City of TemeculaLocal Government

Program: Nationally Significant Freight and Highway Projects Financial Assistance Listing Number: 20.934 Federal Agency: U.S. Department of Transportation Pass-through: California Department of Transportation Award Year: 2019 Grant Award Number: INFRALUL-5459(031) Compliance Requirements: Special Tests and Provisions – Wage Rate Requirements Type of Finding: Material Weakness in Internal Control over Compliance and Material Instance of Noncompliance Criteria: All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) 40 USC 3141–3144, 3146, and 3147. Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR Part 5, Labor Standards Provisions Applicable to Contracts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); OMB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326. 2 CFR 200.303, the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. This includes internal controls over maintaining records of the receipt and review of certified payrolls. Condition: For fifty-seven (57) out of sixty (60) weeks of certified payroll submissions selected, we noted that the City did not have appropriate internal controls in place to review the contractors’ statement of compliance of certified payroll to determine they were prepared and submitted in a timely manner. For thirty-four (34) out of sixty (60) weeks of certified payroll submissions selected, we noted that the contractor or subcontractor had not submitted on a timely basis the certified payroll weekly for each week in which the contract work was performed. Cause: The City’s procedures did not include documenting the review of the certified payroll received. In addition, the City did not have the necessary internal controls in place to ensure the contractor’s and subcontractor’s certified payroll were submitted weekly. The City’s monitoring was done on a monthly basis through April 2025 and was changed to weekly in May 2025. Effect: Ineffective controls over this area of compliance resulted in noncompliance with the wage rate compliance requirements. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: A nonstatistical sample of sixty (60) contractor work weeks out of greater than two hundred and fifty (250) were selected for testwork. Repeat Finding from the Prior Year(s): Yes, prior year finding 2024-003 Recommendation: We recommend that the City strengthen its internal controls to ensure that timely reviews of certified payroll submissions are being performed by the City. View of Responsible Officials Management agrees. See separate Corrective Action Plan.

2024-002 Program: CDBG – Entitlement/Special Purpose Grants Cluster Financial Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Award Year: All Grant Award Number: All Compliance Requirements: Reporting Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: Per 2 CFR 200.303, the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. This includes internal controls over maintaining records of the preparer and approver of required reports. Condition: We identified one (1) instance in which the City did not retain evidence to document the individual who reviewed and approved the required reports prior to submission. This consisted of one (1) financial report. Cause: The City's procedures did not include documenting the review and approval of the reports prior to submission. Effect: Ineffective controls over this area of compliance could result in reports that are inaccurate or incomplete being submitted or disclosed to the granting agency. Questioned Costs: No questioned costs were identified as a result of our audit procedures. Context/Sampling: A nonstatistical sample of two (2) out of four (4) cash on hand reports were selected for reporting testing. Repeat Finding from the Prior Year(s): Yes. Recommendation: The City has implemented the appropriate changes subsequent to the end of fiscal year 2024. During fiscal year 2024, the City had not fully implemented corrective actions. We recommend the City continue performing the corrective actions they made. Views of Responsible Official: The City concurs with the finding. See separate corrective action plan.

2024-003 Program: Nationally Significant Freight and Highway Projects Financial Assistance Listing Number: 20.934 Federal Agency: U.S. Department of Transportation Pass-through: California Department of Transportation Award Year: Multiple Grant Award Number: Multiple Compliance Requirements: Special Tests and Provisions – Wage Rate Requirements Type of Finding: Material Weakness in Internal Control over Compliance and Material Instance of Noncompliance Criteria: All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) 40 USC 3141–3144, 3146, and 3147. Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR Part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); OMB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326. 2 CFR 200.303, the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. This includes internal controls over maintaining records of the receipt and review of certified payrolls. Condition: In March 2024, the City implemented procedural changes to their certified payroll review process. Until February 2024, the City did not retain evidence to document the individual who reviewed the certified payroll for each week in which work was performed by construction contractors and subcontractors. Due to backlog, the City was not able to catch up on certifications until August 2024 which was after the fiscal year had ended. For fifty-four (54) of sixty (60) weeks of certified payroll submissions selected for testing, we noted that the City did not review the contractors’ submissions of certified payroll in a timely manner. For six (6) out of sixty (60) weeks of certified payroll submissions selected, we noted that a statement of non-performance was submitted. However, the tracking spreadsheet provided to the City by its 3rd party project manager indicated that work had been performed. For nineteen (19) out of sixty (60) weeks of certified payroll submissions selected, we noted that the contractor or subcontractor had not submitted the weekly certified payroll in a timely manner. The contractor had submitted their certified payroll several weeks after the week of work performed. Cause: The City’s procedures did not include documenting the review of the certified payroll received. In addition, the City did not have the necessary internal controls in place to ensure the accuracy of the tracking of work weeks being performed as well as the contractor’s and subcontractor’s timely submittal of certified payroll. Effect: Ineffective controls over this area of compliance could result in noncompliance with the wage rate compliance requirements. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: Sampling was used. We selected sixty (60) out of all weeks indicated as work weeks for the City’s project for testing. However, due to the condition noted above, the population of work weeks could not be verified. Repeat Finding from the Prior Year(s): Yes, 2023-003. Recommendation: We recommend that the City strengthen its internal controls to ensure that timely reviews of certified payroll submissions are being performed by the City. This could include performing procedures to ensure that information being provided to the City by its consultant project managers is accurate and that the required certified payroll is being submitted by contractors and subcontractors in a timely manner. View of Responsible Official and Planned Corrective Actions The City concurs with the finding. See separate corrective action plan.

