CITY OF DECATUR

2024-003 Period of Performance - Community Development Block Grants/Entitlement Grants Cluster Assistance Listing Number 14.218 Grant Period - Year Ended December 31, 2024 Criteria: 24 CFR Section 570.902 of the CDBG regulations states that a grantee is in compliance with timely expenditure requirements if, 60 days prior to the end of its program year, there is no more than 1.5 times its annual grant remaining in the line of credit, including any program income on hand. Condition/Context: The City did not meet program timeliness spending requirements. The City’s unexpended balance at December 31, 2024 of $2,548,256 is more than 1.5 times the $1,319,714 entitlement grant for the current year. We consider this to be an instance of non-compliance relating to the Period of Performance Compliance Requirement. This finding is a repeat finding and also reported in Section IV-Prior Year Audit Findings as finding 2023-003. Questioned Costs: $0 Cause: The City experienced delays in projects funded by the grant. Effect: Failure to meet the timeliness standard results in noncompliance with the period of performance requirement and could result in sanctions and reduction of future grant funds. Recommendation: We recommend that the City establish procedures to ensure that it complies with the CDBG timeliness standard specified in 24 CFR Section 570.902. Views of Responsible Officials: Management agrees with the Single Audit finding and a response is included in the Corrective Action Plan.

2023-002 Reporting - Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number 21.027 Grant Period - Year Ended December 31, 2023 Criteria: In accordance with the grant agreement the City was required to submit quarterly project and expenditure reports to the Illinois Department of Treasury as outlined on the schedule provided within the agreement. Condition/Context: The City failed to submit three quarterly reports in a timely manner. We consider this to be an instance of non-compliance relating to the Reporting Compliance Requirement. Questioned Costs: $0 Effect: The result is that the City did not submit the required information to the Illinois Department of Treasury in a timely fashion. Cause: The condition was an administrative oversight. Recommendation: We recommend the City increase controls over reporting. Views of Responsible Officials: Management agrees with the Single Audit finding and a response is included in the Corrective Action Plan.

2023-003 Period of Performance – Community Development Block Grants/Entitlement Grants Cluster Assistance Listing Number 14.218 Grant Period - Year Ended December 31, 2023 Criteria: 24 CFR Section 570.902 of the CDBG regulations states that a grantee is in compliance with timely expenditure requirements if, 60 days prior to the end of its program year, there is no more than 1.5 times its annual grant remaining in the line of credit, including any program income on hand. Condition/Context: The City did not meet program timeliness spending requirements. The City’s unexpended balance at December 31, 2023 of $2,683,379 is more than 1.5 times the $1,374,790 entitlement grant for the current year. We consider this to be an instance of non-compliance relating to the Period of Performance Compliance Requirement. Questioned Costs: $0 Effect: Failure to meet the timeliness standard results in noncompliance with the period of performance requirement and could result in sanctions and reduction of future grant funds. Cause: The City experienced delays in projects funded by the grant. Recommendation: We recommend that the City establish procedures to ensure that it complies with the CDBG timeliness standard specified in 24 CFR Section 570.902. Views of Responsible Officials: Management agrees with the Single Audit finding and a response is included in the Corrective Action Plan.

Federal Agency: U.S. Department of Treasury/U.S. Department of Transportation Federal Program: Coronavirus State & Local Fiscal Recovery Fund/Federal Transit Cluster Assistance Listing Number: 21.027/20.526 & 20.507 Federal Award Identification Number and Year: 21.027: 1505-0271, 12/31/22; 20.526: IL-2019-010, 10/1/18; 20.507: IL-2020-010, 10/1/21; IL-2020-022-01, 10/19/19; IL-2020-022-02, 10/19/19; IL-2021-023-00, 8/29/22; IL-2022-028-05, 7/1/22; IL-2022-015-01, 03/30/22 Award Period: 21.027: March 3, 2021 through December 31, 2024; 20.526 & 20.507: May 17, 2019 through March 30, 2028 Type of Finding • Significant Deficiency in Internal Control over Compliance • Other Matter Criteria or specific requirement: Federal guidelines required the entity to have procedures documented to verify the vendor of a covered transaction (over $25,000) is not debarred, suspended, or are otherwise excluded from participating in the transaction, prior to entering into a covered transaction. Condition: The City did not maintain records showing vendors were not suspended or debarred prior to entering into covered transactions. Questioned costs: None Context: 7 of 7 items tested had no documentation to support that vendors were not suspended or debarred for Coronavirus State & Local Fiscal Recovery Funds. 2 of 5 items tested had no documentation to support that vendors were not suspended or debarred for Federal Transit Cluster. The samples were statistically valid samples. Cause: Policies in place were not followed or monitored. Effect: Lack of internal control procedures can lead to noncompliance with grant requirements and a disallowed cost. Repeat finding: Repeat of finding 2021-002 Recommendation: We recommend ensuring a procedure is in place to verify vendors or contractors are not suspended or debarred from doing business with the government, prior to the purchase, and maintaining documentation of this. Views of responsible officials: There is no disagreement with the audit finding.

