CITY OF DETROIT, MICHIGAN

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.239, Department of Housing and Urban Development (HUD), Home Investment Partnerships Program Federal Award Identification Number and Year - M18MC260202 2018; M19MC260202 2019; M20MC260202 2020; M21MC260202 2021 Pass through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - Yes 2024 004 Criteria - Per 2 CFR 200.303, the recipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The City is required to complete inspections of HOME-assisted units to ensure they meet the HUD housing standards outlined in 24 CFR 92.251(b)(viii). During the period of affordability (i.e., the period for which the nonfederal entity must maintain subsided housing) for HOME-assisted rental housing, the participating jurisdiction must perform on-site inspections to determine compliance with property standards and verify the information submitted by the owners no less than (a) every three years for projects containing 1 to 4 units, (b) every two years for projects containing 5 to 25 units, and (c) every year for projects containing 26 or more units. The participating jurisdiction must perform on-site inspections of rental housing occupied by tenants receiving HOME/HOME-ARP-assisted tenant-based rental assistance to determine compliance with housing quality standards (24 CFR sections 92.209(i), 92.251(f), and 92.504(d)). Per 24 CFR 92.504(d) (Sept. 30, 2024), once a housing quality standards inspection is completed, the results must be communicated to the property owner, and any deficiencies identified must be remedied immediately after notification if they are life-threatening and an additional inspection completed within 12 months for all other deficiencies. Condition - The requirements mandate that units be inspected, deficiencies communicated, and corrective actions taken promptly. However, controls over housing quality standards are not effectively designed, reflecting a persistent lack of segregation of duties necessary to ensure compliance. Furthermore, existing controls were insufficient to guarantee that HQS inspection requirements were met and that identified deficiencies were addressed in a timely manner. Questioned Costs - None If Questioned Costs are Not Determinable, Description of Why Known Questioned Costs Were Undetermined or Otherwise Could Not be Reported - N/A Identification of How Questioned Costs Were Computed - N/A Context - During our walkthrough of the City’s processes and controls, we observed that the inspector responsible for conducting inspections of HOME-assisted projects also prepares and signs the certification of completion, with no secondary review in place. In addition, sample testing revealed that 8 of 13 HOME-assisted projects were not inspected according to the established schedule. Finally, 4 of 13 projects did not have deficiencies identified during inspection resolved in a timely manner. Cause and Effect - The absence of effectively designed controls over inspection resulted in material noncompliance with program requirements, as described above. Recommendation - We recommend that the City establish and implement effective internal controls over inspections. These controls should include segregation of duties, independent review of inspection results, and documented approval processes. Strengthening these measures will help prevent errors or omissions from going undetected and reduce the risk of material noncompliance with program requirements. Views of Responsible Officials and Corrective Action Plan - During the fiscal year, the City reviewed and enhanced its internal controls over HQS inspections to strengthen oversight and segregation of duties. Process changes were implemented to ensure that inspections, documentation of deficiencies, follow-up actions, and certifications of completion have independent review and approval. In addition, management implemented monitoring procedures to track inspection schedules to help ensure HQS requirements are met in a timely manner. While corrective actions were initiated during the fiscal year, they were not fully implemented throughout the entire period. By year end, the controls were in place. The City will continue to monitor these controls to ensure ongoing compliance and to prevent similar issues from recurring.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.239, Department of Housing and Urban Development, Home Investment Partnerships Program Federal Award Identification Number and Year - M18MC260202 2018; M19MC260202 2019; M20MC260202 2020; M21MC260202 2021 Pass through Entity - N/A Finding Type - Material weakness Repeat Finding - Yes 2024 006 Criteria - Per 2 CFR 200.303, the recipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. The HOME program has income targeting requirements such that only low-income or very low-income persons can receive housing assistance, as prescribed by 24 CFR 92.216, which covers income targeting for tenant-based rental assistance and rental units. The City maintains Asset Management Policies and Procedures to comply with these standards, which state that an annual review will be performed on each asset. Condition - The City lacked adequate controls to ensure annual reviews were conducted in accordance with its policy, limiting its ability to exercise proper oversight of eligibility determinations performed by the program’s contractor. If Questioned Costs are Not Determinable, Description of Why Known Questioned Costs Were Undetermined or Otherwise Could Not be Reported - N/A Identification of How Questioned Costs Were Computed - N/A Context - The City engaged a contractor to review developers’ income-eligibility determinations for HOME-assisted housing units. While the contractor performs these reviews, the City retains full responsibility for compliance with eligibility requirements. Our testing showed that the contractor reviewed 62 determinations during the fiscal period; however, the City conducted annual reviews for only 50 of these projects. Additionally, for 5 of 9 projects selected for testing, there was no evidence that the City reviewed the contractor’s certification of the developers’ income-eligibility determinations. As part of our procedures, we reviewed evidence that the contractor performed the required number of reviews and that individuals assessed were income-eligible to receive program benefits. Cause and Effect - The City did not implement controls to ensure eligibility reviews performed by the contractor were in compliance with the terms and conditions of the award. Without oversight of the contractor’s procedures for assessing participant eligibility, there is an increased risk that ineligible participants could receive program benefits, potentially resulting in material noncompliance and repayment obligations to the funder. Recommendation - We recommend that the City continue to implement oversight procedures to conduct and document reviews of contractor work related to compliance requirements and programmatic decisions, specifically, eligibility determinations. Views of Responsible Officials and Planned Corrective Actions - This finding is timing related and was resolved by the City during the fiscal year. The City reviewed and updated its policies and procedures to help ensure proper segregation of duties and proper oversight of eligibility determination. Additional processes now have independent review of inspections after the program’s contractor to further support program compliance. Review responsibilities were put in place to help ensure determinations receive an independent secondary review by city staff. These changes were in place by year end. The City will continue to monitor the program and review procedures to ensure continued compliance and to prevent the recurrence of similar timing-related issues.

Assistance Listing Number, Federal Agency, and Program Name - ALN 93.914, Department of Health and Human Services (HHS), HIV Relief Project Grants Federal Award Identification Number and Year - 6 H89HA00021 32 01 2024 Pass through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303, the recipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Per 2 CFR 200.305(b)(3), when the reimbursement method is used, the federal agency or pass-through entity must make payment within 30 calendar days after receipt of the payment request, unless the federal agency or pass-through entity reasonably believes the request to be improper. Condition - A lack of effective controls resulted in noncompliance with federal payment requirements, specifically for payments made to subrecipients. Questioned Costs - None If Questioned Costs are Not Determinable, Description of Why Known Questioned Costs Were Undetermined or Otherwise Could Not be Reported - N/A Identification of How Questioned Costs Were Computed - N/A Context - During testing over a sample of 40 payments to subrecipients, we noted 3 payments that were made more than the required 30 days after the City received a reimbursement request from the subrecipient. Cause and Effect - A lack of effectively operating controls could result in the untimely disbursement of funds to subrecipients and material noncompliance with federal payment requirements. Recommendation - We recommend that the City design and implement controls to ensure compliance with federal payment requirements, including establishing timelines for processing subrecipient payments and review to ensure adherence to federal payment requirements. Views of Responsible Officials and Planned Corrective Actions - The three payments made were paid 1 to 2 days after the 30 day reimbursement requirement. The City will review its subrecipient payment terms and implement additional processes to help ensure compliance with federal payment requirements.

Assistance Listing Number, Federal Agency, and Program Name - ALN 10.557, United States Department of Agriculture, WIC Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Federal Award Identification Number and Year - E20240675 00 and E20241960 00 2024 Pass through Entity - Michigan Department of Health and Human Services (MDHHS) Finding Type - Material weakness Repeat Finding - No Criteria - 2 CFR 200 Appendix V.4 requires that each central service cost allocation plan be accompanied by a certification, which includes the period to which the accumulated costs under the plan are allocated. 2 CFR 200.303(a) requires nonfederal entities to establish and maintain effective internal controls over federal awards, providing reasonable assurance of compliance with federal statutes, regulations, and award terms. These controls should align with the "Standards for Internal Control in the Federal Government" or the COSO framework. Condition - The City applied indirect costs to the programs in a manner that did not align with the allocation methodology outlined in the 2022-2023 cost allocation plan submitted to MDHHS. Furthermore, the plan lacked explicit certification and contained minor errors and omissions. Questioned Costs - None If Questioned Costs are Not Determinable, Description of Why Known Questioned Costs Were Undetermined or Otherwise Could Not be Reported - N/A Identification of How Questioned Costs Were Computed - N/A Context - The City prepares an annual cost allocation plan as required by 2 CFR 200, Appendix V. During testing, we noted that the City charged indirect costs to ensure the amount did not exceed the budgeted indirect cost amount. However, under the methodology submitted with the plan, indirect costs should have been allocated based on the program’s total direct costs. Although total direct costs were below the budgeted amount, indirect costs were applied without consideration of this methodology. Additionally, the plan lacked evidence of certification and did not accurately specify the allocation period. Following identification of these matters, the City obtained approval from MDHHS permitting indirect costs to be charged without regard to total direct costs and acknowledging oversights in the plan, including the failure to clearly identify the applicable allocation period. Based on MDHHS’ approval, the additional indirect costs charged, though not proportional to total direct costs, did not result in questioned costs. Cause and Effect - The City’s internal controls were not sufficient to ensure that the required certification was performed or to detect the inconsistent application of the indirect cost allocation methodology. This control weakness increases the risk of noncompliance and may result in excessive indirect costs being charged to the program. Recommendation - We recommend that the City conduct a comprehensive review of its indirect cost allocation methodology, incorporating feedback provided by the funder, to ensure consistency between the cost allocation plan and its application. Additionally, the City should design and implement internal controls to verify that indirect costs are applied in accordance with the approved methodology and allocation period. We further recommend that all personnel involved in the preparation, submission, and application of indirect costs receive training on the revised methodology and related controls to prevent future inconsistencies and reduce the risk of noncompliance. Views of Responsible Officials and Planned Corrective Actions - Upon identification, the City worked with the Michigan Department of Health and Human Services and obtained approval and acceptance of the indirect cost calculation. The City will continue to work with MDHHS to ensure full compliance. The City has initiated a review of its indirect cost allocation methodology to ensure compliance. Management is updating the cost allocation calculation to document the approved allocation method and ensure the method is in accordance with the approved plan. The City will also provide training to staff involved in the preparation, submission, and calculation of the indirect costs to ensure understanding requirements.

Assistance Listing Number, Federal Agency, and Program Name - ALN 97.036, Department of Homeland Security, Disaster Grants - Public Assistance (Presidentially Declared Disasters) (FEMA) Federal Award Identification Number and Year - PA-05-MI-4607-PW-00098(0) Pass-through Entity - Michigan State Police Finding Type - Significant deficiency Repeat Finding - No Criteria - Per 2 CFR 200.303(a), a nonfederal entity must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government,” issued by the Comptroller General of the United States, or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - The FEMA grant expenses are charged to various funds in the general ledger over several years but is managed and tracked by project in a manual spreadsheet that agrees to the amount of expenses reported on the fiscal year 2024 schedule of expenditures of federal awards (the "Schedule"). FEMA expenditures are reported on the Schedule when there is an award and expenditures. Given that the award is made subsequent to the expenditures being incurred, a manual spreadsheet is used to track expenditures being charged to the grant. There were instances of duplicated costs in the manual spreadsheet. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The FEMA projects have periods of performances that began prior to fiscal year 2024. As a result, the City used spreadsheets to accumulate costs to charge to the projects. Given that manual processes carry a higher risk of error due to their reliance on human input, in addition to our allowability sample, we performed an analysis of the spreadsheet, which listed all costs charged to the grant during fiscal year 2024, and found 11 instances of duplicate costs totaling $5,161. Of the $5,161 submitted, FEMA reimburses ninety percent of the amount, i.e., $4,645. Cause and Effect - A lack of effective controls over the spreadsheet did not identify $5,161 of duplicative costs. The schedule of expenditures of federal awards was initially overstated by this amount. These costs have been excluded from the Schedule for the year ended June 30, 2024. Recommendation - We recommend the City continue to evaluate its processes and controls when manual processes are utilized to accumulate costs charged to a grant, including risk assessing for gaps that can cause noncompliance. Based on the gaps identified, we recommend the City implement effective controls to address the risks. Views of Responsible Officials and Corrective Action Plan - Detroit Water and Sewer Department (DWSD) management recognizes the importance of maintaining effective controls to ensure the accuracy and completeness of reported expenditures. The identified duplicate cost was an isolated occurrence caused by an oversight during the spreadsheet preparation process. While existing controls are in place, management will perform a secondary review of the end to end process to enhance these controls.

