnel compensation plan, or where applicable up to the limit of Commonwealth compensation levels. The Commonwealth will not participate in costs which exceed the maximum salary levels. Effect: The fiscal 2019 County Children and Youth Social Services Programs? Fiscal Summary included ineligible expenditures of $457,716. Because DHS is reimbursed a percentage of the expenditures it reports to PaDHS, we determined that ineligible costs had resulted in excess reimbursement of $366,449. That amount represents questioned costs distributed to the following programs: "See Schedule of Findings and Questioned Costs for chart/table". Cause: DHS does not have procedures in place to ensure that salaries and benefits requested for reimbursement do not exceed the maximum allowable amount per the Commonwealth Compensation Plan. Recommendation: DHS should revise its procedures to ensure that amounts requested for reimbursement do not exceed the maximum allowable amount per the Commonwealth Compensation Plan. Views of the Responsible Officials: DHS understands the importance of adhering to PaDHS approved salary compensation plans and will request waivers from the state department in the future for occasions where salaries being charged to the State Act 148 invoice exceed allowable limits. Contact Person: Nadine Perese, Budget Director, DHS (215) 686-6136

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