Federal Agency: U.S. Department of Treasury Federal Program: Coronavirus State & Local Fiscal Recovery Fund Assistance Listing Number: 21.027 Federal Award Identification Number and Year: 1505-0271; 12/31/22 Award Period: March 3, 2021 through December 31, 2024 Type of Finding • Significant Deficiency in Internal Control over Compliance • Other Matter Criteria or specific requirement: Uniform Grant Guidance (UGG) (2 CFR 200.303) requires non-federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include ensuring reports are completed accurately. Condition: The program reporting includes classification of vendors into types, including contractors, beneficiaries, or subrecipients. A total of 12 out of 13 vendors were reported as subrecipients in the reports submitted that did not qualify as subrecipients under UGG. Questioned costs: None Context: In 4 of 4 reports tested, various vendors shown as subrecipients in the vendor classification section were not subrecipients, but rather beneficiaries or contractors. The sample was a statistically valid sample. Cause: Policies in place were not followed or monitored. Effect: Noncompliance with reporting requirements. Repeat finding: No Recommendation: We recommend the City strengthen its review procedures over reports to ensure all applicable data elements are accurate. Views of responsible officials: There is no disagreement with the audit finding.

Federal Agency: U.S. Department of Treasury Federal Program: Coronavirus State & Local Fiscal Recovery Fund Assistance Listing Number: 21.027 Federal Award Identification Number and Year: 1505-0271; 12/31/22 Award Period: March 3, 2021 through December 31, 2024 Type of Finding • Significant Deficiency in Internal Control over Compliance • Other Matter Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires non-federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include ensuring that expenditures are properly reviewed and the review is documented. Condition: While the expenditures where properly approved during the accounts payable process, our testing noted several instances in which the grant program manager did not document his approval on the expenditures. Questioned costs: None Context: 17 out 26 disbursements tested did not have documented approval of the grant program manager. The sample was a statistically valid sample. Cause: Policies in place were not followed or monitored. Effect: Lack of an adequate review process may result in unallowable costs being charged to the program. Repeat finding: No Recommendation: We recommend the City strengthen its review procedures over expenditures and ensure all reviews are properly documented. Views of responsible officials: There is no disagreement with the audit finding.

FINDING 2021 ? 002 SUSPENSION AND DEBARMENT Federal Agency: Department of Transportation Federal Program: Federal Transit Cluster; Highway Planning and Construction Cluster Assistance Listing Number: 20.507; 20.205 Award Period: Federal Transit Cluster 2015-2021; Highway Planning and Construction Cluster July 1, 2020 ? December 31, 2022 ? Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Federal guidelines required the entity to have procedures documented to verify the vendor of a covered transaction (over $25,000) is not debarred, suspended, or are otherwise excluded from participating in the transaction, prior to entering into a covered transaction. Condition: During the course of the audit, the City did not follow policies for suspended or debarred vendors prior to procuring goods or services for all covered transactions. CLA completed the SAM search and none of the vendors were suspended or debarred and therefore no noncompliance or questioned costs. Questioned costs: None

FINDING 2021 ? 003 EQUIPMENT MANAGEMENT Federal Agency: Department of Transportation Federal Program: Highway Planning and Construction Cluster Assistance Listing Number: 20.205 Award Period: July 1, 2020 ? December 31, 2022 ?Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property( 2 CFR section 200.313(d)(1)). A physical inventory should be conducted every 2 years to compare to this listing. Condition: In our equipment testing, we noted an equipment listing was not maintained which identified the purchases from this grant program, with the required detail. In addition, no physical inventory was completed. Questioned costs: None

Federal guidelines require progress reports and federal financial reports (FFR) to be submitted on a quarterly basis. Proper internal controls require a review process over the reports to ensure accuracy and timeliness. Quarterly reports are prepared and submitted by the same individual without review prior to submission. Additionally, allowable expenditures of $4,000 were incurred but not included on a quarterly filling. Quarterly reports filed in fiscal year 2019 had no documented review completed prior to submission. One quarterly report did not contain all expenditures that could have been requested for reimbursement and was not caught in a review prior to submission . The City put a policy into place for the Decatur Public Transit System effective December 2017 for a City official to review information prior to submission to the granting agency, however the policy was not put in place at other departments that submit reporting for federal expenditures. A lack of internal control over reporting can allow for expenses reported incorrectly and lack of timely reporting.

Federal guidelines require the entity to have procedures documented to verify the vendor of a covered transaction (over $25,000) is not debarred, suspended, or otherwise excluded from participating in the transaction, prior to entering into a covered transaction. During the course of the audit, it was noted that the City does not have a policy or procedure in place for certain departments to verify whether a contractor or vendor is suspended or debarred and the Decatur Public Transit System did not follow policies for suspended or debarred in place for all covered transactions. CLA completed the SAM search and none of the vendors where suspended or debarred and therefore no compliance or questioned costs. We noted this in eight of ten transactions tested, for in which there was no documentation maintained as to whether the vendor was suspended or debarred. The City procurement policy, separate from the Decatur Public Transit System policy, does not have written policies for suspension and debarment compliance. A lack of internal control procedures can lead to noncompliance with grant requirements.

The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. The City didn't not provide supporting documentation to detail the history of the procurement as required by Uniform Grant Guidance. In discussion with the client and with the supporting documentation that was provided, there was evidence that open competition did occur, however the documentation for cost analysis was not completely documented. The City?s procurement policy has not been updated to Uniform Grant Guidance, except for a specific policy developed for the Decatur Public Transit System. The City put a policy into place for the Decatur Public Transit System effective January 1, 2018 however the policy was not put in place at other City Departments. A lack of internal control procedures can lead to noncompliance with grant requirements.

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