Assistance Listing Number, Federal Agency, and Program Name - ALN 10.557, Department of Agriculture, Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Federal Award Identification Number and Year - 232MI013W5003 Pass-through Entity - Michigan Department of Health and Human Services Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - Yes 2023-004 Criteria - Per 2 CFR 200.344(c), unless the federal awarding agency or pass through entity authorizes an extension, a nonfederal entity must liquidate all financial obligations incurred under the federal award no later than 120 calendar days after the end of the period of performance, as specified in the terms and conditions of the federal award. However, as outlined within the grant award from the Michigan Department of Health and Human Services and more restrictive than 2 CFR 200.344(c), the City must liquidate within 60 days after the State's fiscal year end any unpaid year end commitments and obligations. Any obligation remaining unliquidated after 60 days from the end of the period shall revert to the State for disposition in accordance with applicable state and/or federal requirements, except as specifically authorized in writing by the department. Condition - The City did not have adequate controls in place to ensure obligations were liquidated (paid) within the required 60 days from the end of the grant period and certain costs were liquidated after 60 days. Questioned Costs - None Identification of How Questioned Costs Were Computed - Refer to context below. Context - There were two invoices totaling $251,332 that were not paid at the end of the grant period. A review of both invoices revealed that they were liquidated after the required 60 days for the performance period ended September 30, 2023. Based on email communication received by the City from the Michigan Department of Health and Human Services, the department granted the City retroactive approval to allow for the expenses despite being liquidated after the 60 day period. As a result, no questioned costs are reported. Cause and Effect - The controls in place were not effective to ensure grant expenditures were liquidated within 60 days following the end of the grant period. Failure to comply with the terms and conditions of the grant agreement, including the liquidation provisions, may result in disallowed costs and the need to repay the funder for such costs. Recommendation - We recommend the City ensure controls are in place to comply with liquidation requirements outlined in the award agreements and/or the Uniform Guidance issued by OMB (whichever is more restrictive). Views of Responsible Officials and Planned Corrective Actions - The Office of the Chief Financial Officer (OCFO) is collaborating with the Health Department to implement enhanced processes over the final review of invoices to address timing related to the liquidation requirement.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.239, Department of Housing and Urban Development, Home Investment Partnerships Program and COVID-19 Home Investment Partnerships Federal Award Identification Number and Year - M22-MC260202, M21-MP260202, Various Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303, the recipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government,” issued by the Comptroller General of the United States, or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The City is required to complete inspections of HOME assisted units to ensure they meet the HUD housing standards as outlined in 24 CFR 92.251(b) (viii). During the period of affordability (i.e., the period for which the nonfederal entity must maintain subsidized housing) for HOME assisted rental housing, the participating jurisdiction must perform on site inspections to determine compliance with property standards and verify the information submitted by the owners no less than (a) every three years for projects containing 1 to 4 units, (b) every two years for projects containing 5 to 25 units, and (c) every year for projects containing 26 or more units. The participating jurisdiction must perform on site inspections of rental housing occupied by tenants receiving HOME/HOME ARP assisted tenant based rental assistance to determine compliance with housing quality standards (24 CFR sections 92.209(i), 92.251(f), and 92.504(d)). Per the City’s Home Program manual adopted on July 1, 2022, at least 20 percent of the HOME assisted units must be rented to households at or below 50 percent of the area median income. The City is required to perform the inspections under the housing quality standards for these units. Condition - The City’s on site inspections for compliance with the housing quality standards are triggered by the City’s process to audit developers for compliance with HOME eligibility requirements. This basis is more restrictive than federal requirements for housing quality inspections. At the end of an inspection cycle, a certificate of completion is completed and signed by the responsible inspector. The City did not have effective controls to ensure the certificate of completion is reviewed for completeness and accuracy. The City did not inspect 20 percent of the units, as required by its policy. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - In the process of understanding the controls over compliance with housing quality standards requirement, we noted that the certificate of completion, which is completed at the end of an inspection cycle, was not consistently reviewed. In addition, in one out the three projects selected for testing for compliance with the housing quality standards, the City did not inspect 20 percent of the units at the property, as outlined in their Home Program manual. Cause and Effect - The controls in place to ensure the certificate of completion is reviewed for completeness and accuracy, including review to ensure 20 percent of the units are inspected, were not in place. The lack of controls resulted in a project not having adequate units reviewed. Furthermore, the lack of controls could result in an instance of noncompliance not being identified. Recommendation - We recommend the City ensure controls are in place to comply with the Home Program manual and federal regulations related to housing quality standards. Views of Responsible Officials and Planned Corrective Actions - The City will review its processes and implement additional controls to ensure certificates of completion are reviewed for completeness and accuracy and to verify 20 percent of the units are inspected to comply with the HOME Program manual and federal regulations related to housing quality standards.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.239, Department of Housing and Urban Development, Home Investment Partnerships Program and COVID-19 Home Investment Partnerships Federal Award Identification Number and Year - M22-MC260202, M21-MP260202, Various Pass-through Entity - N/A Finding Type - Material weakness Repeat Finding - No Criteria - Per 2 CFR 200.303, the recipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government,” issued by the Comptroller General of the United States, or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - The City is required to track and report program income within HUD’s Integrated Disbursement and Information System (IDIS) and the general ledger. The City reported fiscal 2024 program income in fiscal 2025. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The repayments of principal and interest provided to developers with HOME funds constitute program income. Approximately $2.2 million received in program income during fiscal year 2024 was reported within IDIS and the City’s general ledger in fiscal year 2025. Cause and Effect - The City has a process to reconcile program income received each month to the monthly bank statements; however, the controls in place did not ensure that program income was reported within IDIS and the general ledger in a timely manner. As a result, program income revenue for fiscal year 2024 was initially understated in the general ledger, which was subsequently corrected to be reflected in fiscal year 2024. Additionally, within IDIS, program income was not reported as available for fiscal year 2024 expenditures. Recommendation - We recommend the City ensure controls are in place to track and report program income in a timely manner, in both the general ledger and IDIS. Views of Responsible Officials and Planned Corrective Actions - Management understands the importance of timely reconciliation and reporting of program income to maintain compliance and ensure accurate financial reporting. The City will work to enhance controls and processes with the department stakeholders and monitor the process to ensure timely and consistent receipts of the program income and reconciliations.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.239, Department of Housing and Urban Development, Home Investment Partnerships Program and COVID-19 Home Investment Partnerships Federal Award Identification Number and Year - M22-MC260202, M21-MP260202, Various Pass-through Entity - N/A Finding Type - Material weakness Repeat Finding - No Criteria - The HOME program has income targeting requirements such that only low income or very low income persons can receive housing assistance as prescribed by 24 CFR 92.216. Per 2 CFR 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government,” issued by the Comptroller General of the United States, or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - The City did not have adequate controls in place to exercise its oversight responsibility of eligibility determinations that were reviewed by a contractor for the program. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The City entered into an agreement with a contractor to perform eligibility reviews over developers’ determinations of income eligibility. While the City arranges for the contractor to perform the review of eligibility, the City is fully responsible for compliance with eligibility requirements. Testing revealed that the City contractor reviewed the developers’ income eligibility determinations of individuals and families living in HOME funded housing units. In 7 out of a sample of 10 projects, there was no evidence of the City’s review of the contractor’s work. Cause and Effect - In the current year, the City contracted with a contractor to perform eligibility reviews over developers’ determination of income eligibility. However, the City did not implement controls to ensure eligibility reviews performed by the contractor were in compliance with the terms and conditions of the award. Without a review of the contractor’s procedures to assess participant eligibility, ineligible participants could receive program benefits, resulting in material noncompliance and the need to repay the funder for such costs. Recommendation - We recommend the City develop oversight procedures to perform a documented review of the work completed by contractors, which pertains to compliance requirements and programmatic decisions, in this case, eligibility review. Views of Responsible Officials and Planned Corrective Actions - The City will implement a control for completeness and accuracy by hosting regular meetings with the contractor to review recent projects for which the contractor has documented their determinations of income eligibility. When a recently reviewed project is not due for an annual review, staff will still have timely insight into the income eligibility of properties in its HOME portfolio, thereby maintaining compliance with HOME program regulations.

Assistance Listing Number, Federal Agency, and Program Name - ALN 10.557, Department of Agriculture, Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Federal Award Identification Number and Year - 213MI013W5003, 212MI003W1003, program years 2022 and 2023 Pass-through Entity - Michigan Department of Health and Human Services Finding Type - Material weakness Repeat Finding - Yes 2022-006 Criteria - Per 2 CFR 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government," issued by the Comptroller General of the United States, or the "Internal Control Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - The City did not have adequate controls in place to exercise its oversight responsibility of eligibility determinations that were performed by a contractor for the program. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The City entered into an agreement with a contractor to perform eligibility intake for WIC applicants. While the City arranges for the contractor to perform the intake function, the City is fully responsible for the federal compliance for the eligibility determination process. Testing revealed that the contractor's staff performed both initial and secondary reviews during the intake process. Procedures further revealed that the City did not have any control in place to exercise its oversight responsibility of the grant and relied solely on the contractor's eligibility determinations through May 2023. Cause and Effect - In the current year, the City contracted with a contractor to perform the eligibility intake function and other programmatic decisions for WIC. However, the City did not implement controls to ensure eligibility conclusions reached by the contractor were in compliance with the terms and conditions of the award. Without a review of the contractor's procedures to determine participant eligibility, ineligible participants could receive program benefits. Recommendation - We recommend the City develop oversight procedures to review the work completed by contractors, which pertains to compliance requirements and programmatic decisions, in this case, participant eligibility determination. Views of Responsible Officials and Planned Corrective Actions - The City has implemented controls to ensure that the Health Department provides oversight over the contractors. A new contract was in place in May, and the Health Department hired a WIC program director to monitor participant eligibility compliance and ensure policies and procedures are maintained and followed.

Assistance Listing Number, Federal Agency, and Program Name - ALN 10.557, Department of Agriculture, Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Federal Award Identification Number and Year - 213MI013W5003, 212MI003W1003, program years 2022 and 2023 Pass-through Entity - Michigan Department of Health and Human Services Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.344(b), unless the federal awarding agency or pass-through entity authorizes an extension, a nonfederal entity must liquidate all financial obligations incurred under the federal award no later than 120 calendar days after the end of the period of performance, as specified in the terms and conditions of the federal award. However, as outlined within the grant award from the Michigan Department of Health and Human Services and more restrictive than 2 CFR 200.344(b), the City must liquidate within 60 days after the State's fiscal year end any unpaid year-end commitments and obligations. Any obligation remaining unliquidated after 60 days from the end of the period shall revert to the State for disposition in accordance with applicable state and/or federal requirements, except as specifically authorized in writing by the department. Condition - The City did not have adequate controls in place to ensure obligations were liquidated (paid) within the required 60 days. Questioned Costs - None Identification of How Questioned Costs Were Computed - Refer to context below. Context - Testing revealed 3 invoices out of 25 were liquidated after the required 60 days for the performance period ended September 30, 2022. Based on email communication received by the City from the Michigan Department of Health and Human Services, the department granted the City retroactive approval to allow for the expenses despite being liquidated after the 60-day period. As a result, no questioned costs are reported. Cause and Effect - Failure to comply with the terms and conditions of the grant agreement, including the liquidation provisions, may result in disallowed costs and the need to repay the funder for such costs. Recommendation - We recommend the City ensure controls are in place to comply with liquidation requirements outlined in the award agreements and/or Uniform Guidance issued by 0MB (whichever is more restrictive). Views of Responsible Officials and Planned Corrective Actions - The OCFO will work with the Health Department to implement additional controls to ensure all subrecipients and contractors submit invoices timely and that they are reviewed, approved, and processed for payment prior to the 60-day liquidation requirement period.

