City of Forest City

Single Audit Process Criteria – Title 2, U.S. Code of Federal Regulations §200.501 states that an entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards, must have a single audit or program-specific audit conducted for that year in accordance with the provision in §200.501. Condition – The City did not provide an accurate listing of federal awards expended even though they were aware of the single audit requirement. Cause – The City’s management did not track expenditures of federal awards for the year ended June 30, 2025 to determine what federal audit requirements applied if any. Effect – The City’s internal control over compliance with federal audit requirements was inadequate. Recommendation – The City should establish a process to track the dollar amount of federal expenditures that were spent during the year to determine if an audit in accordance with uniform guidance is required. This should be done and communicated with the auditors before audit work begins. Response and Corrective Action Planned – The City will work on a formal process for tracking all federal grants. Conclusion – Response accepted.

The City will work on a formal process for tracking all federal grants so that the reported federal expenditures are accurate.

Special Tests and Provision Criteria – The basic requirement for use of airport revenue is that all revenues generated by a public airport must be expended for the capital or operating costs of the airport and the local airport system. The City should have a proper written policy in regards to how airport revenue is to be spent. Condition – The City did not establish a written policy for the use of airport revenue. However, the City has established a separate set of general ledger accounts specifically to segregate airport revenues and expenses. While no written policy exists, the City has maintained proper tracking to ensure revenue is spent according to the terms and conditions of the grant. Cause – The City’s management was not aware that they needed to have a written policy regarding airport revenue. Effect – The City is not in compliance with Federal regulations pertaining special tests and provisions as required by the Uniform Guidance. Recommendation – The City should establish a written policy for the use of airport revenue. Corrective Action – The City will establish a written policy for the use of airport revenue. Conclusion – Response accepted.

The City will establish a policy for the use of airport revenue.