City of MontgomeryLocal Government

Finding 2025-009 – Reporting (Material Weakness and Noncompliance)(Repeat Finding) Identification of the Federal Program: Community Development Block Grants, ALN 14.218, Department of Housing and Urban Development (CDBG) and Coronavirus State and Local Fiscal Recovery Funds, ALN 21.027, Department of the Treasury (CRF). Criteria: 2 CFR 200.328-330 establish the requirements of nonfederal entities for financial and performance reporting that include timely and accurate reporting. 2 CFR 200.303 requires nonfederal entities to establish, document and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Typical control procedures for reporting include having a supervisor review the submitted report and ensuring the work is performed and documented in a way that confirms the accuracy and completeness of all data and information included. Condition: We selected five reports for the two grant programs to test for compliance and controls over reporting requirements. No documentation of review or approval of the reports was available. For CDBG, 2 quarterly cash reports and the FY24 Consolidated Annual Performance and Evaluation Report (CAPER) were tested, one cash report was late. Cause: The City did not retain documentation of a review and approval of federal reports submitted. Effect: The City did not have appropriate controls in place over documentation of reporting requirements. Questioned Costs: None reported. Recommendation: We recommend the City strengthen its policies and procedures over the grant reporting process to ensure controls are properly implemented and working effectively. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2025-010 – Procurement (Material Weakness and Noncompliance) Identification of the Federal Program: Coronavirus State and Local Fiscal Recovery Funds, ALN 21.027, Department of the Treasury (CRF); Highway Planning and Construction, ALN 20.205, Department of Transportation (HPC). Criteria: 2 CFR 200.317-327 establishes procurement standards for nonfederal entities. This includes different requirements based on the amount of purchases made from the vendor during the year. Specifically, the recipient or subrecipient must maintain and use documented procedures for procurement transactions under a federal award or subaward, including for acquisition of property or services. Per the City’s Fiscal Policy and Procedures Manual, the small purchase method has a lower threshold of $15,000. All contracts and purchases over $15,000 must be bid. 2 CFR Part 180 requires nonfederal entities to verify that an entity they are entering into a contract with is not suspended or debarred or otherwise excluded. Condition: We selected seven vendors for the two grant programs to test compliance and controls over procurement. Of those seven, it was noted that for five vendors the City did not document the appropriate procurement procedures took place and three were not verified as not being suspended or debarred. Cause: On HPC, the City contracted or accumulated costs for two vendors over the small purchase threshold and did not provide documentation of bid procedures. Also, documentation was not provided that the City ensured the vendor was not suspended or debarred prior to contracting with them. On CRF, the City contracted two vendors over the small purchase threshold and did not provide documentation of bid procedures. And finally, one vendor was disclosed as part of a cooperative purchase agreement but documentation to support the City’s participation in that agreement was not provided. In 4 instances, The City followed state bid law which allows exemptions of certain professional services from requiring a bid. The federal regulations only allow specific circumstances in which a vendor does not have to be competitively procured. These vendors did not meet that criteria. Effect: The City did not have appropriate documentation to support compliance with the procurement, suspension, and debarment requirements. Questioned Costs: HPC - $383,445; CRF - $1,538,000 Recommendation: We recommend the City reinforce its procurement policies for purchases with federal funding through regular training and clear communication to all relevant staff members. Additionally, implementing a periodic review process to ensure compliance with this policy can help prevent future occurrences. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2025-011 – Allowable Costs (Material Weakness and Noncompliance) Identification of the Federal Program: Highway Planning and Construction, ALN 20.205, Department of Transportation (HPC). Criteria: 2 CFR Part 200 Subpart E establishes cost principles to apply in determining costs under federal awards. Nonfederal entities are also required to establish controls over the disbursement process to ensure compliance with allowable cost requirements. The accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. Condition: We selected one month’s payroll which included the same five employees reimbursed each month by the state agency. For those five, the time charged to the grant did not agree to the hours that should have been charged based on the recalculation performed from the timesheets. In addition, one employee was paid at an old rate for the first two paychecks of the month after city employees received a 5% COLA effective 10/1/24. And lastly, one employee was not paid 1.5 hours of overtime according to the timesheet and paycheck detail. Also for those five, documentation and/or support for the leave calculation could not be provided. Cause: The City uses a spreadsheet provided by the state agency to calculate the number of hours worked plus a portion of leave to be reimbursed. The hours entered into the spreadsheet did not agree to the hours documented on the timesheets. In addition, the rationale for the amount of leave calculated could not be provided. Lastly, a pay rate was not updated and overtime was not paid during the normal payroll process and controls in place did not detect or prevent the mistake. Effect: The City did not retain proper documentation to support the amounts reimbursed by the grant. Payroll review and approval process did not detect two mistakes noted in the month tested. Questioned Costs: $415. Recommendation: We recommend the City strengthen the fiscal policies and procedures to ensure all pay is properly documented and reviewed for accuracy. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2024-008 – Reporting (Material Weakness) Identification of the Federal Program: Community Program to Improve Minority Health, ALN 93.137, Department of Health and Human Services (Minority Health); Community Development Block Grants, ALN 14.218, Department of Housing and Urban Development (CDBG); Coronavirus State and Local Fiscal Recovery Funds, ALN 21.027, Department of the Treasury (CRF). Criteria: 2 CFR 200.328-330 establish the requirements of nonfederal entities for financial and performance reporting. 2 CFR 200.303 requires nonfederal entities to establish, document and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Typical control procedures related to reporting are to verify the filed report is supported by supporting documentation and inspecting filed report and supporting documentation, noting supervisory review of reports performed to assure accuracy and completeness of data and information included in the report. Condition: We selected nine reports for the three grant programs tested to test for controls over reporting requirements. No documentation of review or approval of the reports was available. Cause: The City did not retain documentation of a review and approval of federal reports submitted. Effect: The City did not have appropriate controls in place over documentation of reporting requirements. Questioned Costs: None reported. Recommendation: We recommend the City strengthen its policies and procedures over the grant reporting process to ensure controls are properly implemented and working effectively. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2024-009 – Reporting (Noncompliance) Identification of the Federal Program: Community Program to Improve Minority Health, ALN 93.137, Department of Health and Human Services (Minority Health); Community Development Block Grants, ALN 14.218, Department of Housing and Urban Development (CDBG); Coronavirus State and Local Fiscal Recovery Funds, ALN 21.027, Department of the Treasury (CRF). Criteria: 2 CFR 200.328-330 establish the requirements of nonfederal entities for financial and performance reporting that include timely and accurate reporting. Reporting requirements are unique to each awarding agency and criteria is based on the guidelines and regulations set forth by the funding agency. Each program required quarterly reports to be submitted. Condition: We selected nine reports for the three grant programs tested to test for timely and accurate reporting requirements. The following exceptions were noted: • Minority Health: Two Federal Financial Report (FFR) and two Federal Performance Report (FPR) reports tested; the two FFR reports were not submitted by the due date and one FFR report did not agree or reconcile to the accounting records • CDBG: Two quarterly cash reports and the FY23 Consolidated Annual Performance and Evaluation Report (CAPER) tested; the two cash on hand reports did not have supporting documentation for the amounts reported or documentation that amounts were reconciled to the City's accounting system. One cash report was also filed late. • CRF: Two project and expenditure reports tested; one was not submitted and the other was submitted late. Expenditure information for one subrecipient was underreported by $186,364. Cause: Minority Health FFR reports were not submitted until February 2025, well past the due date. In addition, one FFR was not properly supported. CDBG project profit and loss statements did not tie to the numbers on the reports, the reports were submitted based on the IDIS reports from the HUD site and were not reconciled to the general ledger. CRF subaward amounts reported did not reconcile back to the general ledger. Various reports were filed after the due date. Effect: The City did not submit timely and accurate reports in compliance with federal reporting requirements. Questioned Costs: None reported. Recommendation: The City should ensure responsible personnel have a clear understanding of the reporting guidance. The City should implement policies and procedures to monitor due dates and review all reports prepared by the grants department or its designee to ensure accurate and timely reporting. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2024-010 – Procurement (Material Weakness and Noncompliance) Identification of the Federal Program: Community Program to Improve Minority Health, ALN 93.137, Department of Health and Human Services (Minority Health); Coronavirus State and Local Fiscal Recovery Funds, ALN 21.027, Department of the Treasury (CRF). Criteria: 2 CFR 200.317-327 establishes procurement standards for nonfederal entities. This includes different requirements based on the amount of purchases made from the vendor during the year. Specifically, the recipient or subrecipient must maintain and use documented procedures for procurement transactions under a federal award or subaward, including for acquisition of property or services. Per the City’s Fiscal Policy and Procedures Manual, the simplified acquisition method has a lower threshold of $15,000. All contracts and purchases over $15,000 must be bid. Condition: We selected eight vendors for procurement testing. Of those eight, it was noted that for five vendors the City did not document the appropriate procurement procedures took place. Cause: Minority Health - the City contracted or accumulated costs for four vendors over the simplified acquisition threshold and did not provide documentation of bid procedures. CRF - the City contracted one vendor over the simplified acquisition threshold and did not provide documentation of bid procedures. Effect: The City did not have appropriate documentation to support compliance with the procurement policy. Questioned Costs: Minority Health - $433,369; CRF - $22,813 Recommendation: We recommend the City reinforce its procurement policies through regular training and clear communication to all relevant staff members. Additionally, implementing a periodic review process to ensure compliance with this policy can help prevent future occurrences. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2024-011 – Allowable Costs (Material Weakness and Noncompliance) Identification of the Federal Program: Community Program to Improve Minority Health, ALN 93.137, Department of Health and Human Services (Minority Health); HOME Investment Partnerships Program, ALN 14.239, Department of Housing and Urban Development (HOME). Criteria: 2 CFR Part 200 Subpart E establishes cost principles to apply in determining costs under federal awards. Nonfederal entities are also required to establish controls over the disbursement process to ensure compliance with allowable cost requirements. According to the City's approved fiscal policies and procedures, all purchase orders, blanket purchase agreements and special purchase authorizations require review and approval by the Finance Director or Deputy Finance Director. Condition: Minority Health - we selected a sample of 40 disbursements charged to the grant. Of the 40, 21 were not properly approved in accordance with the City’s fiscal policies and procedures. HOME - we selected a sample of seven non-payroll disbursements charged to the grant. Of those seven, two were not properly approved in accordance with the City’s fiscal policies and procedures. Cause: Disbursements were not approved by the Finance Director or Deputy Finance Director as required by the City’s fiscal policies and procedures. The workflow rules set up in the system are not consistent with the required approval workflow. Effect: The City did not obtain proper approvals according to the policy of established controls. Questioned Costs: None reported. Recommendation: We recommend the City should update the fiscal policies and procedures to incorporate and clearly define the control system of approvals. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2024-012 – Subrecipient Monitoring (Significant Deficiency and Noncompliance) Identification of the Federal Program: Community Program to Improve Minority Health, ALN 93.137, Department of Health and Human Services (Minority Health); Community Development Block Grants, ALN 14.218, Department of Housing and Urban Development (CDBG). Criteria: 2 CFR 200.332 establishes subrecipient monitoring requirements of all pass through entities. These requirements include that every subaward is clearly identified to the subrecipient as a subaward and includes the following information: assistance listings title and number, the dollar amount made available under each federal award, and the assistance listings number at the time of disbursement, etc. These requirements also include evaluating each subrecipient's fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring. Evaluations of a subrecipient's risk should consider the following: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of any federal agency monitoring. In addition, subrecipient activities must be monitored to ensure compliance with federal statutes, regulations, and terms and conditions of the subaward. Monitoring must include the review of financial and performance reports, ensure that corrective action is taken by the subrecipient on any significant developments impacting the subaward, and resolving findings specifically related to the subaward. The City has a grants manual in place that includes requirements of subrecipient and contract oversight. The policy includes processes to perform pre-award evaluations, post-award monitoring and closeout reporting to ensure compliance. Condition: Minority Health – two subawards were tested for monitoring requirements. One of the subaward agreements did not include a required piece of information in the award document. CDBG - two subawards were tested for monitoring requirements. Pre-risk assessment procedures were not documented as performed prior to the subaward date on either subrecipient. In addition, one subrecipient had deficiencies noted in their annual audit. The City did not perform required monitoring duties to ensure the subrecipient took timely and appropriate action on the deficiencies reported. Cause: Minority Health - the City did not communicate the federal assistance listing number in the subaward document. CDBG - did not document a pre-award risk assessment or follow up of corrective action for reported audit findings for their subrecipients. Effect: The City did not have proper subrecipient monitoring documentation. Questioned Costs: None reported. Recommendation: We recommend the City should strengthen procedures to ensure it complies with federal subrecipient monitoring requirements and its policies and procedures to perform all subrecipient oversight responsibilities to ensure compliance with federal subrecipient monitoring requirements. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2024-013 – Equipment Management (Noncompliance) Identification of the Federal Program: All programs Criteria: 2 CFR 200.313 requires a physical inventory of property must be taken and the results reconciled with the property records at least once every two years. Condition/Cause/Effect: The City has not performed a physical inventory since September 2022. Questioned Costs: None reported. Recommendation: We recommend the City should strengthen policies and procedures to ensure a physical inventory of all city-wide departments is performed every two years. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Finding 2024-014 – Cash Management (Significant Deficiency and Noncompliance) Identification of the Federal Program: Community Program to Improve Minority Health, ALN 93.137, Department of Health and Human Services (Minority Health). Criteria: 2 CFR 200.305 establishes methods of receiving payment from federal agencies. 2 CFR 200.303 established that recipients must establish, document and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to the City's approved fiscal policies and procedures, drawdown reports/reimbursement requests must be approved by the grants department and accounting manager or CFO. Condition: The City drew the remaining balance on the Minority Health award during the year. Documentation of review and approval for the draw was not available. Cause: The City is experiencing turnovers and staffing challenges which have led to some gaps in following procedures. Effect: The City did not document proper controls in place over cash management. Questioned Costs: None reported. Recommendation: We recommend the City should strengthen procedures to ensure it complies with its policies and procedures to ensure appropriate level of management is reviewing cash drawdown requests. Views of Responsible Officials: The City agrees with the finding. See Management’s View and Corrective Action Plan included at the end of the report.

Identification of the Federal Program - Coronavirus State and Local Fiscal Recovery Funds - Assistance Listing Number 21.027 Criteria - The criteria is based on the guidelines and regulations set forth by the funding agency, the Department of the Treasury, in the Compliance and Reporting Guidance: State and Local Fiscal Recovery Funds document. According to these requirements, recipients must include the total of both the current period expenditure and the cumulative expenditure as of the end of each quarter on each quarterly Project and Expenditure report. These amounts should agree to amounts recorded in the City’s trial balance and amounts reported on the SEFA. The recipients must also include detailed obligation and expenditure information for contracts and grants awarded. 2 CFR 200.303, Internal Controls, requires that recipients establish and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Condition - There was a lack of monitoring and appropriate review by the City of certain reports prepared by the grant department. Effect - The following reporting errors were identified: • For the reporting period ended September 30, 2023, current expenditures of $2,138,225 were excluded from the report. • For the reporting period ended September 30, 2023, cumulative expenditures were understated by $4,286,504. • For the reporting period ended September 30, 2023, there were subrecipients listed on the report that were not true subrecipients. The entities incorrectly listed as subrecipients had subawards totaling $7,098,989 incorrectly reported on the report. • There were four reporting periods during the fiscal year under audit. The reports for two out of the four reporting periods were not submitted timely. The report for the period October to December 2022 was due on January 31, 2023 but was not submitted until February 28, 2023. The report for the period April to June 2023 was due on July 31, 2023, but it was not submitted until August 3, 2023. • The City reported that they calculated their Actual General Revenue using fiscal year amounts while the City actually used calendar year amounts to calculate their Actual General Revenue. • Six out of the nine projects reported have expected capital expenditures. Out of those six, four reported expected or actual capital expenditures of over $1,000,000 and required written justification of capital expenditures. Two of those four projects did not have written justification of capital expenditures. Cause - The reporting errors attributed to a lack of understanding/interpretation of the reporting guidelines by the responsible personnel. Recommendation - The City should ensure responsible personnel has a clear understanding of the reporting guidance. The City should implement policies and procedures to monitor and review all reports prepared and submitted by the grants department or its designee. Views of Responsible Officials - The City agrees with the finding. The City will implement additional review procedures over grant reporting requirements, including more adequate review of reports prepared by third-party grant administrators.