Assistance Listing Number, Federal Agency, and Program Name - ALN 20.507, Department of Transportation, Federal Transit Cluster - Federal Transit Formula Grants Federal Award Identification Number and Year - Ml-2022-026-00, program year 2022 Pass-through Entity - N/A Finding Type - Material weakness Repeat Finding - No Criteria - Per 2 CFR 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government," issued by the Comptroller General of the United States, or the "Internal Control Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - The City did not have adequate controls in place to ensure payroll costs charged to the program were accurate in relation to underlying payroll records. Questioned Costs - None Identification of How Questioned Costs Were Computed - Refer to context below. Context - Testing revealed approximately $141,000 in credit adjustments was incorrectly excluded from a $14,419,000 adjusting journal entry to increase payroll costs charged to the program during the fiscal period under audit. The pool of gross payroll costs identified by the City for allocation to the grant under the final adjusting journal entry, which includes the costs described in the preceding paragraph, totaled approximately $20,932,000. However, the City only allocated approximately $18,620,000 of these gross payroll costs to the grant to align with the budgeted use of the funds for the fiscal period. The City in essence had $20,791,000 of eligible expenses, after accounting for the approximately $141,000 of credit adjustments, to expend the remaining $14,419,000 award amount. The City did not specifically identify which transactions within the payroll cost population were not ultimately allocated to the program. After identifying approximately $4,201,000 of payroll already charged to the program through the City's usual biweekly payroll process, the City's internal control procedures did not include a verification process to ensure that the payroll records used to develop the $14,419,000 adjusting entry to true up payroll costs agreed to underlying payroll records. Given that the City did not need to allocate the entire $20,932,000, the $141,000 overstatement is not considered questioned costs, as there was approximately $2,300,000 of eligible costs not allocated. Cause and Effect - The lack of controls surrounding the payroll adjustment resulted in payroll costs that were overstated in relation to the underlying payroll register. The lack of controls could result in disallowed costs. Recommendation - We recommend the City ensure controls are in place to verify the accuracy and completeness of amounts charged to the grant against supporting documentation and underlying records. Views of Responsible Officials and Planned Corrective Actions - The City will ensure the required controls are in place to help ensure accurate payroll costs are charged to the program and completeness of the supporting documentation.

Assistance Listing Number, Federal Agency, and Program Name - ALN 21 .027, Department the of the Treasury, COVID-19 Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Federal Award Identification Number and Year- N/A Pass-through Entity - N/A Finding Type - Material weakness Repeat Finding - No Criteria - Per 2 CFR 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government," issued by the Comptroller General of the United States, or the "Internal Control Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - The payroll costs that were reported as incurred on four CSLFRF projects were incorrect in the performance report submitted for the period from October 1, 2022 through December 31, 2022 (Quarter 4). Questioned Costs - N/A Identification of How Questioned Costs Were Computed - N/A Context - In our sample of two performance reports selected for testing, we noted one instance where certain information reported did not agree to the general ledger and underlying records. Cause and Effect - The City's controls were not adequate to ensure that underlying data for reports was consistently accumulated. The payroll data for the report submitted for the period from July 1, 2022 through September 30, 2022 (Quarter 3) was accumulated from the payroll system and appropriately reflected the payroll costs. The general ledger at the time did not yet fully reflect transactions due to timing. For Quarter 4, the City accumulated the payroll costs based on the general ledger, and, as a result, certain costs reported in Quarter 3 were reported again in the Quarter 4. The Quarter 4 report was overstated by $21,670. Recommendation - We recommend the City implement a process to ensure that reports are completed based on a consistent methodology and a detail review be performed to ensure accuracy. Views of Responsible Officials and Planned Corrective Actions - The City will implement additional controls to ensure that the quarterly Treasury reports align with the expenses stated on the general ledger.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.241, Department of Department of Housing and Urban Development, Housing Opportunities for Persons With AIDS (HOPWA) and COVID-19 HOPWA Federal Award Identification Number and Year - MIH20-FHW001, MIH20-F001, MIH21- F001, MIH22-F001 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - Yes 2022-007 Criteria - Per 24 CFR 574.310, except for persons in short-term supportive housing, each person receiving rental assistance under the HOPWA program must pay as rent the higher of (1) 30 percent of the family's monthly adjusted gross income; (2) 10 percent of the family's monthly gross income; or (3) the portion of the payments that is designated if the family is receiving payments for welfare assistance from a public agency and a part of the payments, adjusted in accordance with the family's actual housing costs, that is specifically designated by the agency to meet the family's housing costs. Per 2 CFR 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with the guidance in "Standards for Internal Control in the Federal Government," issued by the Comptroller General of the United States, or the "Internal Control Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - In conjunction with eligibility testing, instances of noncompliance specific to the rental assistance calculation and distribution of benefits were identified. Questioned Costs - $3,022 Identification of How Questioned Costs Were Computed - Questioned costs reflect the gross overpayments. See context below for instances of benefits being overpaid. Context - During eligibility testing of a sample of 60, we noted the following: • A lack of effective supervisory review of the annual certification process and calculation of benefits resulted in one instance of benefits being overpaid by $176 and four instances of benefits being underpaid by $221 based on income and family size. • A lack of effective supervisory review over the distribution of benefits throughout the benefit agreement period resulted in two instances of an overpayment of benefits by $2,846 and one instances of an underpayment of benefits by $10. Cause and Effect - The lack of adequate controls in the form of detailed reviews over the calculation and payment of rental assistance, based on the requirements of 24 CFR 574.310, resulted in both overpayments and underpayments of rental assistance to beneficiaries. Recommendation - We recommend the City review its procedures and controls specific to the calculation and distribution of rental assistance and make modifications as necessary to ensure that inputs of the calculation are reviewed for completeness and accuracy and that the payments are consistent with the calculation prior to finalizing the benefit agreements and communicating the same to the participant. Views of Responsible Officials and Planned Corrective Actions - City of Detroit HOPWA program has a dedicated quality coordinator position. The coordinator will continue to work closely with the HOPWA program team and conduct regular file audits. The HOPWA program team has also implemented additional steps, including the use of eligibility templates to help ensure accurate rental assistance calculations.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.241, Department of Department of Housing and Urban Development, Housing Opportunities for Persons With AIDS (HOPWA) and COVID-19 HOPWA Federal Award Identification Number and Year - MIH20-FHW001, MIH20-F001, MIH21- F001, MIH22-F001 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Under 0MB Number 2506-40110-C, on an annual basis, HOPWA formula grantees are required to submit a Consolidated Annual Performance and Evaluation Report (CAPER) demonstrating essential information on grant activities, project sponsors, housing sites, units and households, and beneficiaries. Per 2 CFR 200.302(b), the nonfederal entity must maintain a financial management system that provides records that identify adequately the source and application of funds for federally funded activities. Per 2 CFR 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with the guidance in "Standards for Internal Control in the Federal Government," issued by the Comptroller General of the United States, or the "Internal Control Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - The controls in place were not adequate to ensure that amounts reported within the CAPER were accurate and complete in relation to activity reported in the general ledger and underlying records of the City. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - Management has a process in place to compile beneficiary headcounts, rental assistance, and other costs for reporting within the CAPER; however, management did not maintain the underlying records to support the amounts and expenditures reported in the CAPER submitted for program year ended June 30, 2023. Where we were able to perform procedures to reconcile to the beneficiary headcount, we identified approximately $3.9 million of expenditures reported within the CAPER was understated by approximately $300,000 in relation to the amounts reported in the general ledger. Cause and Effect - Not maintaining the underlying records and supporting documentation may lead to inaccurate information being reported to the funder and could perhaps inappropriately influence subsequent decisions. Recommendation - We recommend the City implement a system of internal controls to ensure that records used in reporting information to the funding agency are retained in support of the amounts and that supervisory review over those inputs are in place. Additionally, we recommend the City reconcile the books and records timely to ensure accurate and complete reporting of program activity. Views of Responsible Officials and Planned Corrective Actions - The City will review its current process and implement additional reporting controls, including verification of expenditures, retention of supporting documentation, and a timely final reconciliation of the CAPER to the general ledger.

Assistance Listing Number, Federal Agency, and Program Name - ALN 93.914, Department of Health and Human Services, HIV Emergency Relief Project Grants Federal Award Identification Number and Year - 6 H89HA00021-31-01, 6 H89hA00021 29- 01 Pass-through Entity - N/A Finding Type - Significant deficiency Repeat Finding - No Criteria - Per 45 CFR 75.303(a), a nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government," issued by the Comptroller General of the United States, or the "Internal Control Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - The City did not provide a formal report on monitoring performed for 3 of its subrecipients. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - In the case of 3 out of the City's 14 subrecipients that received funding under the above-mentioned award, the City's communication to the subrecipients related to the results of the monitoring was significantly delayed. Communication was sent approximately one year subsequent to the monitoring procedures. Based on the reports, there were no matters noted requiring a corrective action plan from the subrecipients. The reports also did not reveal any questioned costs. Cause and Effect - There were no controls in place to ensure monitoring results were communicated timely to subrecipients subsequent to a staff member's departure. The lack of timely communication could result in delayed corrective action and possible disallowance of costs. Recommendation - We recommend the City review its controls to ensure the entire cycle of monitoring, from the planning phase to the close-out phase, is completed in a timely manner. Views of Responsible Officials and Planned Corrective Actions - The City will review its subrecipient monitoring policy and implement additional controls to ensure an end-to-end monitoring process is in place that includes timely communication of the reports.

