CITY OF DAYTON

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Community Project Funding (CPF) Program Assistance Listing Number: 14.251 Federal Award Identification Number and Year: B-22-CP-MN-0492, 2025 Award Period: January 1, 2025 – December 31, 2025 Type of Finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: The non‑federal entity is required to have controls in place to ensure compliance with suspension and debarment requirements. Uniform Guidance (2 CFR §200.214) requires non‑federal entities to verify that contractors are not suspended or debarred from participating in federal programs. Verification may be accomplished by reviewing the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA), obtaining a certification from the contractor, or by including a clause or condition in the covered transaction. Condition: The City did not maintain documentation demonstrating that required suspension and debarment verifications were performed for contractors associated with the Community Project Funding program. Questioned costs: None. Context: During testing of compliance with suspension and debarment requirements for the Community Project Funding program, the auditors reviewed covered transactions subject to suspension and debarment requirements. Documentation evidencing verification through SAM.gov or other allowable methods was not retained for the transactions tested. Cause: The City does not have a formalized policy or documented procedures requiring suspension and debarment verification to be performed and retained for covered transactions associated with federal programs. Effect: Failure to perform and document required suspension and debarment procedures could result in the City entering into transactions with entities that are suspended or debarred, resulting in potential noncompliance with federal requirements. Repeat Finding: No. Recommendation: We recommend the City formalize suspension and debarment compliance procedures in a written policy and ensure verification is performed and documented for all covered transactions prior to entering into contracts funded by Community Project Funding. Views of responsible officials: There is no disagreement with the audit finding. Management acknowledges the need to formalize suspension and debarment procedures and will implement controls to ensure required verifications are performed and documented for applicable transactions.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Community Project Funding (CPF) Program Assistance Listing Number: 14.251 Federal Award Identification Number and Year: B-22-CP-MN-0492, 2025 Award Period: January 1, 2025 – December 31, 2025 Type of Finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: The Uniform Guidance (2 CFR §200.303) requires non‑federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance the entity is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the award. For the Community Project Funding program, reporting is a compliance requirement and includes submission of required performance and financial reports. Condition: The City did not maintain documentation demonstrating that required reports for the Community Project Funding program were reviewed by someone other than the preparer prior to submission, including the DRGR Performance Report and the DRGR Financial Report. Questioned costs: None. Context: Reporting is a compliance requirement for the Community Project Funding program and includes submission of multiple reports during the award period. The City’s internal control over compliance related to reporting consists of review of reports prior to submission. Instances were identified where evidence of such review was not documented. Cause: Due to limited staffing levels, the City Administrator/Finance Director is responsible for both preparing and reviewing required program reports. As a result, independent review and documentation of report approval is limited. Effect: Lack of documented review of required reports increases the risk that errors or noncompliance in program reporting may occur and not be identified prior to submission, which could result in noncompliance with federal reporting requirements. Repeat Finding: No. Recommendation: We recommend the City implement procedures to ensure appropriate internal controls over compliance related to reporting, including documentation of review and approval of all required reports by someone other than the preparer prior to submission. Views of responsible officials: There is no disagreement with the audit finding. City management acknowledges that limited staffing and experience constrain segregation of duties; however, the City will evaluate and implement procedures to improve documentation of review and approval of required reports for the Community Project Funding program.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Community Project Funding (CPF) Program Assistance Listing Number: 14.251 Federal Award Identification Number and Year: B-22-CP-MN-0492, 2025 Award Period: January 1, 2025 – December 31, 2025 Type of Finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: The grant agreement requires that, following the letter of invitation for the grant, neither the City nor contractors funded under the grant may undertake, commit, or expend grant funds or local funds for project activities until an acceptable environmental review process has been completed in accordance with applicable federal requirements. Condition: Project expenditures related to the Community Project Funding program were incurred prior to completion of the required environmental review process. Environmental review activities did not begin until after project-related expenditures had already occurred. Questioned costs: None. Context: The City received erroneous advice regarding the requirements for this environmental review from the federal grants officer, leading the City to believe the environmental review process was not required for their circumstances. Once revised guidance was provided to the city, the review was completed and costs were allowably spent on the project subsequent to the review. Cause: The environmental review was not completed prior to incurring project expenditures due to errors in guidance received regarding the timing and requirements of the environmental review process. Effect: Failure to complete the required environmental review prior to incurring project expenditures resulted in noncompliance with the terms and conditions of the federal award and applicable federal requirements. Repeat Finding: No. Recommendation: We recommend the City ensure environmental review requirements are completed and documented prior to incurring any project-related expenditures for the Community Project Funding program. The City should continue to maintain procedures designed to prevent project activities from beginning before environmental review requirements are satisfied. Views of responsible officials: There is no disagreement with the audit finding. City management noted that procedures have been implemented for this grant, including a memorandum of understanding that is annually reaffirmed by the City Council, to ensure environmental review requirements are completed prior to incurring project expenditures and to prevent similar occurrences in the future.