Identification of the Federal Program - Coronavirus State and Local Fiscal Recovery Funds - Assistance Listing Number 21.027 Criteria - 2 CFR 200.303, Internal Controls, requires that recipients establish and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Per the City’s Ethics and Fiscal Policy and Procedures Manual, all contracts that create a commitment between the City and another party are to be routed from the originating department through the appropriate departments for signature approval prior to execution of the agreement by the Mayor. The signatures should be listed on the pre-numbered routing sheet obtained from the Finance Department. The signatures should include the appropriate individuals: department head, Director of Finance, legal department, Chief of Staff, Mayor, and City Clerk. This policy is designed to prevent unauthorized commitments and ensure compliance with procurement regulations. Condition - The City entered into a contract with a consulting firm which obligated the City to pay a monthly fee of $20,668 for a period of two years. Instead of following the typical contract approval, the contract was only signed by one individual. Effect - The failure to obtain the other approvals undermines the internal controls established by the City’s procurement policy. This increases the risk of unauthorized or improper contractual commitments and potentially exposes the city to legal and financial liabilities. Additionally, it diminishes the accountability and transparency of the procurement process. Cause - The deviation from the established procurement procedure appears to be due to a lack of awareness and oversight. The Mayor assumed sole responsibility for contract execution, without seeking the necessary additional approval. There may also be insufficient training or reminders regarding the contract routing requirement. Recommendation - The City should reinforce its procurement policies through regular training and clear communication to all relevant staff members. Specifically, the importance of using a contract routing sheet and obtaining all required signatures on contracts should be emphasized. Additionally, implementing a periodic review process to ensure compliance with this policy can help prevent future occurrences. Steps should also be taken to review past contracts for similar issues and take corrective action where necessary. Views of Responsible Officials - The City agrees with the finding. The City will implement additional review procedures over contract approvals.

Identification of the Federal Program - Community Programs to Improve Minority Health Grant Program - Assistance Listing Number 93.137Criteria - Financial reports are required to be submitted within 30 days after the end of each quarter in which the grant is open. 2 CFR 200.303, Internal Controls, requires that recipients establish and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Condition - There was a lack of monitoring and appropriate review by the City of certain reports. Effect - The financial reports for quarters one and two were not submitted within 30 days after quarters end. Cause - The City’s policies and procedures over federal award reporting were not adequate. Recommendation - The City should strengthen its policies and procedures related to federal award reporting to comply with reporting requirements. Views of Responsible Officials - The City agrees with the finding. The City will implement additional oversight over the timely preparation and submittal of required grant reporting documents.