Assistance Listing Number, Federal Agency, and Program Name - 14.218, Department of Housing and Urban Development, CDBG Entitlement Grants Cluster - Community Development Block Grant/Entitlement Grants (CDBG) 14.241, Department of Housing and Urban Development, Housing Opportunities for Persons With Aids (HOPWA) 14.905, Department of Housing and Urban Development, Lead Hazard Reduction Demonstration Grant Program (Lead) Federal Award Identification Number and Year - CDBG - B-22-MC-26-0006 HOPWA - MIH22F001 Lead - MILNG0007-19, and MILHB0682-18 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303(a), nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government," issued by the Comptroller General of the United States, or the "Internal Control Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(9), costs must be adequately documented. Condition - The City duplicated costs charged to certain grants. Questioned Costs - None Identification of How Questioned Costs Were Computed - Refer to context below Context - In conjunction with the year-end close process, the City manually reviews invoices received subsequent to year end and identifies amounts to be accrued. These amounts are accrued via manual journal entries posted to period 13. As this is a period 13 entry, the amounts automatically reverse in the new year. During this process, the City duplicated costs to be accrued in the amount of $12,300 under ALN 14.218 (CDBG), $327,709 under ALN 14.241 (HOPWA), and $235,911 under ALN 14.905 (Lead). Despite being accrued, the City did not request reimbursement for these costs, as reimbursement is only requested after expenses are paid. Upon identification of the error, the City reduced the amounts reported on the schedule of expenditures of federal awards (SEFA) by the amounts noted above. Cause and Effect - The City's control regarding the year-end close process did not identify that certain costs accrued were duplicated. As a result, the initial SEFA provided to the auditors was overstated by these costs. The City excluded the duplicate costs from the final SEFA. Recommendation - We recommend the City review its processes and controls to ensure that the preparation and review of journal entries to accrue for costs include a review for duplicate costs. Views of Responsible Officials and Corrective Action Plan - The City will review its journal entry controls and processes to help ensure journal entries are posted accurately and implement a review for duplicate costs.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.905, United States Department of Housing and Urban Development, Lead Hazard Reduction Demonstration Grant Program Federal Award Identification Number and Year - MILHD0487-22, MILNG00007-19, MILHB0682-18, program years 2022, 2019, and 2018 Pass-through Entity - N/A Finding Type - Material weakness Repeat Finding - No Criteria - Per 2 CFR 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government," issued by the Comptroller General of the United States, or the "Internal Control Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Additionally, per 2 CFR 200.303(b), the nonfederal entity must comply with the U.S. Constitution, federal statutes, regulations, and the terms and conditions of the federal award. Condition - Certain controls in place did not operate effectively specific to eligibility, earmarking, and reporting compliance requirements. Certain controls in place were not effective either because of design flaws or due to the lack of fully implemented controls. Our testing revealed that control design flaws existed and certain controls did not operate effectively during the fiscal year. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - Controls must be designed effectively in order to be effective. The controls in place for eligibility and earmarking were not designed effectively. For the year ended June 30, 2023, the controls were neither designed to ensure supervisory review and approval of applicants' eligibility nor designed to ensure at least 90 percent of the total number of owner-occupied units assisted have a child occupant under six years of age. Additionally, controls did not operate effectively to ensure that performance reports submitted agreed to underlying records and/or supporting documentation. For one of the three reports selected for testing, the City overstated the number of units that received evaluations based on the underlying support. The report indicated 19 units received evaluations, while the underlying support showed 10 units. Cause and Effect - Without adequate controls in place over eligibility determinations and earmarking, ineligible participants could receive program benefits or the City could exceed the 10 percent allowance to provide support for applicants who do not have a child under the age of six, resulting in disallowed costs. Inadequate controls in place over reporting could result in noncompliance with the terms and conditions of the award and could lead to inappropriate decision-making. Recommendation - We recommend the City maintain on file all terms and conditions outlined by the funding agency. Additionally, we recommend the City review the controls in place for the Lead Hazard Reduction Demonstration Grant Program to ensure that controls are designed effectively and implemented to address the risks of noncompliance identified by the City. Views of Responsible Officials and Planned Corrective Actions - The City will review its processes and implement additional controls and the required review of eligibility approval is in place and all supporting documentation is stored and maintained.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.218, Department of Housing and Urban Development, CDBG Entitlement Grants Cluster - Community Development Block Grants Cluster Federal Award Identification Number and Year - B-22-MC-26-0006, B-21-MC-26-0006, B- 20-MW-26-006 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - Yes, 2022-014 Criteria - The Federal Funding Accountability and Transparency Act (FFATA), as amended by 6202 of Public La 110-252, requires a prime grant awardee to report its subgrants using the FFATA Subaward reporting System (FSRS) tool. The prime recipient will have until the end of the month plus one additional month after an award or subaward is obligated to fulfill the reporting requirement. Condition - During reporting testing, we noted that the City did not file one FFATA report, and there were five untimely submissions. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The City obligated several subawards throughout the year ended June 30, 2023, and the reports were due at end of the month plus one additional month after the award or subaward was obligated. The following table summarizes the transactions examined and the noncompliance identified: See the finding 2023-012 in Section III of the Schedule of Findings and Questioned Costs for chart/table Cause and Effect - The City’s processes did not properly identify the FFATA filing requirements resulting in a lack of filing and delay in filing reports. Recommendation - We recommend the City implement adequate controls to ensure compliance with FFATA reporting requirements. Views of Responsible Officials and Corrective Action Plan - The City will review its current FFATA processes and implement additional controls to ensure timely and accurate filings and compliance with reporting requirements.

Assistance Listing Number, Federal Agency, and Program Name - ALN 10.557, Department of Agriculture, WIC Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Federal Award Identification Number and Year - 212MI013W5003, 202MI003W1003, programs years 2020 and 2021 Pass-through Entity - Michigan Department of Health and Human Services Finding Type - Material weakness Repeat Finding - No Criteria - Per 2 CFR 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework,? issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - The City of Detroit, Michigan did not have adequate controls in place to exercise its oversight responsibility of eligibility determinations that were performed by a contractor for the program. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The City entered into agreement with a contractor to perform eligibility intake for WIC applicants. While the City arranges for the contractor to perform the intake function, the City is fully responsible for the federal compliance for the eligibility determination process. Testing revealed that the contractor?s staff performed both initial and secondary reviews during the intake process. Procedures further revealed that the City did not have any control in place to exercise its oversight responsibility of the grant and relied solely on the contractor?s eligibility determinations. Cause and Effect - In the current year, the City contracted with a contractor to perform the eligibility intake function and other programmatic decisions for WIC. However, the City did not implement controls to ensure eligibility conclusions reached by the contractor were in compliance with the terms and conditions of the award. Without a review of the contractor?s procedures to determine participant eligibility, ineligible participants could receive program benefits. Recommendation - We recommend the City develop oversight procedures to review the work completed by contractors that pertain to compliance requirements and programmatic decisions, in this case, participant eligibility determination. Views of Responsible Officials and Corrective Action Plan - The City will implement controls to ensure that health department provides oversight of our contractor and the participant eligibility process. The health department has hired a WIC program director who will monitor participant eligibility compliance and ensure that eligibility policies and procedures are maintained and followed.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.241, Department of Housing and Urban Development, Housing Opportunities for Persons With AIDS (HOPWA) and COVID 19 HOPWA Federal Award Identification Number and Year - MIH20 F001, MIH21 F001, and MIH20 FHW001, Program Years 2020 (includes COVID funding), and 2021 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - Yes-2021 007, 2020 008, 2019 010 Criteria - Per 24 CFR 574.310, except for persons in short term supportive housing, each person receiving rental assistance under the HOPWA program must pay as rent the higher of (1) 30 percent of the family?s monthly adjusted gross income; (2) 10 percent of the family?s monthly gross income; or (3) the portion of the payments that is designated if the family is receiving payments for welfare assistance from a public agency and a part of the payments, adjusted in accordance with the family's actual housing costs, that is specifically designated by the agency to meet the family's housing costs. Per 2 CFR 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework,? issued by the Committee of Sponsoring Organizations of the Treadway Commission. Condition - In conjunction with eligibility testing, instances of noncompliance specific to the rental assistance calculation were identified. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - During eligibility testing of a sample of 60, we noted: ? 14 instances where the calculation of rental assistance was incorrect. In 2 instances, the error resulted in an overpayment, and, in 12 instances, the error resulted in an underpayment of benefits. ? 1 instance where the amount paid as rental assistance exceeded the calculated rental assistance. ? 17 instances where there was no evidence of second review of the calculations of rental assistance. Cause and Effect - The lack of adequate controls in the form of detailed reviews over the calculation and payment of rental assistance, based on the requirements of 24 CFR 574.310, resulted in both overpayments and underpayments of rental assistance to beneficiaries. Recommendation - We recommend that the City review its procedures and controls specific to the calculation of rental assistance and make modifications as necessary to ensure that inputs of the calculation are reviewed for completeness and accuracy, and that the payments are consistent with the calculation prior to finalizing the benefits and communicating the same to the participant. Views of Responsible Officials and Planned Corrective Actions - In FY23, the City of Detroit?s Public Health Project Coordinator implemented a review of 100 percent of clients who received subsidy services. The intensive review is being performed to help ensure all required documents are saved and accurate. A corrective action plan will be documented and further reviews put in place to help ensure compliance and consistency for all rental calculations. The City will also continue to work with its contractor on process improvements.

Assistance Listing Number, Federal Agency, and Program Name - ALN 93.914, Department of Health and Human Services, HIV Emergency Relief Project Grants Federal Award Identification Number and Year - H89HA00021 29-01, H89HA00021-30-00 Pass-through Entity - N/A Finding Type - Significant deficiency Repeat Finding - No Criteria - Criteria Per 2 CFR 200.331 (b) Contractors. A contract is for the purpose of obtaining goods and services for the nonfederal entity's own use and creates a procurement relationship with the contractor. See the definition of contract in ? 200.1 of this part. Characteristics indicative of a procurement relationship between the nonfederal entity and a contractor are when the contractor: (1) Provides the goods and services within normal business operations (2) Provides similar goods or services to many different purchasers (3) Normally operates in a competitive environment (4) Provides goods or services that are ancillary to the operation of the Federal program (5) Is not subject to compliance requirements of the federal program as a result of the agreement, though similar requirements may apply for other reasons Condition - We noted that the City?s contractor was a party to the agreements with the City?s subrecipients. Based on the definition of a subaward as defined by Uniform Guidance (UG), a subaward is provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. Further, a pass-through entity is defined as a nonfederal entity that provides a subaward to a subrecipient to carry out part of a federal program. A contractor is not a pass-through entity. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The City?s contractor selected the City?s 15 subrecipients and entered into a subaward agreement with each of them. In addition to the contractor?s signature, the City was also a signer of the agreement. It was noted that the City performed the monitoring of the 15 subrecipients as required by UG. Cause and Effect - The City?s relationship with the contractor changed recently from a fiduciary relationship to a contractor relationship, and certain responsibilities that were more in line with a subrecipient characteristic were retained in the contract. The City is responsible for evaluating agreements to assess whether a subrecipient or contractor relationship exists. The inclusion of programmatic decisions within an agreement could result in an inappropriate conclusion as to whether a subrecipient or contractor relationship exists and the City not performing appropriate oversight procedures. Recommendation - We recommend that the City review the contract and ensure that the scope of services excludes responsibilities that might apply to a subrecipient rather than a contractor and verify that adequate oversight controls are in place. Views of Responsible Officials and Planned Corrective Actions - The City will implement a process to ensure that its contractors do not enter into subrecipient agreements on behalf of the City. This will be monitored by ensuring that the contractors scope of work does not include solicitating and contracting with organizations as subrecipients. The City will issue its own Notice of Funding Availability (NOFA) application and directly enter into subrecipient agreements with qualified organizations.

Assistance Listing Number, Federal Agency, and Program Name - ALN 93.914, Department of Health and Human Services, HIV Emergency Relief Project Grants Federal Award Identification Number and Year - H89HA00021-29-01, H89HA00021-30-00 Pass-through Entity - N/A Finding Type - Material weakness Repeat Finding - No Criteria - The grant agreement with the awarding agency, Health Resources and Services Administration (HRSA), identifies that program income must be treated under the addition method. Per 45 CFR 75.307 (e), program income may be added to the federal award by the federal agency and the nonfederal entity. The program income must be used for the purposes and under the conditions of the federal award. Condition - The city controls did not result in the reporting of program income earned by subrecipients to the funding agency and not reporting the program income and related expenditures in their general ledger and on the SEFA. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The City?s subrecipients earn and report program income to City, and the City monitors the subrecipients? compliance related to the use of the program income; however, the City did not report the program income to its funding agency and did not reflect program income and related expenditures in their general ledger or on the SEFA for the year ended June 30, 2022. Program income earned by subrecipients for fiscal year 2022 totaled approximately $4,800 and was subsequently included on the SEFA as of June 30, 2022. Cause and Effect - The City was aware of the regulations related to program income delegated to the subrecipients but was not aware of the regulations it needed to comply with. As a result, the City did not report the program income to HRSA and did not reflect program income and related expenditures in its general ledger and on the SEFA. The lack of reporting could also result in the appropriate major programs not being selected as a result of the SEFA being understated. Recommendation - We recommend the City evaluate all applicable regulations to determine their responsibility and implement processes and controls in order to be in compliance with the requirements. Views of Responsible Officials and Planned Corrective Actions - The $4,800 program income was reported on the general ledger in FY22 and included in the final FY22 SEFA but after the notification from the auditors. The City will implement a corrective action plan to document the program income requirements and track all awards with program income to help ensure proper and accurate reporting.