2024-004 Program: Highway Planning and Construction Financial Assistance Listing Number: 20.205 Federal Agency: U.S. Department of Transportation Pass-through: California Department of Transportation Award Year: Multiple Grant Award Number: Multiple Compliance Requirements: Special Tests and Provisions – Wage Rate Requirements Type of Finding: Material Weakness in Internal Control over Compliance and Instance of Noncompliance Criteria: All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) (40 USC 3141–3144, 3146, and 3147. Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR Part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); OMB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326). 2 CFR 200.303, the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. This includes internal controls over maintaining records of the receipt and review of certified payrolls. Condition: We noted for eight (8) out of eight (8) certified payrolls selected for testing, the City did not document their review and approval of certified payroll submission. In addition, for two (2) out of eight (8) weeks of certified payroll selected for testing, we noted the contractor or subcontractor did not submit the certified payroll in a timely manner. Cause: The City’s procedures did not include documenting the review of the certified payroll received. In addition, the City did not have the necessary internal controls in place to ensure the contractor’s and subcontractor’s timely submittal of certified payroll. Effect: Ineffective procedures over this area of compliance could result in noncompliance with the wage rate compliance requirements. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: Sampling was used. We selected eight (8) of twenty-one (21) certified payrolls for testing. Repeat Finding from the Prior Year(s): No. Recommendation: We recommend that the City strengthen its internal controls to ensure that timely reviews of certified payroll submissions are being performed by the City. This could include performing procedures to ensure that information being provided to the City by its consultant project managers is accurate and that the required certified payroll is being submitted by contractors and subcontractors in a timely manner. View of Responsible Official and Planned Corrective Actions The City concurs with the finding. See separate corrective action plan.

2023-001 Program: CDBG - Entitlement Grants Cluster / Highway Planning and Construction / Nationally Significant Freight and Highway Project Funds Federal Financial Assistance Listing No.: 14.218 / 20.205 / 20.934 Federal Agency: U.S. Department of Housing and Urban Development / U.S. Department of Transportation Direct Award: U.S. Department of Housing and Urban Development Pass-through: California Department of Transportation in relation to the Highway Planning and Construction and Nationally Significant Freight and Highway Project Funds Award Year: Multiple Grant Award Number: Multiple Compliance Requirements: Other - Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.510(b) - Schedule of expenditures of Federal awards Type of Finding: Material Weakness in Internal Control over Compliance Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.510(b) states that the auditee (the City) must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee’s financial statements, which must include the total federal awards expended as determined in accordance with §200.502. In addition, §200.303 of the Uniform Guidance states that the City must establish and maintain effective internal control over the federal awards, including controls over the accuracy of program information and expenditure amounts. Condition: During our audit procedures performed over the SEFA and expenditures reported for the CDBG - Entitlement Grants Cluster, Highway Planning and Construction, and Nationally Significant Freight and Highway Project Funds, we noted the following: 1. The City did not properly identify the amount expended for the CDBG - Entitlement Grants Cluster, AL No. 14.218. The expenditures reported by the City were understated by $154,071. 2. The City did not properly identify the amount expended for the Highway Planning and Construction, AL No. 20.205. The expenditures reported by the City were overstated by $5,098,179. 3. The City did not properly classify the amount expended for the Nationally Significant Freight and Highway Project Funds, AL No. 20.934. The expenditures reported by the City were understated by $2,769,610. Cause: As a result, the City lacks adequate internal controls to ensure the SEFA is completely and accurately stated. Specifically, the City’s processes for recording and tracking expenditures of federal awards are not designed so that expenditures are identified when incurred and assigned to the correct program name or cluster in a complete and timely manner. Effect: The SEFA, as originally presented, was overstated by $2,174,498. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: No sampling was used. Program expenditures on the SEFA were reconciled to supporting records. Repeat Finding from the Prior Year(s): No. Recommendation: The City should establish policies and implement internal controls to ensure all federal expenditures are accurately tracked and reported on the SEFA. Personnel knowledgeable of federal expenditures should review amounts coded to federal programs for completeness and accuracy. The SEFA should be prepared and reviewed in a timely manner and reconciled to underlying records as well as the basic financial statements. View of Responsible Official and Planned Corrective Actions See separate corrective action plan.

