CITY OF MAYVILLE

Activities Allowed or Unallowed; Allowable Costs/Cost Principles Identification of federal programs: Water & Waste Disposal Systems for Rural Communities (ALN 10.760) Criteria: Per 7 CFR 1780, Section 1780.9, loan and grant funds may be expended on eligible project costs as approved by RUS. Condition: During testing, we noted a transaction charged to the program with unallowable costs. Questioned costs: N/A Effect: The City is not in compliance with allowable activities/costs requirements Context: Of a population of 36, 4 transactions were selected for testing. In this testing, we noted 1 transaction that contained unallowable costs. Cause: The City did not have adequate controls in place to ensure only allowable costs are charged to federal programs. Repeat finding: No Recommendation: We recommend the City implement policies and procedures to ensure only allowable costs are being charged to federal grants. Views of responsible officials of the auditee: When Specials were printed, they were printed twice for 2 projects - 2022-1 and 2022-2 – all costs went to 2022-2 where there were grant funds used rather than ½ to 2022-1 and 2022-2. Even if not the most cost effective, grant projects and non-grant projects should not have combined invoices.

Suspension, and Debarment Identification of federal programs: Water & Waste Disposal Systems for Rural Communities (ALN 10.760) Criteria: An entity who receives federal funds is required to have documented procurement procedures that reflect applicable state and local laws and regulations, provided that the procurements confirm to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. Condition: During testing, we noted the City does not have a procurement policy that follows federal requirements. Questioned costs: None Effect: The City is not in compliance with federal procurement requirements. Context: During testing, we noted the City does not have a procurement policy that follows federal requirements. Cause: Management oversight Repeat finding: No Recommendation: We recommend the City implement a procurement policy that follows federal requirements. Views of responsible officials of the auditee: A Federal Procurement manual will be created and put into place.

Reporting Identification of federal programs: Water & Waste Disposal Systems for Rural Communities (ALN 10.760) Criteria: The City is required to submit Forms RD 442-2 Statement of Budget, Income and Equity and Form RD 442-3 Balance Sheet during the year. Furthermore, a system of internal controls requires the review and approval of all reports before they are submitted. Condition: During testing, we noted supporting documentation did not agree with the reports submitted. We also noted the reports are not reviewed and approved prior to submission. Questioned costs: None Effect: The City is not in compliance with federal reporting requirements Context: Of a population of 2, 1 report was selected for testing. In this test, we noted 2 instances where the report did not agree with the supporting documentation. We also noted that there is no formal review and approval of the report before being submitted. Cause: The City did not have adequate controls in place to ensure accurate reporting. Repeat finding: No Recommendation: We recommend the City implement policies and procedures to ensure all reports are completed correctly and reviewed prior to submission. Views of responsible officials of the auditee: The City will keep all work papers used to prepare the reports as it is not possible to recreate them later after adjusting entries due to limitations in the software. The reports will be provided for Council approval prior to sending vs after as an info item.

Reporting Identification of federal programs: All federal programs Criteria: Annual audited financial statements must be submitted to the Federal Audit Clearinghouse within nine months of the City’s year end. Condition: The City’s December 31, 2024 audited financial statements were not filed with the Federal Audit Clearinghouse within nine months of the City’s year end. Questioned costs: None Effect: The City is not in compliance with federal reporting requirements Context: The City’s December 31, 2024 audited financial statements were not filed with the Federal Audit Clearinghouse within nine months of the City’s year end. Cause: The City’s annual audit was not completed by September 30, 2025. Repeat finding: No Recommendation: We recommend the City implement policies and procedures to ensure the annual audit is submitted to the Federal Audit Clearinghouse within the nine-month deadline. Views of responsible officials of the auditee: The City is working with their provider to move the schedule for the annual audit up to accommodate the need for the Single Audit. This will be the focus of the 2025 Audit.