Assistance Listing Number, Federal Agency, and Program Name - ALN 20.507 and 20.526, Department of Transportation, Federal Transit Cluster, including COVID-19 ALN 14.231, Department of Housing and Urban Development, Emergency Solutions Grant Program, including COVID-19 Federal Award Identification Number and Year - ALN 14.231: E19MC260006, E20MC260006, E20MW260006, E21MC260006 ALN 20.507 and 20.526: All awards included on the schedule under the ALNs Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303(a), the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework,? issued by the Committee of Sponsoring Organizations of the Treadway Commission. The City has written procedures for the use of noncompetitive procurement methods in place, as required by procurement standards within 2 CFR Part 200, Subpart D (Post Federal Award Requirements) and Notice CPD-21-09 issued by the Department of Housing and Urban Development, as well as the Federal Transit Authority Circular 4220.The City?s internal policy requires the Office of Contracting and Procurement (OCP) to notify City Council in writing of basis for the emergency and selection of a particular supplier within one week of procurement and for the OCP to submit the contract for City Council approval within four weeks of procurement. Condition - A contract selected for testing within Emergency Solutions Grant Program that was procured in August 2021 was not communicated to City Council until October 2022. A contract selected for testing within the Federal Transit Cluster that was procured in November 2021 was submitted for City Council approval within the prescribed four weeks; however, OCP did not notify City Council in writing of the basis for the emergency contract within one week of the procurement. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - In our sample of one ESG procurements, we noted one instance of noncompliance. In our sample of seven FTC procurements, we noted one instance of noncompliance. Cause and Effect - The City?s controls were not adequate to ensure it followed its internal policy concerning noncompetitive procurements. As a result, there were two instances of noncompliance related to procurement. Recommendation - We recommend the City follow the existing policies and procedures to ensure procurement practices remain in compliance with the City?s internal policies and procedures. Views of Responsible Officials and Planned Corrective Actions - The City will review its current procurement noncompetitive policy to ensure the required review, controls, and checklist are in place to ensure compliance and all policy steps are followed by staff.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.231, Department of Housing and Urban Development, Emergency Solutions Grant Program, including COVID-19 ALN 20.507 and 20.526, Department of Transportation, Federal Transit Cluster, including COVID 19 Federal Award Identification Number and Year - ALN 14.231: E19MC260006, E20MC260006, E20MW260006, E21MC260006 ALN 20.507 and 20.526: All awards included on the schedule under the ALNs Pass through Entity - N/A Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - A nonfederal entity must have adequate procedures in place to verify that an entity with which it plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded (2 CFR sections 200.212 and 200.318(h); 2 CFR section 180.300; 48 CFR section 52.209 6). Additionally, a nonfederal entity requires a cost price analysis to be performed with every procurement action in excess of the Simplified Acquisition Threshold (2 CFR section 200.324). Condition During procurement testing, we noted two contracts for which the City did not review sam.gov to ensure the entity was not suspended or debarred. Additionally, we noted one contract for which the City did not perform the required cost price analysis. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The contracts identified above was tested among a sample of 15 contracts in total, a sample of 8 for ESG and a sample of 7 for FTC. Cause and Effect - The City?s controls were not adequate to comply with suspension and debarment and cost price analysis requirements. A possible effect is that the City could be responsible for repaying costs charged to the grant if it enters into a transaction with an entity that is suspended or debarred or that the appropriate cost price analysis has not been performed. Recommendation We recommend the City implement adequate controls to ensure verification of debarment, suspension, or exclusion takes place before entering into covered transactions, and, when required, a cost price analysis is performed. Views of Responsible Officials and Planned Corrective Actions - The City will review its current procurement policy and implement additional controls as needed to help ensure verification is performed as required and the required processes are followed.

Assistance Listing Number, Federal Agency, and Program Name - ALN 21.027, Department of Treasury, COVID-19 Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) Federal Award Identification Number and Year - N/A Pass-through Entity - N/A Finding Type - Significant deficiency and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.332 (a), all pass-through entities must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and, if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the federal award and subaward. Required information includes the following: (1) Federal award identification (i) Subrecipient name (which must match the name associated with its unique entity identifier) (ii) Subrecipient's unique entity identifier (iii) Federal Award Identification Number (FAIN) (iv) Federal award date (see the definition of federal award date in ? 200.1 of this part) of award to the recipient by the federal agency (v) Subaward period of performance start and end date (vi) Subaward budget period start and end date (vii) Amount of federal funds obligated by this action by the pass-through entity to the subrecipient (viii) Total amount of federal funds obligated to the subrecipient by the pass-through entity, including the current financial obligation (ix) Total amount of the federal award committed to the subrecipient by the pass-through entity (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA) (xi) Name of federal awarding agency, pass-through entity, and contact information for awarding official of the pass-through entity (xii) Assistance Listing Numbers and title; the pass-through entity must identify the dollar amount made available under each federal award and the Assistance Listing Numbers at time of disbursement (xiii) Identification of whether the award is R&D (xiv) Indirect cost rate for the federal award (including if the de minimis rate is charged) per ? 200.414 Condition - The CSLFRF subrecipient agreements did not include the CSLFRF assistance Listing Number (ALN), as required per 2 CFR 200.332 (a)(1)(xii). Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - During the fiscal year, the City passed through CSLFRF funding to three subrecipients. The agreements with the subrecipients included a reference to the applicable regulations provided by the Treasury and all the elements outlined under 2 CFR 200.331 (a)(1) with the exception of the ALN. Cause and Effect - The City?s controls did not ensure that the subrecipient agreements included all the required elements, as outlined under 2 CFR 200.332 (a)(1). The lack of information could result in noncompliance by the subrecipient, as well as incorrect SEFA reporting. Recommendation - We recommend the City implement adequate controls to ensure subrecipient agreements included all the required elements, as outlined under 2 CFR 200.332 a)(1). Views of Responsible Officials and Planned Corrective Actions - The City has implemented a process to ensure that all subrecipient agreements contain the federal ALN, as required by 2 CFR 200.332. All subrecipient agreements will include a new exhibit as an attachment in the agreement that will include the ALN and any other required grant elements.

Assistance Listing Number, Federal Agency, and Program Name - ALN 21.023, Department of Treasury, COVID-19 Emergency Rental Assistance Program (ERAP) ALN 20.205, Department of Transportation, Highway Planning and Construction Cluster, Highway Planning and Construction (Federal-aid Highway Program) ALN 20.505, Department of Transportation, Metropolitan Transportation Planning and State and Non-Metropolitan Planning and Research ALN 93.323, Department of Health and Human Services, COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) ALN 97.036, Department of Homeland Security, COVID-19 Disaster Grants - Public Assistance (Presidentially Declared Disasters) (FEMA) ALN 93.268, Department of Health and Human Services, Total Immunizations Cooperative Agreements ALN 93.145, Department of Health and Human Services, HIV Related Training and Technical Assistance ALN 93.686, Department of Health and Human Services, Ending the HIV Pandemic: A Plan for America - Ryan White HIV/AIDS Program Parts A and B Federal Award Identification Number and Year Various Pass-through Entity - N/A for ALN 21.023, 20.505, 93.145, and 93.686 ALN 20.205 is passed through Michigan Department of Transportation, Metropolitan Transportation Planning and State and Non-Metropolitan Planning and Research. ALN 93.323 is passed through Michigan Department of Health and Human Services. ALN 97.036 is directly funded and passed through Michigan Department of Health and Human Services and Michigan State Police. ALN 93.323 is passed through Michigan Department of Health and Human Services. Finding Type - Material weakness Repeat Finding - Yes - 2021-013 Criteria - Per 2 CFR 200.510(b)-The auditee must also prepare a schedule of expenditures of federal awards 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. While not required, the auditee may choose to provide information requested by federal awarding agencies and pass-through entities to make the schedule easier to use. Condition - The schedule of expenditures of federal awards (SEFA) was not complete, accurate, or prepared timely. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - In fiscal year 2022, the City expended approximately $229.7 million of federal funding. The funding was received by various departments within the City from several federal and nonfederal entities. The City accumulates the financial data and other required information to complete the SEFA. The SEFA included the following inaccuracies: ? ALN 21.023 (ERAP) - The expenditures reported on the SEFA were understated by $1,868,133 related to the June 30, 2022 accrual. ? ALN 20.205 Highway Planning and Construction program - Expenditures of $2,027,058 were improperly included under the Federal Transit Cluster, ALN 20.500, instead of the Highway Planning and Construction Cluster. ? ALN 20.505 Metropolitan Transportation Planning and State and Non-Metropolitan Planning and Research. - Expenditures of $249,939 was improperly included under the Transit Services Program Cluster, ALN 20.516 and 20.521. ? ALN 93.323 (ELC) and ALN 97.036 (FEMA) - $283,851 spent under ALN 97.036 (FEMA) was improperly reported under ALN 93.323 (ELC). ? ALN 93.268 Immunizations Cooperative Agreements Expenditures of $1,698,773 were improperly excluded from the SEFA. ? ALN 93.145, HIV Related Training and Technical Assistance and ALN 93.686, Ending the HIV Pandemic: A Plan for America - Ryan White HIV/AIDS Program Parts A and B - Expenditures of $240,000 were improperly reported as ALN 93.686 instead of ALN 93.145. Cause and Effect - Controls in place did not ensure the SEFA was completed in a timely manner and that it was complete and accurate. The resulting errors had the following impact: ? ALN 21.023 (ERAP) - The expenditures reported on the SEFA were initially understated by $1,868,133. ? ALN 20.205 Highway Planning and Construction program - Expenditures of $2,027,058 were improperly included under the Federal Transit Cluster instead of the Highway Planning and Construction Cluster resulting in the Highway Planning and Construction Cluster being a Type B program ? ALN 20.505 Metropolitan Transportation Planning and State and Non Metropolitan Planning and Research - Expenditures of $249,939 was improperly included under the Transit Services Program Cluster. ? ALN 93.323 (ELC) and ALN 97.036 (FEMA) - $1,371,758 spent under ALN 97.036 (FEMA) was improperly reported under ALN 93.323, (ELC). The initial understatement of FEMA expenditures impacted major program determination. ? ALN 93.268 Total Immunizations Cooperative Agreements - The expenditures reported on the SEFA were initially understated by $283,851. ? ALN 93.145, HIV Related Training and Technical Assistance and ALN 93.686, Ending the HIV Pandemic: A Plan for America Ryan White HIV/AIDS Program Parts A and B - $240,000 spent under ALN 93.145 were improperly included in ALN 93.686. These errors, noted above, have been corrected on the SEFA as of June 30, 2022. Recommendation - The City should implement process to ensure that the SEFA is prepared timely and that it is complete and accurate. Views of Responsible Officials and Planned Corrective Actions - As part of the City Audit Finding Corrective Action Plan, in FY22, the City developed a SEFA checklist to help ensure all federal expenditures are properly reported. A follow up AFCAP will be implemented and additional processes put in place by management that will provide timelines, a pre SEFA reporting review before the year end close to effectively meet audit report timelines and help ensure completeness, validity, and accuracy in advance of the final SEFA reporting.

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.218, Department of Housing and Urban Development, Community Development Block Grants Cluster Federal Award Identification Number and Year - B-21-MC-26-0006 Pass-through Entity - N/A Finding Type - Material noncompliance and material weakness Repeat Finding - Yes, 2021-014 Criteria - The Federal Funding Accountability and Transparency Act (FFATA), as amended by 6202 of Public La 110-252, requires a prime grant awardee to report its subgrants using the FFATA Subaward reporting System (FSRS) tool. The prime recipient will have until the end of the month plus one additional month after an award or subaward is obligated to fulfill the reporting requirement. Condition - During reporting testing, we noted that the City did not file three FFATA reports, and there were five untimely submissions. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The City obligated several subawards throughout the year ended June 30,2022,and the reports were due at end of the month plus one additional month after the awards or subaward was obligated. The following table summarizes the transactions examined and the noncompliance identified: Transactions Tested - 10 Subaward Not Reported - 3 Report Not Timely - 5 Subaward Amount Incorrect - 0 Dollar Amount of Tested Transactions - $3,177,529 Subward Not Reported - $806,928 Report Not timely - $2,219,706 Subaward Amount Incorrect - $0 Subaward Missing Key Elements - $0 Cause and Effect - The City's processes did not properly identify the FFATA filing requirements resulting in a delay in filing the report. Recommendation - We recommend the City implement adequate controls to ensure compliance with FFATA reporting requirements. Views of Responsible Officials and Corrective Action Plan - In fiscal year 2022, the City created and implemented a Federal Funding Accountability and Transparency Act (FFATA) SOP that included roles and responsibilities and process requirements. Management will finalize the rollout of the policy and implement additional controls to ensure the FFATA filing requirements are met and reporting is timely and accurate.

