CITY OF MCKEESPORT

CONDITION: During the calendar year 2024, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2023-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City.Findings and questioned costs related to Federal Awards which are required to be reported in accordance with the Uniform Guidance 2 CFR 200.516(a):CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.

CONDITION: During the calendar year 2024, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund.CONDITION (Continued): As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2023-001) for the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. MANAGEMENT’S CORRECTIVE ACTION PLAN: Management of the City is continuing their review of the recommended options as presented by the Audit Firm’s recommendation for feasibility considering current manpower, expertise, and budgetary constraints. In addition, the City plans to ensure that written procedures for all accounting functions are implemented, reviewed and updated as necessary with the objective of ensuring that all balance sheet account balances are supported by the underlying documentation available at the City. The timeframe for completion of this review will occur during the first nine months of calendar year 2026 with the intention of having the City be in full compliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented which would include the applicable general ledgers of the City.

2023-001

• CONDITION: During the calendar year 2024, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. This is a repeat finding (2023-002) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. EFFECT: The lack of procedures in place for maintaining a formal general ledger system of accounting for all ‘Funds’ of the City 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: The City began the process during calendar year 2019 of creating general ledgers on the computer accounting software system for all funds of the City, however due to changes in business office personnel, and other workload responsibilities, the City has not been able to fully complete this process.RECOMMENDATION: I am recommending that the City continue the process of making sure the financial activity for all funds individually is entered into the software accounting system. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.

CONDITION: During the calendar year 2024, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. This is a repeat finding (2023-002) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. MANAGEMENT’S CORRECTIVE ACTION PLAN: Management of the City is continuing to assess the current workload and expertise of the City’s business office personnel in an effort to determine a feasible timeframe to continue the process of creating a formal general ledger system of accounting for all City ‘Funds’ that are not already entered into the software accounting system. The timeframe for completion of this review will occur during the first nine months of calendar year 2026 with the intention of having the City be in full compliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City.

2023-002

CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.

CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) for the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. MANAGEMENT’S CORRECTIVE ACTION PLAN: Management of the City will review the recommended options as presented by the Audit Firm’s recommendation for feasibility considering current manpower, expertise, and budgetary constraints. In addition, the City plans to ensure that written procedures for all accounting functions are implemented, reviewed and updated as necessary with the objective of ensuring that all balance sheet account balances are supported by the underlying documentation available at the City. The timeframe for completion of this review will occur during the first nine months of calendar year 2025 with the intention of having the City be in full compliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented which would include the applicable general ledgers of the City.

2022-001

CONDITION: During the calendar year 2023, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. This is a repeat finding (2022-002) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. EFFECT: The lack of procedures in place for maintaining a formal general ledger system of accounting for all ‘Funds’ of the City 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: The City began the process during calendar year 2019 of creating general ledgers on the computer accounting software system for all funds of the City, however due to changes in business office personnel, and other workload responsibilities, the City has not been able to fully complete this process. RECOMMENDATION: I am recommending that the City continue the process of making sure the financial activity for all funds individually is entered into the software accounting system. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.

CONDITION: During the calendar year 2023, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. This is a repeat finding (2022-002) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. MANAGEMENT’S CORRECTIVE ACTION PLAN: Management of the City will assess the current workload and expertise of the City’s business office personnel in an effort to determine a feasible timeframe to continue the process of creating a formal general ledger system of accounting for all City ‘Funds’ that are not already entered into the software accounting system. The timeframe for completion of this review will occur during the first nine months of calendar year 2025 with the intention of having the City be in full compliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City.

2022-002

CONDITION: The City of McKeesport inadvertently charged as eligible expenditures two (2) purchases totaling $144,000 on the third quarter financial report required to be filed with the Department of Treasury that had already been claimed as eligible expenditures in the second quarter financial report. CRITERIA: Section 2 CFR 200.1 of the Uniform Guidance defines a disallowed cost as a charge to a Federal Award that is determined to be unallowable under the Award’s terms, which would include duplicate payments. Section 2 CFR 200.339 of the Uniform Guidance gives the federal agency the authority to disallow costs if the recipient fails to comply with the aforementioned Award terms and conditions. CAUSE: The City inadvertently claimed two vendor payments on both the second and third quarter financial reports required to be submitted to the Department of Treasury which were not detected as part of the oversight process. EFFECT: The City of McKeesport did not comply with the requirements of Sections 2 CFR 200.1 and 200.339 of the Uniform Guidance by inadvertently claiming two vendor payments twice as eligible program costs during calendar year 2023.QUESTIONED COST: Soundthinking, Inc. $99,000 and Butler Township Volunteer Fire Company $45,000. Total - $144,000. RECOMMENDATION: I am recommending that City management reallocate the duplicate payments for other allowable expenditures and update its financial reporting to the Department of Treasury to reflect this reallocation. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.

