Sacramento Metropolitan Air Quality Management District

Program: Targeted Airshed Grant Program Federal Financial Assistance Listing Number: 66.956 Federal Grantor: Environmental Protection Agency Award Year: 4/15/2021-4/30/2026; 5/1/2022-4/30/2027 Grant Award Number: TA98T10501; TA98T36001 Compliance Requirements: Procurement and Suspension and Debarment Type of Finding: Material Weakness in Internal Control over Compliance Criteria: 2 CFR section 200.303(a), Internal Controls, states that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 2 CFR Section 200.214 of the Uniform Guidance states that the District must comply with 2 CFR part 180, which implements Executive Orders 12549 and 12689. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. The 2024 Compliance Supplement states: Non-Federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. All non-procurement transactions entered into by a pass-through entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR section 180.215. When a non-Federal entity enters into a covered transaction with an entity at a lower tier, the non-Federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA) and available at https://www.sam.gov/SAM/, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). Condition: As a result of our testwork, we noted three (3) out of three (3) instances where there was no evidence that the District verified the entity was not suspended or debarred or otherwise excluded from participating in the transaction, prior to entering the contract. However, none of the payments in our sample were made to a suspended or debarred party. Cause: The District did not have policies and procedures in place to verify the entity was not suspended or debarred or otherwise excluded from participating in the transaction, prior to entering the contract. Effect: The District lacked documentation to support compliance with suspension and debarment requirements. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: Suspension and debarment was applicable to 3 subrecipients. We tested all 3 subrecipients during the year. Repeat Finding from Prior Years: No. Recommendation: We recommend that the District implement procedures to retain documentation supporting compliance with major federal program compliance requirements regarding suspension and debarment. Views of Responsible Officials: Management agrees. See separately issued Corrective Action Plan.

Program: Targeted Airshed Grant Program Federal Financial Assistance Listing Number: 66.956 Federal Grantor: Environmental Protection Agency Award Year: 4/15/2021-4/30/2026; 5/1/2022-4/30/2027 Grant Award Number: TA98T10501; TA98T36001 Compliance Requirements: Reporting Type of Finding: Material Weakness in Internal Control over Compliance and Material Instance of Non-Compliance Criteria: Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Condition: During the period July 1, 2023 through June 30, 2024 no reports for subawards were filed with the FSRS that were $30,000 or more in federal funds. Cause: Management was not aware of the filing requirement. Effect: No FFATA reports were filed during the period July 1, 2023 through June 30, 2024. Thus, the District did not comply with 2 CFR Part 170. Questioned Costs: None Context/Sampling: Sampling not applicable since no reports were submitted. For the period July 1, 2023 through June 30, 2024, subrecipient expenditures totaled $2,830,661. Repeat Finding from Prior Year: No Recommendation: We recommend the District implement policies and procedures to ensure the requirement FFATA reports are prepared and submitted to the Federal Funding Accountability and Transparency Act Subaward Reporting System in a timely manner. Views of Responsible Officials: Management agrees. See separately issued Corrective Action Plan.

FINDING 2019-005 Program: Air Pollution Control Program Support CFDA No.: 66.001 Federal Agency: U.S Environmental Protection Agency Award Year: 2019 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Cash Management Criteria: Title 2 CFR Section 200.302(b)(6-7) of the Uniform Guidance requires recipients of federal funds to prepare written procedures related to cash management and cost allowability, along with appropriate financial management systems and internal controls over federal awards to safeguard federal funds. Condition Found: Significant Deficiency, Instances of Non-Compliance ? As a result of our audit procedures over cash management and activities allowed or activities unallowed and allowable costs/cost principles, we noted the District has not established written procedures to implement the requirements to maintain written procedures and standards in accordance with Title 2 CFR 200.302(b)(6-7). Questioned Costs: We identified no questioned costs in our tests of compliance with this requirement. Effect: The District has not complied with the specific requirements for written procedures and standards as noted in 2 CFR 200.302(b)(6-7). Cause: The District did not ensure the required written procedures and standards were developed and implemented in accordance with 2 CFR 200.302(b)(6-7). Recommendation: We recommend that the District implement written policies and standards to comply with the requirements of 2 CFR 200.302(b)(6-7). Views of Responsible Officials and Planned Corrective Actions: Management?s Response: The District concurs with this finding. Views of Responsible Officials and Planned Corrective Action: The District will create written policies and standards related to cash management and allowability of costs in accordance with 2 CFR 200.302(b)(6-7). III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Name of Department Contact: Patty Kepner, District Controller Target Corrective Action Completion Date: On or before September 30, 2020 See separate corrective action plan.

FINDING 2019-006 Program: Air Pollution Control Program Support CFDA No.: 66.001 Federal Agency: U.S Environmental Protection Agency Award Year: 2019 Compliance Requirement: Equipment and Real Property Management Criteria: Title 2 CFR Section 200.313(d)(2) of the Uniform Guidance requires a physical inventory of federally acquired property must be taken and the results reconciled with the property records at least once every 2 years Condition Found: Significant Deficiency, Instance of Non-Compliance ? As a result of our testwork, we noted the District did not conduct, or have record of, a physical inventory of equipment conducted during the past 2 years and reconciled to the property records listing and general ledger. Questioned Costs: We identified no questioned costs in our tests of compliance with this requirement. Effect: By not performing the required physical inventory of federal assets, there is a risk that the District is not maintaining accurate and current records of federal purchased assets. Cause: The District did not maintain policies and procedures to ensure that a physical inventory is being performed in accordance with Title 2 CFR Section 200.313(d)(2) of the Uniform Guidance. Recommendation: We recommend that the District implement policies and procedures to ensure that equipment and real property management procedures are performed in accordance with Uniform Guidance. Views of Responsible Officials and Planned Corrective Actions: Management?s Response: The District agrees with this recommendation. III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Views of Responsible Officials and Planned Corrective Action: The District will formally document the policies and procedures to improve the process surrounding the fixed asset inventory. The District procedures will ensure that departments verify the status of assets on an annual basis and that a periodic physical inventory is conducted, properly documented and the results reconciled on a timely basis. Name of Department Contact: Patty Kepner, District Controller Target Corrective Action Completion Date: On or before September 30, 2020 See separate corrective action plan.