2021-006 Assistance Listing Number (ALN), Federal Agency, and Program Name - ALN 14.241, Department of Housing and Urban Development (HUD), Housing Opportunities for Persons with Aids (HOPWA) and COVID 19 HOPWA Federal Award Identification Number and Year - MIH19 F001, MIH20 F001, and MIH20 FHW001 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 24 CFR 574.625, in addition to the conflict of interest requirements in 2 CFR 200.318 , no person who is an employee, agent, consultant, officer, or elected or appointed official of the grantee or project sponsor and who exercises or has exercised any functions or responsibilities with respect to assisted activities, or who is in a position to participate in a decision making process or gain inside information with regard to such activities, may obtain a financial interest or benefit from the activity, or have an interest in any contract, subcontract, or agreement with respect thereto, or the proceeds thereunder, either for himself or herself or for those with whom he or she has family or business ties, during his or her tenure or for one year thereafter. 24 CFR 574.605 states that the provisions of 2 CFR part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal awards? apply. In accordance with 2 CFR 200.318, general procurement standards state that the non Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. Condition - In July of 2021, the Department of Housing and Urban Development's (HUD) Detroit Field Office monitored the HOPWA program administered by the City of Detroit. As a result of the monitoring HUD identified the following items: ? The Chief Public Health Officer sits on the Board of Directors of an entity with which the City has contracted with to provide administrative and fiduciary services for the HOPWA program. The entity was identified as a sole source provider for the services. ? It was determined that procurement records (including RFPs, cost analyses, contracts, bid tabulations, etc.) for federally funded goods and services were either missing, incomplete, inconsistent, or inadequate. Questioned Costs - $712,939 Identification of How Questioned Costs Were Computed - The questioned costs represent amounts paid to the contractor during fiscal year 2021. Context - In fiscal year 2021, the City incurred approximately. $3.0 million HOPWA expenditures of which $712,939 were paid to a contractor that HUD?s monitoring revealed procurement requirements were not followed. Cause and Effect - The City?s controls were not adequate to address UG requirements, including conflict of interest. The potential effect is that the County may be required to repay the amount paid to the contractor during the life of the contract. Recommendation - The City should review its policies and procedures concerning sole source vendor selection to ensure documentation is consistent with UG. Further the City should establish policies and procedures to identify potential conflicts in order to take the necessary action(s) as required by UG. Views of Responsible Officials and Corrective Action Plan - The City has established a Conflict-of-Interest Policy to help ensure consistency with UG that includes The City, its Contractors and Sub-recipients shall avoid conflicts of interest, in fact, and any perception, and shall notify, in writing, HRD?s Director & assigned program staff and the Department of Housing and Urban Development ? Detroit Office (HUD) of the occurrence or existence of potential conflicts, whether perceived or actual. The City has requested an exception from HUD to whether a possible conflict of interest exists under federal laws where the Chief Public Health Officer sits on the Board of Directors of an entity with which the city has contracted with and to provide administrative and fiduciary services. The City requested an exemption under 2 CFR 200.218 and 24 CFR 574.625, which would allow the entity to continue to provide fiduciary services. The City's Offices of the Chief Financial Officer (CFO) and Housing and Revitalization Department (HRD) has partnered to rollout new and updated policies and procedures to address the HUD finding. This includes a continuous improvement management plan for employee rollout, implementation, training and progress reporting.

2021-007 Assistance Listing Number (ALN), Federal Agency, and Program Name - ALN 14.241, Department of Housing and Urban Development (HUD), Housing Opportunities for Persons with Aids (HOPWA) and COVID-19 HOPWA Federal Award Identification Number and Year - MIH19-F001, MIH20-F001, and MIH20-FHW001 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - Yes-2020-008, 2019-010 Criteria - Per 24 CFR 574.310, except for persons in short term supportive housing, each person receiving rental assistance under the HOPWA Program must pay as rent the higher of: (1) 30 percent of the family?s monthly adjusted gross income; (2) 10 percent of the family?s monthly gross income; or (3) the portion of the payments that is designated if the family is receiving payments for welfare assistance from a public agency and a part of the payments, adjusted in accordance with the family?s actual housing costs, is specifically designated by the agency to meet the family?s housing costs. Condition - During eligibility testing, PM noted two instances where the calculation of rental assistance was not performed. Questioned Costs - $2,189 Identification of How Questioned Costs Were Computed - Questioned costs represent actual rental assistance provided to a participant during fiscal year 2021 that was unsupported by a calculation of rental assistance. Context - Out of 60 samples selected for testing, PM noted two instances of missing rent subsidy calculations. Cause and Effect - Without a calculation of rental assistance based on the requirements of 24 CFR 574.310, the City is unable to ascertain whether the appropriate amount of assistance is provided. Recommendation - We recommend that the City implement a detailed review process of the participants? rent assessment prior to finalizing the benefits and communicating the same to the participant. Views of Responsible Officials and Planned Corrective Actions - The City of Detroit HOPWA program has a dedicated quality coordinator position in place. The coordinator will continue to work closely with HOPWA and city staff, conduct regular file audits and develop and implement strategies to help eliminate the rise of non-compliance. The coordinator will continue to work with HOPWA to conduct detailed reviews of participants rent assessments prior to finalizing the benefits and communicating the same to the participant. The $2,189 was refunded to HUD to resolve the questioned cost finding.

2021-008 Assistance Listing Number (ALN), Federal Agency, and Program Name - ALN 10.557, Department of Agriculture, Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Federal Award Identification Number and Year - 192MI003W1003 and 202MI003W1003 Pass-through Entity - Michigan Department of Health and Human Services Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.318 (c) (1) The Non Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial, or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity. Per 2 CFR 200.318(a) The Non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in sections 317 through 327. Condition - In July of 2021, the Department of Housing and Urban Development's (HUD) Detroit Field Office monitored the HOPWA program administered by the City of Detroit. As a result of the monitoring HUD identified the following items which would extend to the WIC program since these conditions apply to WIC as well: ? The Chief Public Health Officer sits on the Board of Directors of an entity with which the City has contracted with to provide administrative and fiduciary services for the WIC program. The entity was identified as a sole source provider for the services. ? It was determined that procurement records (including RFPs, cost analyses, contracts, bid tabulations, etc.) for federally funded goods and services were either missing, incomplete, inconsistent, or inadequate. Questioned Costs - $1,542,357 Identification of How Questioned Costs Were Computed - The questioned costs represent amounts paid to the contractor during fiscal year 2021. Context - In fiscal year 2021, the City incurred approximately. $4.9 million WIC expenditures of which $1,542,357 were paid to a contractor that HUD monitoring revealed procurement requirements were not followed. Cause and Effect - The City should implement policies and procedures to comply with the procurement standards which include the conflict of interest regulations. Additionally, the City should review its policies and procedures concerning sole source vendor selection to ensure documentation is consistent with UG. Further the City should establish policies and procedures to identify potential conflicts in order to take the necessary action(s) as required by UG. Recommendation - The City should implement policies and procedures to comply with the procurement standards which include the conflict of interest regulations. Additionally, the City should review its policies and procedures concerning sole source vendor selection to ensure documentation is consistent with UG. Further the City should establish policies and procedures to identify potential conflicts in order to take the necessary action(s) as required by UG. Views of Responsible Officials and Planned Corrective Actions - The city will review its policies and procedures and update as needed to comply with conflict-of-interest regulations and sole source vendor selection. The City will also review the WIC program guidelines and request an exception to avoid the possible conflict of interest from WIC if exists under federal laws where the Chief Public Health Officer sits on the Board of Directors of an entity with which the city has contracted with and to provide administrative and fiduciary services.

2021-009 Assistance Listing Number (ALN), Federal Agency, and Program Name - ALN 14.218, Department of Housing and Urban Development (HUD), Community Development Block Grants Cluster, COVID-19 Community Development Block Grants Program ? CV (CDBG CV) Federal Award Identification Number and Year - B20MW260006 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - As part of the CARES Act and per FR 6218 N 01 (CDBG CV Federal Register Notice) o there must be adequate procedures in place to prevent any duplication of benefits as required by Section 312 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), as amended by section 1210 of the Disaster Recovery Reform Act of 2018 (division D of Public Law 115?254; 42 U.S.C. 5121 et seq.). Duplication of benefits requirements apply to all CDBG CV allocations as well as to FY2019 and FY2020 formula CDBG allocations used to prevent, prepare for, and respond to coronavirus. o Section III.B.5. (a) states that the grantee is required to use all CDBG?CV funds for CDBG eligible activities that are carried out to prevent, prepare for, and respond to coronavirus. CDBG?CV grants cannot be used for any other purpose. Grantees are required to document how the CDBG-CV activities tie back to the prevention, preparation, and response to coronavirus. o In Section III.B.5. (f) Eligible Activities as described in the FR 6218 N 01 (CDBG-CV federal Register Notice), HUD cautions grantees that the recordkeeping requirements of this notice require clear documentation that all uses of funds satisfy the statutory purposes of the CARES Act. The regulations under 2 CFR 200.302(b) (5) require that records must contain information pertaining to the federal award ? and be supported by source documentation. Accounting records must be supported by source documentation such as cancelled checks, paid bills, payrolls, contract and subawards. In addition, both 2 CFR 200.403(g), which states that costs must be adequately documented, and 2 CFR 200.404 Reasonable Costs (a e) apply. o Per 24 CFR 570.502 (a), grantees and subrecipients shall comply with 2 CFR Part 200. All funds must satisfy a CDBG eligible activity regulation and cost principles under 2 CFR Part 200. Condition - In July of 2021, the Department of Housing and Urban Development's (HUD) Detroit Field Office monitored the Community Development Block Grant program administered by the City of Detroit. As a result of the monitoring HUD identified the following items: ? For two specific activities (#8828 and #8829) funded with CDBG-CV funds, HUD noted the following: o There was insufficient documentation to support that the CARES Act Duplication of Benefit (DOB) requirements were met. o There was insufficient documentation to show how the activities tied back to preventing, preparing for, and responding to COVID-19. o There was insufficient documentation to support how the activities met the CDBG CV eligibility requirements. Questioned Costs - $442,785 Identification of How Questioned Costs Were Computed - The question costs represent total amount of costs identified by HUD and incurred under the two activities, #8828 and #8829. Context - In fiscal year 2021, the City incurred approximately. $2.6 million CDBG CV expenditures and two specific vouchers totaling $442,785 did not comply with certain regulations applicable to CDBG CV funding. Cause and Effect - The City?s controls were not adequate to ensure the terms and conditions of the CDBG CV awards were met and evidenced with appropriate documentation. As a result, $442,785 may be recouped by the funder. Recommendation - The City should implement process to determine applicable regulations and ensure that all costs are treated consistently to meet the requirements outlined within the regulations. Views of Responsible Officials and Planned Corrective Actions - The City has updated and implemented its Duplication of Benefits policy and processes and provided to HUD to help ensure timely submission of requested supporting documentation. In addition, the City provided a response to HUD and submitted the additional support which includes the DOB affidavits and certifications for the two specific activities (#8828 and #8829) to show there was no duplication of benefits.

2021-010 Assistance Listing Number (ALN), Federal Agency, and Program Name - ALN 14.218, Department of Housing and Urban Development (HUD), Community Development Block Grants Cluster, Community Development Block Grants Program (CDBG) Federal Award Identification Number and Year - B-18-MC-26-0006 and B-19-MC-26-0006 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - The CDBG regulations, 24 CFR 570.502(a), state that the requirements of 2 CFR Part 200 apply to the recipient and subrecipients. In turn, regulations under 2 CFR 200.302(b)(3) require records be maintained to adequately identify the source and application of federal funds. Condition - In July of 2021, the Department of Housing and Urban Development's (HUD) Detroit Filed Office monitored the Community Development Block Grant program administered by the City of Detroit. As a result of the monitoring HUD questioned whether CDBG expenditures incurred by the City?s subrecipient were allowable, including whether indirect and direct costs were allocated appropriately. Questioned Costs - $419,589 Identification of How Questioned Costs Were Computed - The question costs represent total amount of costs identified by HUD and incurred IDIS activity #8764. Context - In fiscal year 2021, the City incurred approximately. $33 million of CDBG expenditures of which $12.4million was passed through to various subrecipients. HUD identified disallowed expenditures incurred by one subrecipient. Cause and Effect - There were insufficient internal controls to ensure the indirect and direct costs for both grant programs were appropriately allocated and the regulations for each grant program were met and documented. The City?s financial review procedures didn?t include recordkeeping for aligning the dollar amount in the cost support to the amount of the accounting transaction. Additionally, the City?s procedures did not include identifying the subrecipient?s basis for allocating costs between activities. The lack of adequate controls and review resulted in disallowed costs. Recommendation - The City should implement process to review costs submitted by subrecipients for allowability under the grant, including methodologies for determining allowability and allocation of costs between activities. Views of Responsible Officials and Planned Corrective Actions - The City has documented and implemented a Sub Recipient policy that includes a process to review allowability and allocation of cost. In addition, the City provided additional documentation to HUD for the questioned cost to further demonstrate the cost in fact was not disallowed cost. The City's Offices of the Chief Financial Officer (CFO) and Housing and Revitalization Department (HRD) has partnered to rollout new and updated policies and procedures to address the HUD finding. This includes a continuous improvement management plan for employee rollout, implementation, training and progress reporting.

