CITY OF BEAVERTON

AL# 11.300 Investments for Public Works & Economic Develpment - Written Policies Required by the Uniform Guidance (repeated from prior year)Material Weakness in Internal Control over Compliance 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 allowability of costs charged to federal programs, cash management, financial management, procurement, compensation/payroll, and travel costs (§200.300 - 328). Condition: Although the City has processes in place to cover these areas, the City lacks formal written policies covering these areas. 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 have been questioned as a result of this finding. Recommendation: We recommend that the City ensures these policies are updated to conform with the Uniform Guidance as soon as practical, but no later than the end of fiscal year 2024. View of Responsible Officials: We agree with the finding. The City is currently working on updating all current procedures and policies to ensure that they are compliant with Uniform Guidance for all current and future Federal Awards.

AL# 11.300 Investments for Public Works & Economic Develpment - Other Tests and Provisions Compliance Other Matters Criteria: The City is required to erect and maintain in good condition and repair a sign or signs in accordance with EDA specifications. Prior to on-site construction, a reproducible photograph of the sign must be submitted to EDA along with evidence that the sign is located at the project site. Condition: During our inquiry of grant specific conditions the City was not able to readily produce a photograph of a sign at the site of the project. Additionally, the City did not have a sign erected at a second project site. Cause: This condition appears to be the result of a lack of administrative oversight. Effect: As a result of this condition, the City did not fully comply with the grant specific conditions of a major federal program/award. Questioned Costs: No costs have been questioned as a result of this finding. Recommendation: We recommend that the City ensures a sign is erected at both project sites and photographs are retained in the project files. View of Responsible Officials: We agree with the finding. The City, immediately after auditor inquiry, took a photograph of the erected sign and will retain it in the project file. Additionally, the City has provided a copy of the photograph to the Economic Development Administration.

2022-004 AL# 10.766 Community Facilities Loans and Grants - Written Policies Required by the Uniform Guidance Material Weakness in Internal Control over Compliance 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 allowability of costs charged to federal programs, cash management, financial management, procurement, compensation/payroll, and travel costs (?200.300 - 328). Condition: Although the City has processes in place to cover these areas, the City lacks formal written policies covering these areas. 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 have been questioned as a result of this finding. Recommendation: We recommend that the City ensures these policies are updated to conform with the Uniform Guidance as soon as practical, but no later than the end of fiscal year 2023. View of Responsible Officials: We agree with the finding. The City is currently working on updating all current procedures and policies to ensure that they are compliant with Uniform Guidance for all current and future Federal Awards.

2021-06 Violation of Reserve Requirements Related to Debt (repeated from prior year) Material Noncompliance or Other Matters Criteria: The City has revenue bonds outstanding in the Hydroelectric, Sewer and Water funds. The provisions of those debt agreements require the City to set aside assets in reserve accounts for debt service and repairs, replacement and improvements (RRI). Condition: The City has not accumulated sufficient rese1ves to satisfy the requirements, as follows: ? 92-08, 09 Sewer bond reserve; $77 500 required - $16,125 in reserves ? 91-11 Water Bond reserve; $65,000 required - $0 in reserves ? 91-11 Water RRI reserve; $106,600 required- $0 in reserves ? 2020 Series C sewer bond reserve; $2,900 required - $0 ? 2020 Series C RRI reserve $3,200 required - $0 ? 2020 Series D sewer bond reserve; $400 required - $0 ? 2020 Series D sewer bond reserve; $3,200 required - $0 Cause: Inadequate financial resources have been available to satisfy the requirements. Effect: The City is not in compliance with the reserve requirements imposed by the U.S. Department of Agriculture; Rural Development. Questioned Costs: No costs have been questioned as a result of this finding. Recommendation: We recommend that the City develop a long-term plan to replenish and fund the USDA Reserve Accounts to the reserve provisions established in the debt agreements. View of Responsible Officials: The previous City Manager made unauthorized transfers out of the USDA Reserve Accounts to pay for capital improvements. The City has coordinated with the USDA to provide an explanation and solution to replenish the reserves. The City made the first transfer of an approved five (5) year workout plan in April 2020 and will continue to make the transfers as agreed. The City has adopted a five (5) year utility rate study that projects a 9.9% increase in rates over the next 5 years. Year 4 of the rate increase go into effect on July 1, 2021. The City plans to restrict funds to begin the process of replenishing these reserves.