2023-002 Program: Community Development Block Grants/Entitlement Grants Cluster Financial Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Award Year: All Grant Award Number: All Compliance Requirements: Reporting Type of Finding: Material Weakness in Internal Control over Compliance Criteria: Per 2 CFR 200.303, the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. This includes internal controls over maintaining records of the preparer and approver of required reports. Condition: We identified three (3) instances in which the City did not retain evidence to document the individual who reviewed and approved the required reports prior to submission. This consisted of two (2) financial reports and one (1) special report for the Federal Funding Accountability and Transparency Act (FFATA). Cause: The City's procedures did not include documenting the review and approval of the reports prior to submission. Effect: Ineffective controls over this area of compliance could result in reports that are inaccurate or incomplete being submitted or disclosed to the granting agency. Questioned Costs: No questioned costs were identified as a result of our audit procedures. Context/Sampling: FFATA - Sampling was not used. We selected all FFATA reports (1) for testing. The condition noted above was identified during our procedures over reporting testing. Cash on Hand Reports - Sampling was used. We selected two (2) of four (4) Cash on Hand reports for testing. The condition noted above was identified during our procedures over reporting testing. Repeat Finding from the Prior Year(s): No. Recommendation: We recommend that the City revise its procedures to include evidence to document the individual who reviewed and approved required reports prior to submission. View of Responsible Official and Planned Corrective Actions See separate corrective action plan.

2023-003 Program: Nationally Significant Freight and Highway Projects Financial Assistance Listing Number: 20.934 Federal Agency: U.S. Department of Transportation Pass-through: California Department of Transportation Award Year: 2019 Grant Award Number: INFRALUL-5459(031) Compliance Requirements: Special Tests and Provisions – Wage Rate Requirements Type of Finding: Material Weakness in Internal Control over Compliance Criteria: 2 CFR 200.303, the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. This includes internal controls over maintaining records of the receipt and review of certified payrolls. Condition: We identified nine (9) instances in which the City did not retain evidence to document the individual who reviewed the certified payroll for each week in which work was performed by construction contractors. Cause: The City’s procedures did not include documenting the review of the certified payroll received. Effect: Ineffective controls over this area of compliance could result in noncompliance with the wage rate compliance requirements. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: The population consisted of forty-nine (49) certified payrolls required during the fiscal year. A sample of nine (9) were selected for testwork. Repeat Finding from the Prior Year(s): No. Recommendation: The City should establish controls to ensure there are procedures in place requiring the documented review of the certified payroll submitted by the construction contractors. View of Responsible Official and Planned Corrective Actions See separate corrective action plan.

2023-004 Program: Nationally Significant Freight and Highway Projects Financial Assistance Listing Number: 20.934 Federal Agency: U.S. Department of Transportation Pass-through: California Department of Transportation Award Year: 2019 Grant Award Number: INFRALUL-5459(031) Compliance Requirements: Cash Management / Matching, Earmarking, Level of Effort Type of Finding: Material Weakness in Internal Control over Compliance Criteria: 2 CFR 200.303, the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. This includes internal controls over preparation of reimbursement requests. Condition: We identified two (2) instances in which the City did not retain evidence to document the individual who reviewed and approved reimbursement requests and matching percentages prior to being submitted to the granting agency. We noted one individual prepares the reimbursement request, calculates the matching percentages, and submits the reimbursements requests. Cause: The City's procedures did not include documenting the management review and approval of the reimbursement requests and matching percentages prior to submission to the granting agency. Effect: Ineffective internal controls over these areas of compliance could result in reimbursement requests being inaccurate or incomplete prior to submission to the granting agency. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: Sampling was not used. We selected all reimbursement requests (3) for testing. Repeat Finding from the Prior Year(s): No. Recommendation: We recommend that the City revise its procedures to include evidence to document the individual who reviewed the reimbursement requests prior to submission. View of Responsible Official and Planned Corrective Actions: See separate corrective action plan.