Identification of the Federal Program - Community Programs to Improve Minority Health Grant Program- Assistance Listing Number 93.137 Criteria - Per 2 CFR 200.332, Requirements for Pass-Through Entities, the City is required to monitor the subrecipients activities to ensure that the grant funds are used for authorized purposes by reviewing financial and performance reports that were required by the City. The City was also required by 2 CFR 200.332 to verify that each of their subrecipients had a single audit performed if their federal expenditures exceeded $750,000. In the Notice of Award, the Department of Health and Human Services required the City to create and provide to the Department a subrecipient monitoring plan as well as use that plan to monitor each of the City’s subrecipients. In the subrecipient monitoring plan, the City was required to perform the following steps: •Regularly communicate at least once a month with subrecipients to ensure that the project is beingcarried out as proposed and according to schedule. •Review and approve periodic technical/performance reports. •Review and approve subrecipient invoices. •Monitor general rate of expenditures and implementation of activities. •Review each subrecipient monthly through the subrecipients preparation of the City’s SubrecipientDesk Review form. •Perform an annual review for each subrecipient through the preparation of the Annual SubrecipientField Review form using the monthly desk review forms. 2 CFR 200.303, Internal Controls, requires that recipients establish and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Condition - There was a lack of subrecipient monitoring and appropriate review by the City. The City did not effectively monitor subrecipient activities to ensure the proper utilization of grant funds. There was a lack of documented evidence demonstrating the monitoring of subrecipients. The City also failed to verify whether each of their subrecipients met the threshold of $750,000 in federal expenditures and subsequently underwent a single audit. There is no documented evidence indicating that the City systematically reviewed the subrecipient expenditures to ensure compliance with this requirement. Effect - Without proper documentation and monitoring, there is an increased likelihood of financial mismanagement, misuse of funds, and noncompliance with grant terms and regulations. Additionally, the absence of adequate records impedes transparency and accountability in the use of federal funds. This deficiency also may result in undetected instances of subrecipients failing to undergo required single audits. Cause - The absence of robust monitoring procedures may stem from insufficient staff training on federal grant requirements, a lack of awareness regarding the importance of maintaining accurate records and conducting thorough monitoring of subrecipient activities, a lack of established processes for reviewing financial and performance reports, or inadequate internal controls. Additionally, there may be a lack of clear communication and accountability regarding subrecipient monitoring roles and responsibilities. Recommendation - The City should establish and enforce comprehensive subrecipient monitoring protocols. This includes developing standardized monitoring procedures, providing staff training on monitoring requirements, allocating sufficient resources for monitoring activities, and implementing mechanisms for regular review and documentation of monitoring efforts. By strengthening subrecipient monitoring practices, the City can mitigate risks, ensure compliance with grant requirements, and safeguard the effective utilization of grant funds. Views of Responsible Officials - The City agrees with the finding. The City will implement additional subrecipient monitoring procedures.

Identification of the Federal Program - Staffing for Adequate Fire and Emergency Response (SAFER) - Assistance Listing Number 97.083 Criteria - Financial reports are required to be submitted each July 30 (for period January 1 - June 30) and January 31 (for period July 1 - December 31). The last report is required to be submitted no later than 90 days after the end of the performance period. 2 CFR 200.303, Internal Controls, requires that recipients establish and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Condition - There was a lack of monitoring and appropriate review by the City of certain reports. Effect - The financial report for the period July 1, 2022 - December 31, 2022 was not submitted timely. Cause - The City’s policies and procedures over federal award reporting were not adequate. Recommendation - The City should strengthen its policies and procedures related to federal award reporting to comply with reporting requirements. Views of Responsible Officials - The City agrees with the finding. The City will implement additional oversight over the timely preparation and submittal of required grant reporting documents.

Identification of the Federal Program - Coronavirus State and Local Fiscal Recovery Funds - Assistance Listing Number 21.027 Criteria - The criteria is based on the guidelines and regulations set forth by the funding agency, the Department of the Treasury, in the Compliance and Reporting Guidance: State and Local Fiscal Recovery Funds document. According to these requirements, recipients must include the total of both the current period expenditure and the cumulative expenditure as of the end of each quarter on each quarterly Project and Expenditure report. These amounts should agree to amounts recorded in the City?s trial balance and amounts reported on the SEFA. The recipients must also include detailed obligation and expenditure information for contracts and grants awarded. The recipient should also report on any subawards agreed upon with obligations or payments made to subrecipients. 2 CFR 200.303, Internal Controls, requires that recipients establish and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Condition - There was a lack of monitoring and appropriate review by the City of certain reports prepared by the grant department. Effect - For the reporting period ended June 30, 2022, current expenditures of $1,213,447 were excluded from the report and Cumulative Expenditures was understated by $1,328,786. Also, subrecipients were listed on the June 30, 2022 report that were not true subrecipients. The entities incorrectly listed as subrecipients had subawards totaling $1,541,016 incorrectly reported on the report. Cause - The incorrect reporting is attributed to a lack of understanding/misinterpretation of the reporting guidelines by the responsible personnel. Recommendation - The City should ensure responsible personnel has a clear understanding of the reporting guidance including what constitutes a subrecipient. The City should implement policies and procedures to monitor and review all reports prepared and submitted by the grants department. Views of Responsible Officials - The City agrees with the finding. The City will implement additional review procedures over grant reporting requirements, including more adequate review of reports prepared by third-party grant administrators.

