City of Gaylord

2020-004 ? Failure to File Required Report Finding Type. Immaterial noncompliance/Significant Deficiency in Internal Control over Compliance (Reporting). Program. Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii (CDBG); U.S. Department of Housing and Urban Development (HUD); CFDA Number 14.228; Award Number MSC 217044-FRZ. Criteria. For each CDBG grant over $200,000 that involves housing rehabilitation, housing construction, or other public construction, the recipient must file form HUD-60002, annually. Condition. During the fiscal year ended June 30, 2020, the City failed to file the required report. Cause. The cause of this condition appears to be a lack of information obtained from the contractor on the project. Effect. As a result of this condition, the City was not in compliance with the reporting requirements of the Uniform Guidance related to this program. Questioned Costs. No costs were required to be questioned as a result of this finding inasmuch as our testing revealed any unallowed costs. Recommendation. Since this project is completed as of June 30, 2020, we recommend that the City file this report with the grantor agency as soon as is practical. View of Responsible Officials. The City relied too heavily on hired grant administrator to insure that all needed paperwork was completed in a timely fashion. Future grants will be monitored within city staff to insure that all filing requirements are being met. Responsible Official. Joseph Duff, City Manager.

2020-005 ? Written Policies Required by the Uniform Grant Guidance (Repeat Finding) Finding Type. Immaterial Noncompliance (Allowable Costs/Cost Principles, Cash Management and Procurement and Suspension and Debarment). Program. Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii (CDBG); U.S. Department of Housing and Urban Development (HUD); CFDA Number 14.228; Award Number MSC 217044-FRZ. Criteria. The Uniform Guidance requires a non-federal entity that has expended federal awards for a grant awarded on or after December 26, 2014 to have written policies pertaining to various areas, including: 1) Payments (draws of federal funds and how to minimize the time elapsing between the receipt of federal funds and the disbursement to contractors/employees/subrecipients) (?200.302 (6)); 2) Procurement (including bidding and a conflict of interest policy) (?200.318); and 3) Allowability of costs charged to federal programs (?200.302 (7)). Condition. Although the City has processes in place to cover these areas, there are no formal written policies covering payments, procurement and allowability of costs that address all of the areas required by the Uniform Guidance. Cause. This condition appears to be the result of a time lag in identifying the requirement and developing a plan for compliance. Effect. As a result of this condition, the City did not fully comply with the Uniform Guidance applicable to the above noted grants. Questioned Costs. No costs were required to be questioned as a result of this finding inasmuch as our testing revealed any unallowed costs. Recommendation. We recommend that the City draft the required policies as soon as practical, but no later than the end of fiscal year 2021. View of Responsible Officials. It is the City of Gaylord?s intention to draft the recommended regarding payments, procurement, and allowability of costs charged to federal programs. This policy will be adopted prior to the end of June 30, 2021 fiscal year. Responsible Official. Kimberly Awrey, Assistant City Manager/City Clerk.

Finding Type. Material Weakness in Internal Control over Financial Reporting. Criteria. Uniform Guidance, ? 200.302 Financial Management, requires that the City identify "in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the CFDA title and number, Federal award identification number and year, name of the Federal agency, and name of the passthrough entity, if any. Condition. While management was able to provide us with a partially complete schedule of expenditures of federal awards (SEFA) during audit fieldwork, several adjustments were ultimately required. Cause. As is the case with many organizations of similar size, the City administers a vast array of federal and state grants throughout its many departments. The function of grant administration is, therefore, very decentralized. Effect. As a result of this condition, the City's SEFA was initially misstated by $358,343. Recommendation. We recommend that the City formally adopt a policy for grants administration, and clearly assign the responsibility for grant reporting and preparation of the SEFA each year. All grant financial reports should be reviewed centrally by a member of management prior to submission, and compared against the City's accounting records. Federally revenue should be recorded upon submission of grant financial reports. Incoming grant receipts should, similarly, be reviewed to determine the appropriate program for coding. Difference between amounts requested, amounts received, and/or amounts reported on the City's accounting records should be promptly investigated and resolved.

Finding Type. Immaterial Noncompliance (Allowable Costs/Cost Principles, Cash Management and Procurement and Suspension and Debarment). Programs. Community Development Block Grant (CDBG); U.S. Department of Housing and Urban Development; CFDA Number 14.228; Award Number B-16-DC-26-001. "Criteria. The Uniform Guidance requires a non-federal entity that has expended federal awards for a grant awarded on or after December 26, 2014 to have written policies pertaining to various areas, including: 1) Payments (draws of federal funds and how to minimize the time elapsing between the receipt of federal funds and the disbursement to contractors/employees/subrecipients) (?200.302 (6)); 2) Procurement (including bidding and a conflict of interest policy) (?200.318); and 3) Allowability of costs charged to federal programs (?200.302 (7)). "Condition. Although the City has processes in place to cover these areas, there are no formal written policies covering payments, procurement and allowability of costs that address all of the areas required by the Uniform Guidance. "Cause. This condition appears to be the result of a time lag in identifying the requirement and developing a plan for compliance." Effect. As a result of this condition, the City did not fully comply with the Uniform Guidance applicable to the above noted grants. Questioned Costs. No costs were required to be questioned as a result of this finding inasmuch as our testing revealed any unallowed costs. Recommendation. We recommend that the City draft the required policies as soon as practical, but no later than the end of fiscal year 2020.

Finding Type. Immaterial Noncompliance / Significant Deficiency in Internal Controls over Compliance (Cash Management). Programs. Community Development Block Grant (CDBG); U.S. Department of Housing and Urban Development; CFDA Number 14.228; Award Number B-16-DC-26-001. Criteria. Uniform Guidance, ? 200.305 Payment, requires that recipients of federal awards minimize the time elapsing between transfer to recipients of grants and cooperative agreements and the recipient's need for the funds. Cash should not be drawn down in excess of three days' immediate cash needs. Condition. At times, during the year ended June 30, 2019, and the period subsequent to year end, the City was in receipt of cash in excess of three days' needs. Cause. This condition was the result of not reconciling the federal expenditures per the general ledger to the third party grant administrator's payment request prior to submission. Questioned Costs. No costs were required to be questioned as a result of this finding since the City eventually incurred sufficient expenditures to utilize the requested funds prior to the end of the grant period. Effect. As a result of this condition, the City was, at times, in receipt of federal funds which it did not need to meet current cash needs. Recommendation. We recommend that the City review the drawn down of funds prior to submission to determine that the amount requested is based on actual cash needs.