Program: COVID-19 ? Coronavirus State and Local Fiscal Recovery Funds Financial Assistance Listing Number: 21.027 Federal Agency: U.S. Department of Treasury Award Year: 2021 Grant Award Number: N/A Compliance Requirements: Reporting Type of Finding: Instance of Noncompliance, Significant Deficiency in Internal Control over Compliance Criteria: In accordance with the 2022 Compliance Supplement, there are three types of reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) program: 1. Interim Report: Provides initial overview of status and uses of funding. The interim report will include a recipient?s expenditures through July 31, 2021 by category and at the summary level. The reporting requirements vary by type of recipient, the total allocation amount, and the date which the recipient first received its allocation. For the City, this is a one-time report and was due no later than October 25, 2021 (60 days after the receipt of first allocation). 2. Project and Expenditure Report: Report on financial data, projects funded, expenditures, and contracts and subawards over $50,000, and other information. Project and Expenditure Reports are due on a regular, recurring basis after the Interim Reports. The reporting frequency and deadlines vary by type of recipient and total allocation amount. 3. Recovery Plan Performance Report: The Recovery Plan Performance Report (the ?Recovery Plan?) will provide information on the projects that large recipients are undertaking with program funding and how they plan to ensure program outcomes are achieved in an effective, efficient, and equitable manner. It will include key performance indicators identified by the recipient and some mandatory indicators identified by Treasury. The Recovery Plan will be posted on the website of the recipient as well as provided to Treasury. For the City, this report is not required. The reporting threshold is based on the total allocation expected under the CSLFRF program, not the funds received by the recipient as of the time of reporting. Reporting requirements include which reports a recipient must file, the frequency at which the recipient must report, the covered period of reporting, and the report deadlines. Reporting requirements for each type and size of recipient can be found in Part 2, Section B of the Compliance and Reporting Guidance. The City is considered a Tier 2 reporting entity due to having a population below 250,000 residents and being allocated more than $10 million in CSLFRF funding. As a result, the first two reporting requirements noted above (Interim Report and Project and Expenditure Report) are applicable. Condition: Of the four (4) reports selected for testing, we noted the following: 1. Interim Report ? a. For the one (1) interim report tested, we noted no evidence of management review prior to the submission of the Interim Report. We also noted that the City had reported total cumulative obligations in the amount of $36,366,744. However, as of the time of the submission of the interim report (9/17/2021), the City had not formally obligated the program funds. 2. Project and Expenditure Report ? a. For the three (3) quarterly and expenditure reports tested, we noted no evidence of management review prior to the submission of each project and expenditure report selected for testing. Cause: Management did not have established policies and procedures in place for the preparation and review of the Interim Report and the quarterly Project and Expenditure Reports. For the Interim Report, the City had erroneously reported the result of the City?s Revenue Loss Calculation as the total cumulative obligation balance. Effect: The City?s interim report did not report accurate cumulative obligations for the period March 3, 2021 through July 31, 2021. The City had erroneously reported the result of the City?s Revenue Loss Calculation as the total cumulative obligation balance. The City had formally obligated the use of program funding in October of 2021. Therefore, the cumulative obligation balance at the time the report was prepared should have been $0. Questioned Costs: None. Context/Sampling: A nonstatistical sample of four (4) reports out of four (4) reports were selected for testing. Repeat Finding from the Prior Year(s): No. Recommendation: We recommend the City implement formal policies and procedures for the reporting of Coronavirus State and Local Fiscal Recovery Funds. According to the Compliance and Reporting Guidance published by the US Department of the Treasury, all recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of the Guidance. Recipients should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, recipients need to establish internal controls, including establishing segregation of duties over the preparation and approval of reports, to ensure completion and timely submission of all mandatory performance and/or compliance reporting. View of Responsible Official and Planned Corrective Actions See separate corrective action plan.

GSA_MIGRATION