Information on the federal program: U.S. Department of Treasury CFDA No. 21.019 COVID 19 - Coronavirus Relief Fund, U.S. Department of Homeland Security CFDA No. 97.036 Disaster Grants - Public Assistance, U.S. Department of Homeland Security CFDA No. 97.036 COVID 19 - Disaster Grants - Public Assistance, U.S. Department of Transportation, Federal Transit Cluster, U.S. Department of Transportation, COVID 19 - Federal Transit Cluster Criteria: 2 CFR 200.302 establishes the requirements of a financial management system adequate to ensure compliance with federal regulations. This system must include written procedures to implement requirements for payment methods and determine the allowability of costs in accordance with subpart E. Condition: The City has written fiscal policies but they do not meet the financial management system requirements established in the regulations. Cause: The City has processes and procedures in place to administer grant funds but written policies do not contain compliance requirements. Effect: The City is not in compliance with financial management system requirements. Recommendation: The City should develop a grants manual or additional written policies to incorporate all the requirements of 2 CFR 200 and ensure compliance. Views of Responsible Officials: See Management?s response and Corrective Action Plan included at the end of the report.

Information on the federal program: U.S. Department of Transportation, Federal Transit Cluster, U.S. Department of Transportation, COVID 19 - Federal Transit Cluster Criteria: 2 CFR 200.318 through 200.326 establish procurement standards for non-federal entities. For purchases over the $3,500 micro-purchase threshold but below $150,000, the small purchase procedures must be used. The small purchase procedures require price or rate quotations be obtained from an adequate number of qualified sources or noncompetitive procurement must be documented. Condition: We tested 40 disbursements for Federal Transit Administration and 12 of those were over the micro-purchase threshold. In one instance, proper procurement documentation was not provided.Cause: Price quote documentation or sole source justification was not provided for the one instance noted above. Effect: The City is not in compliance with procurement standards. Views of Responsible Officials: See Management?s response and Corrective Action Plan included at the end of the report.

Finding 2019-002 - Reporting (Noncompliance) Identification of the federal program - U.S. Department of Homeland Security CFDA No. 97.083 Staffing for Adequate Fire and Emergency Response. Criteria - 2 CFR 200.328 requires recipients to submit performance reports, the frequency determined by the terms and conditions of the Federal award and supported by the underlying records. Condition - The City is required to file quarterly performance reports. Three quarterly reports filed by the City varied from the underlying personnel records for filled SAFER-funded positions, total operational personnel, and NFPA-certified personnel. Cause and effect - The City did not report accurate information on the Hiring Performance Reports due to errors in compiling information from personnel records. Recommendation - The City should strengthen its policies and procedures related to Federal award reporting to comply with reporting requirements. Views of responsible officials - The City agrees with the finding. The City will strengthen its policies and procedures related to Federal award reporting to comply with reporting requirements.

Finding 2019-003 - Reporting (Significant Deficiency) Identification of the federal program - U.S. Department of Homeland Security CFDA No. 97.083 Staffing for Adequate Fire and Emergency Response Criteria - 2 CFR 200.328 requires recipients to submit performance reports, the frequency determined by the terms and conditions of the Federal award and supported by the underlying records. Condition - The City does not have a process in place for independent review of financial and performance reports for this specific federal program. Cause and effect - The City did not report accurate information on the Hiring Performance Reports due to a lack of appropriate independent review. Recommendation - The City should implement a process over performance reporting in which there is an independent review of reports and underlying information. Views of responsible officials - The City agrees with the finding. The City will implement a process over performance reporting in which there is an independent review of reports and underlying information.

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