2021-011 Assistance Listing Number (ALN), Federal Agency, and Program Name - ALN 14.218, Department of Housing and Urban Development (HUD), CDBG Entitlement Grants Cluster, Community Development Block Grants/Entitlement Grants (CDBG) Federal Award Identification Number and Year - B-18-MC-26-0006 and B-19-MC-26-0006 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 24 CFR 570.504 (a), the receipt and expenditure of program income shall be recorded as part of the financial transactions of the grant program, and, per 24 CFR 570.504 (b), program income received before grant closeout may be retained by the recipient if the income is treated as additional CDBG funds subject to all applicable requirements governing the use of CDBG funds. Furthermore, when the recipient chooses to retain program income or a subrecipient is allowed, by the pass through entity, to retain program income, it should be disbursed for eligible activities before additional cash withdrawals are made from the U.S. Treasury (24 CFR 570.504(b)(ii)). Condition - The City did not report program income earned from the 0% Loan Program administered through a subrecipient of the City and did not reflect the program income and expenditures of program income within the City?s general ledger. In July of 2021, the Department of Housing and Urban Development?s (HUD) Detroit Field Office monitored the CDBG program administered by the City of Detroit. As a result of the monitoring, HUD also identified this matter. Questioned Costs - $1,060,837 Identification of How Questioned Costs Were Computed - The question costs represent total amount of program income reported to HUD via the City's corrective action plan. Context - The City administers CDBG eligible programs directly and through subrecipients. The City earns program income through the repayment of Section 108 loans by developers and the 0% Loan Program which is administered by a subrecipient. The City did not report program income earned from the 0% Loan Program administered through a subrecipient of the City and did not reflect the program income and expenditures of program income within the City?s general ledger. Cause and Effect - Controls in place did not enforce the proper recording and reporting of program income and expenditures of program income within the City?s general ledger and to HUD. Recommendation - The City should implement a process to track program income and report it timely to HUD as well as reflect program income and related expenditures within the City?s general ledger. Views of Responsible Officials and Planned Corrective Actions - The City has documented and implemented its policy and procedure for program income to help ensure all program income is tracked and recorded timely and accurately. The finding has been closed by HUD by acceptance of the policy and recording of the program income in question.

2021-012 Assistance Listing Number (ALN), Federal Agency, and Program Name - ALN 14.231, Department of Housing and Urban Development (HUD), Emergency Solutions Grant (ESG) Federal Award Identification Number and Year - E-18-MC-26-0006 and E-19-MC-26-0006 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - The ESG regulations, 24 CFR 576.407(c) and 24 CFR 576.500(u), state that the requirements of 2 CFR part 200 apply to the recipient and subrecipients and supporting documentation must be maintained for all costs charged to the ESG grant. Under 2 CFR 200.302(b)(3), records must be maintained to adequately identify the source and application of the funds. Condition - In July of 2021, the Department of Housing and Urban Development?s (HUD) Detroit Field Office monitored the Community Development Block Grant program administered by the City of Detroit. As a result of the monitoring HUD questioned whether ESG expenditures incurred by the City?s subrecipient were allowable, including whether indirect and direct costs were allocated appropriately. Questioned Costs - $366,011 Identification of How Questioned Costs Were Computed - The question costs represent total amount of costs identified by HUD and incurred IDIS activity #8777. Context - In fiscal year 2021, the City incurred approximately. $7.4 million of ESG expenditures of which $4.2million was passed through to various subrecipients. HUD identified disallowed expenditures incurred by one subrecipient. Cause and Effect - There were insufficient internal controls to ensure the indirect and direct costs for both grant programs were appropriately allocated and the regulations for each grant program were met and documented. The City?s financial review procedures didn?t include recordkeeping for aligning the dollar amount in the cost support to the amount of the accounting transaction. Additionally, the City?s procedures did not include identifying the subrecipient?s basis for allocating costs between activities. The lack of adequate controls and review resulted in disallowed costs. Recommendation - The City should implement process to review costs submitted by subrecipients for allowability under the grant, including methodologies for determining allowability and allocation of costs between activities. Views of Responsible Officials and Planned Corrective Actions - The City has documented and implementing a Sub Recipient policy that includes a process to review allowability and allocation of cost. This will help ensure submitted cost are allowable under the grant. In addition, the City provided additional documentation to HUD to demonstrate the questioned cost in fact was not disallowed cost.

2021-013 Assistance Listing Number (ALN), Federal Agency, and Program Name - ALN 14.218, Department of Housing and Urban Development (HUD), CDBG Entitlement Grants Cluster, Community Development Block Grants/Entitlement Grants (CDBG), 14.248, HUD, Community Development Block Grants Section 108 Loan Guarantees (Section 108), 21.019, Department of Treasury, COVID-19 Coronavirus Relief Fund (CRF), 93.323, Department of Health and Human Services, COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC), 97.036, Department of Homeland Security, COVID-19 Disaster Grants ? Public Assistance (Presidentially Declared Disasters) (FEMA) Federal Award Identification Number and Year - B-20-MC-26-0006, B-18-MC-26-0006, NU50CK000510. Pass-through Entity - N/A for ALN 14.218, 14.248, and 21.019 which were direct funded. ALN 93.323 and ALN 97.036 are passed through the Michigan Department of Health and Human Services and Michigan State Police Finding Type - Material weakness Repeat Finding - No Criteria - Per 2 CFR 200.510(b) The auditee must also prepare a schedule of expenditures of Federal awards 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. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. Condition -The schedule of expenditures of federal awards (SEFA) was not complete and accurate. Questioned Costs - None Identification of How Questioned Costs Were Computed N/A Context - In fiscal year 2021, the City expended approximately $247 million of federal funding. The funding was received by various departments within the City from several federal and non federal entities. The City accumulates the financial data and other required information to complete the SEFA. The SEFA included the following inaccuracies: ? $6,696,930 spent under ALN 14.248, Section 108 was improperly reported under ALN 14.218, CDBG * $3,657,683 spent under ALN 21.019 (CRF) was improperly excluded from the SEFA due to an initial conclusion of state funding. ? $8,657,942 spent under ALN 97.036 (FEMA) was improperly reported under ALN 93.323, ELC. ? $39,825 spent under ALN 97.036 (FEMA) was overstated for costs incurred outside the fiscal period under audit. Cause and Effect - Controls in place did not ensure the SEFA was complete and accurate. The resulting errors had the following impact: ? $6,696,930 spent under ALN 14.248, Section 108 was reported under ALN 14.218, CDBG as a result Section 108 was understated and CDBG was overstated by the above amount, impacting major program determination. $3,657,683 spent under ALN 21.019 (CRF) was excluded from the total CRF expenditures reported on the SEFA resulting in the initial CRF population being incorrect. ? $8,657,942 spent under ALN 97.036 (FEMA) was reported under ALN 93.323, ELC as a result ELC was overstated and FEMA was understated, by the above amount, impacting major program determination. The above errors were corrected by management and properly reported on the SEFA for the year end June 30, 2021. ? $39,825 spent under ALN 97.036 (FEMA) was overstated for costs incurred outside the fiscal period under audit. This error, though not corrected by management, has an immaterial affect on the SEFA for the year ended June 30, 2021. Recommendation - The City should implement process to ensure that the SEFA is complete and accurate. Views of Responsible Officials and Planned Corrective Actions - As part of the city Audit finding Corrective Action Plan (AFCAP), the City will develop a process to review Assistance Listing Numbers (ALN) to ensure all expenditures are properly reported. In addition, the process will be performed timely in advance of the final SEFA submission and will include management review and checklists to help ensure completeness, validity and accuracy in advance of the SEFA reporting.

2021-014 Assistance Listing Number (ALN), Federal Agency, and Program Name ? ALN 14.218, Community Development Block Grants Cluster, COVID-19 Community Development Block Grants Program ? CV (CDBG-CV) Federal Award Identification Number and Year ? B20MW260006, Program Year 2020 Pass through Entity - N/A Finding Type ? Material noncompliance and material weakness Repeat Finding - No Criteria - The Federal Funding Accountability and Transparency Act (FFATA), as amended by 6202 of Public La 110-252, requires a prime grant awardee to report its subgrants using the FFATA Subaward reporting System (FSRS) tool. The prime recipient will have until the end of the month plus one additional month after an award or sub-award is obligated to fulfill the reporting requirement. Condition ? The City did not file the FFATA report for CDBG-CV in a timely manner. Questioned Costs ? None Identification of How Questioned Costs Were Computed ? N/A Context ? The City obligated the subawards on May 13, 2021 and the report was due no later than June 30, 2021. The report was filed in July of 2021. The following table summarizes the transactions examined and the noncompliance identified: Transactions Tested: 10 Subaward Not Reported: 0 Report Not Timely: 10 Subaward Amount Incorrect: 0 Subaward Missing Key Elements: 0 Dollar Amount of Tested Transactions: $10,545,837.50 Subaward Not Reported: $0 Report Not Timely: $10,545,837.50 Subaward Amount Incorrect: $0 Subaward Missing Key Elements: $0 Cause and Effect - The City?s processes did not properly identify the FFATA filing requirements resulting in a delay in fling the report. Recommendation - The City should implement controls to ensure that required reports are filed in a timely manner. Views of Responsible Officials and Corrective Action Plan - The City will review its current processes and implement additional controls to ensure the requirements for the FFATA filing is done timely and there are no delays in the reporting.

CFDA Number, Federal Agency, and Program Name CFDA #21.019 COVID 19 Coronavirus Relief Fund (CRF) Federal Award Identification Number and Year N/A Pass through Entity N/A Direct funded Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria Pursuant to Section 601(d) of the Social Security Act, as added by Section 5001 of the CARES Act, payments must be used to cover costs that: ? Are necessary expenditures incurred due to the public health emergency with respect to COVID 19 ? Were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the state of government, meaning the cost either: o Cannot be lawfully funded using a line item, allotment, or allocation within that budget o Is for a substantially different use from any expected use of funds in such a line item, allotment, or allocation ? Were incurred during the period that begins on March 1, 2020 and ends on December 30, 2020 Condition The City charged payroll related costs of $29,837 to the grant for time incurred prior to March 1, 2020. Questioned Costs None Identification of How Questioned Costs Were Computed Not applicable Context The City received an allocation of COVID 19 Coronavirus Relief Fund (CRF) of $116,915,242. As of June 30, 2020, the City identified CRF eligible expenditures of $107,417,691. During our testing of expenditures charged to the grant, we noted 3 items from a sample of 60 were incurred prior to March 1, 2020 and, as a result, are ineligible for CRF funding. After the discovery, to address the risk that certain lump sum payments related to time incurred prior to March 1, 2020, the City excluded all lump sum payments that were allocated to the grant, which amounted to approximately $94,000. The City had other eligible payroll related costs not previously charged to grant that were included to replace the ineligible costs noted above. Expenditure reporting to the Treasury was due on November 30, 2020, i.e., after the City?s replacement of cost. An additional sample of 12 was tested to verify the replacement costs were allowable. As a result, there are no questioned costs. Cause and Effect The City accumulated data related to payroll incurred for the period from March 1, 2020 through June 30, 2020 in order to identify CRF eligible expenditures. The City?s process did not consider lump sum payouts for items such as retro pay, vacation payout, or comp time where the time incurred was prior to March 1, 2020. As a result, certain ineligible expenditures were charged to the grant that were later replaced by the City. Recommendation We recommend that the City review the various earnings codes used to charge expenditures to the grant to evaluate whether any of the earnings codes are ineligible to be charged based on the requirements of 601(d) of the Social Security Act. Views of Responsible Officials and Corrective Action Plan The City allocated the CRF payroll dollars based on the general ledger regular pay object account. Upon audit and review, it was determined that lump sum and retro payments were also posted to the object account. The codes (lump sum and retro) relate to various time periods that include both the eligible and ineligible periods. The City performed a detailed review of all payroll earnings codes used to allocate expenditures to the CRF grant. The lump sum and retro earnings codes were excluded from the detail employee support and replaced with eligible costs. Going forward, future payroll cost will be reviewed in detail, and all unallowed earnings codes will be excluded.