CONDITION: The City of McKeesport inadvertently charged as eligible expenditures two (2) purchases totaling $144,000 on the third quarter financial report required to be filed with the Department of Treasury that had already been claimed as eligible expenditures in the second quarter financial report. CRITERIA: Section 2 CFR 200.1 of the Uniform Guidance defines a disallowed cost as a charge to a Federal Award that is determined to be unallowable under the Award’s terms, which would include duplicate payments. Section 2 CFR 200.339 of the Uniform Guidance gives the federal agency the authority to disallow costs if the recipient fails to comply with the aforementioned Award terms and conditions. MANAGEMENT’S CORRECTIVE ACTION PLAN: Management of the City will reallocate the two vendor payments totaling $144,000 which were inadvertently duplicated in the financial reports required to be submitted to the Department of Treasury. The $144,000 in duplicate payments will be reallocated for eligible road salt purchases made during calendar year 2023.

CONDITION: During the calendar year 2022, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2021-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.

CONDITION: During the calendar year 2022, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. CONDITION (Continued): As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2021-001) for the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. MANAGEMENT’S CORRECTIVE ACTION PLAN: Management of the City will review the recommended options as presented by the Audit Firm’s recommendation for feasibility considering current manpower, expertise, and budgetary constraints. In addition, the City plans to ensure that written procedures for all accounting functions are implemented, reviewed and updated as necessary with the objective of ensuring that all balance sheet account balances are supported by the underlying documentation available at the City. The timeframe for completion of this review will occur during the first nine months of calendar year 2025 with the intention of having the City be in full compliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented which would include the applicable general ledgers of the City.

2021-001

• CONDITION: During the calendar year 2022, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. This is a repeat finding (2021-002) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. EFFECT: The lack of procedures in place for maintaining a formal general ledger system of accounting for all ‘Funds’ of the City 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: The City began the process during calendar year 2019 of creating general ledgers on the computer accounting software system for all funds of the City, however due to changes in business office personnel, and other workload responsibilities, the City has not been able to fully complete this process. RECOMMENDATION: I am recommending that the City continue the process of making sure the financial activity for all funds individually is entered into the software accounting system. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.

CONDITION: During the calendar year 2022, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. This is a repeat finding (2021-002) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. MANAGEMENT’S CORRECTIVE ACTION PLAN: Management of the City will assess the current workload and expertise of the City’s business office personnel in an effort to determine a feasible timeframe to continue the process of creating a formal general ledger system of accounting for all City ‘Funds’ that are not already entered into the software accounting system. The timeframe for completion of this review will occur during the first nine months of calendar year 2025 with the intention of having the City be in full compliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City.

2021-002

CONDITION: During the calendar year 2021, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs.CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City.EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City. RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.

CONDITION (Continued): As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. MANAGEMENT’S CORRECTIVE ACTION PLAN: Management of the City will review the recommended options as presented by the Audit Firm’s recommendation for feasibility considering current manpower, expertise, and budgetary constraints. In addition, the City plans to ensure that written procedures for all accounting functions are implemented, reviewed and updated as necessary with the objective of ensuring that all balance sheet account balances are supported by the underlying documentation available at the City. The timeframe for completion of this review will occur during the first nine months of calendar year 2025 with the intention of having the City be in full compliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented which would include the applicable general ledgers of the City.

• CONDITION: During the calendar year 2021, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. EFFECT: The lack of procedures in place for maintaining a formal general ledger system of accounting for all ‘Funds’ of the City 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: The City began the process during calendar year 2019 of creating general ledgers on the computer accounting software system for all funds of the City, however due to changes in business office personnel, and other workload responsibilities, the City has not been able to fully complete this process. RECOMMENDATION: I am recommending that the City continue the process of making sure the financial activity for all funds individually is entered into the software accounting system. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.

• CONDITION: During the calendar year 2021, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. • CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining a formal general ledger system of accounting for all ‘Funds’ of the City. • MANAGEMENT’S CORRECTIVE ACTION PLAN: Management of the City will assess the current workload and expertise of the City’s business office personnel in an effort to determine a feasible timeframe to continue the process of creating a formal general ledger system of accounting for all City ‘Funds’ that are not already entered into the software accounting system. The timeframe for completion of this review will occur during the first nine months of calendar year 2025 with the intention of having the City be in full compliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City.

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