CFDA Number, Federal Agency, and Program Name CFDA #14.241 Department of Housing and Urban Development HOPWA Federal Award Identification Number and Year MIH16 F001, MIH17 F001, and MIH18 F001 Pass through Entity N/A Direct funded Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding Yes 2019 010 Criteria Per 24 CFR 574.310, except for persons in short term supportive housing, each person receiving rental assistance under the HOPWA Program must pay as rent the higher of: (1) 30 percent of the family?s monthly adjusted gross income; (2) 10 percent of the family?s monthly gross income; or (3) the portion of the payments that is designated if the family is receiving payments for welfare assistance from a public agency and a part of the payments, adjusted in accordance with the family?s actual housing costs, is specifically designated by the agency to meet the family?s housing costs. Condition During eligibility testing, Plante & Moran, PLLC (PM) noted two errors in the rental assistance amount charged to participants. In the first instance, the calculation of rental assistance was improperly calculated. In the second instance, the calculation of rental assistance was correctly calculated; however, the correct utility allowance was not used. Questioned Costs $1,344 Identification of How Questioned Costs Were Computed Questioned costs represent actual rental assistance, provided to a participant during fiscal year 2020, in excess of the amount they were eligible to receive. Context Out of 60 samples selected for testing, PM noted two instances of errors in the calculation of the rent contributions due from the participant. In the first instance, the participant?s rent contribution was undercharged by $53 per month over a period of 10 months. In the second instance, the participant?s rent contribution was undercharged $108 per month over a period of 7.5 months. Cause and Effect The participant rent contribution calculations were not reviewed prior to the participant?s assessment. The participants were assessed too little based on the requirements of 24 CFR 574.310, and the errors were not detected. Recommendation We recommend that the City implement a detailed review process of the participants? rent assessment prior to finalizing the benefits and communicating the same to the participant. Views of Responsible Officials and Planned Corrective Actions Effective December 2020, the HOPWA program now has a dedicated quality coordinator position. This coordinator will work closely with HOPWA staff, conduct regular file audits, and create and implement realistic strategies to overcome the risk of noncompliance. This coordinator has already begun to conduct a quality assessment, meeting with staff and performing chart audits. In response to the recommendation from the audit, the coordinator will work closely with the HOPWA manager to conduct a detailed review of participants? rent assessment prior to finalizing the benefits and communicating the same to the participant.

CFDA Number, Federal Agency, and Program Name CFDA #14.241 Department of Housing and Urban Development HOPWA Federal Award Identification Number and Year MIH16 F001, MIH17 F001, and MIH18 F001 Pass through Entity N/A Direct funded Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria All housing that involves acquisition, rehabilitation, conversion, lease, repair of facilities, new construction, project or tenant based rental assistance (including assistance for shared housing arrangements), and operating costs must meet various housing quality standards listed in 24 CFR Sections 574.310(b)(1) (2). Grantees are required to perform required inspections to ensure that units meet housing quality standards, including timely follow up of needed repairs. Condition During testing of housing quality standards, PM noted that the City did not exercise timely follow up of a failed inspection that required needed repairs. Questioned Costs None Identification of How Questioned Costs Were Computed Not applicable Context Out of 60 samples selected for testing, PM noted 1 instance of noncompliance, i.e. a lack of timely follow up of needed repairs. Cause and Effect The City has a Housing and Revitalization Department Annual Action Plan under which housing quality inspection guidelines are established. However, we noted that the plan does not include specific guidelines on what happens in the event of a failed inspection or what constitutes timely repairs. In addition, the City has a tracking mechanism in place for identifying those units on which housing quality inspections are due. However, the City?s tracking mechanism does not clearly track failed inspections and needed repairs or the necessary timeline of completing those repairs. As a result of a lack of clear guidance on inspections, and due to the fact that the controls over inspections are not properly designed, the City is at risk for noncompliance with housing quality standards. Recommendation We recommend that the City revise its Housing and Revitalization Department Annual Action Plan to incorporate controls to monitor failed inspections to verify repairs are completed timely. Views of Responsible Officials and Planned Corrective Actions As stated in response to Finding 2020 008, effective December 2020, the HOPWA program now has a dedicated quality coordinator position, and this staff member will be responsible for monitoring all files and ensuring the correct procedures are followed. The HOPWA program has a policy and procedure in place regarding housing quality inspections.

CFDA Number, Federal Agency, and Program Name CFDA #16.034 COVID 19 Coronavirus Emergency Supplemental Fund (CESF) Federal Award Identification Number and Year N/A Pass through Entity N/A Direct funded Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria Per 2 CFR 200.403 Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under federal awards: (a) Be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the nonfederal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. See also ?200.306(b). (g) Be adequately documented. See also ??200.300 through 200.309 of this part. (h) Cost must be incurred during the approved budget period. The federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to ?200.308(e)(3). Condition Public safety overtime hours charged to the grant were inaccurate and inconsistent with supporting documentation maintained. Questioned Costs None Identification of How Questioned Costs Were Computed Not applicable Context The City charged approximately $1.6 million of public safety overtime to the grant. The process used to accumulate the activity resulted in duplicates being charged to the grant and hours that were inconsistent with time and effort support. The grant was overcharged by approximately $16,000. The City had not drawn down on the funds as of December 5, 2020 and concluded to reduce expenditures reported on the schedule of expenditures of federal awards by approximately $16,000. As a result, there are no questioned costs. Cause and Effect The City accumulated data related to public safety payroll that was incurred during the period from January 20, 2020 through June 30, 2020 and manually identified overtime that was incurred and could be charged to the grant. The manual process used in identifying overtime hours resulted in duplicates being charged to the grant and hours that were inconsistent with time and effort support. Because of the errors identified, the City of Detroit, Michigan reduced the expenditures reported on the SEFA and will reduce the amount requested for reimbursement on its first reimbursement request. Recommendation We recommend the City perform a detail review of the eligible costs identified, including tracing a sample of costs to supporting documentation, to ensure overtime charged is consistent with support. Views of Responsible Officials and Planned Corrective Actions A review of the COVID 19 related overtime tracking process was performed with a sample of Detroit Police Department (DPD) timesheets. Upon review of the sample, no additional errors were found. Going forward, before allocating future DPD overtime payroll cost to CESF, the City will perform a three way review of the overtime payroll hours, which will include (1) the payroll reports, (2) smartsheet tracking log, and (3) individual employee daily activity log to help ensure amounts allocated to CESF are consistent with supporting documentation.

CFDA Number, Federal Agency, and Program Name - CFDA #16.922 - Department of Justice - Equitable Sharing Program. Federal Award Identification Number and Year - N/A. Pass-through Entity - N/A - Direct funded. Finding Type - Material weakness and material noncompliance with laws and regulations. Repeat Finding - No. Criteria - Section VI.A.(7) of the Department of Justice and the Department of the Treasury July 2018 Guide to Equitable Sharing for State, Local, and Tribal Law Enforcement Agencies, (the "Guide"), requires that the state or local participating law enforcement agency report all transactions using cash-based accounting methods. Annually agencies must submit an Equitable Sharing Agreement and Certification (ESAC), which includes the agency?s annual Affidavit and details an agency?s receipts and expenditures of equitably shared funds for both the Department of Justice and the Department of Treasury Equitable Sharing Programs. Condition - The City's fiscal year 2019 ESAC did not report the equitable sharing funds spent using cash-based accounting methods. Questioned Costs - None. Identification of How Questioned Costs Were Computed - Not applicable, reporting matter only. Context - The City is required to prepare and submit the ESAC, for the fiscal year ended June 30, 2019, to the Department of Justice using cash-based accounting methods. The equitable sharing funds spent line item included $4.4 million of expenditures, all of which were paid in August 2019, i.e., subsequent to the June 30, 2019 fiscal year end. During the fiscal year ended June 30, 2019, there were no expenditures paid. Cause and Effect - The City reported the expenditures on the ESAC based on when the City initiated the payment process rather than when the check was available for disbursement to the vendor. As a result, cash-based accounting methods were not followed for the initial ESAC submission for the year ended June 30, 2019. Prior to the issuance of the City?s fiscal year 2019 single audit report, the City concluded to amend the fiscal year 2019 ESAC to reduce the equitable sharing funds spent line item by $4.4 million. As of the report date, the ESAC was amended; the SEFA and ESAC for the year ended June 30, 2019 differ by $4.4 million. Recommendation - We recommend that the City review its procedures and controls to ensure transactions reported on the ESAC are cash based. We further recommend that a review of the ESAC be established, prior to its submission, to ensure it is complete, accurate, and consistent with the reporting requirement of the Guide. Views of Responsible Officials and Corrective Action Plan - The City will implement review procedures to ensure the ESAC report is accurate. The report will be amended to reflect the cash basis of accounting, as required.

CFDA Number, Federal Agency, and Program Name - CFDA #14.241 - Department of Housing and Urban Development - HOPWA. Federal Award Identification Number and Year - MIH15-F001, MIH16-F001, MIH17-F001 and MIH18-F001. Pass-through Entity - N/A. Finding Type - Significant deficiency and material noncompliance with laws and regulations. Repeat Finding - No. Criteria - Per 24 CFR 574.310, except for persons in short-term supportive housing, each person receiving rental assistance under the HOPWA Program must pay as rent the higher of: (1) 30 percent of the family?s monthly adjusted gross income; (2) 10 percent of the family?s monthly gross income; or (3) the portion of the payments that is designated if the family is receiving payments for welfare assistance from a public agency and a part of the payments, adjusted in accordance with the family?s actual housing costs, is specifically designated by the agency to meet the family?s housing costs. Condition - During eligibility testing, Plante & Moran, PLLC (PM) noted two errors in the rental assistance amount charged to participants. In the first instance, the calculation of rental assistance for one out of 60 participants was improperly calculated. In the second instance, the calculation of rental assistance for one out of 60 participants appropriately utilized the three methods in the criteria noted above to determine the participant?s payment amount. Instead of the higher of the three calculations being charged to the participant, the lesser of the three amounts was improperly charged to the participant. Condition - During eligibility testing, Plante & Moran, PLLC (PM) noted two errors in the rental assistance amount charged to participants. In the first instance, the calculation of rental assistance for one out of 60 participants was improperly calculated. In the second instance, the calculation of rental assistance for one out of 60 participants appropriately utilized the three methods in the criteria noted above to determine the participant?s payment amount. Instead of the higher of the three calculations being charged to the participant, the lesser of the three amounts was improperly charged to the participant. Questioned Costs - $3,941. Identification of How Questioned Costs Were Computed - Questioned costs represent actual rental assistance, provided to a participant during fiscal year 2019, in excess of the amount they were eligible to receive. Context - Out of 60 samples selected for testing, PM noted two instances of errors in the calculation of the rent contributions due from the participant. In the first instance, the participant?s rent contribution was undercharged $85 per month over a period of nine months. In the second instance, the participant?s rent contribution was undercharged $397 per month over a period of eight months. Cause and Effect - The participant rent contribution calculations were not reviewed prior to the participant?s assessment. The participants were assessed too little based on the requirements of 24 CFR 574.310, and the errors were not detected. Recommendation - We recommend that the City implement a detailed review process of the participants? rent assessment prior to finalizing the benefits and communicating the same to the participant. Views of Responsible Officials and Planned Corrective Actions - The health department will take additional training surrounding HOPWA financial management and rent calculations. The health department will also implement additional review procedures to ensure the accuracy of the rent calculation before finalizing participant benefits.

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