City of Santa Fe

Federal Award Title and ALN: Airport Improvement Program, 20.106 Federal Awarding Agency: Department of Transportation, Federal Aviation Administration Federal Award ID Number: SAF-SWG-3-35-0037-054-2020, SAF-SWG-3-35-0055-054-2020, SAF-SWG-3-35-0037-057-2020, SAF-SWG-3-35-0037-060-2020, SAF-SWG-3-35-0037-062-2020, SAF-SWG-3-35-0037-063-2020, SAF-SWG-3-35-0037-065-2020 Federal Award Year: 2021, 2022, 2024 Condition: The City’s approved annual inventory was not complete. There was no information to identify the funding source of the equipment and/or property. Management’s Progress on Repeat Findings: The City did not make progress on this finding during FY25. Criteria: Per 2 CFR 200.303(a), 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. These internal controls should be in compliance with 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). Per 2 CFR 200.313(d)(1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Cause: Turnover in related positions resulted in delays in making revisions to the listing to incorporate information on Federal participation in the purchases. Questioned Cost: None. Effect: The City could dispose of federally funded equipment without following federal guidelines. Auditor recommendation: The auditor recommends the City enhance the design of its control activities and create a tool to assist in tracking and maintaining equipment purchased with federal funds. Additionally, the employees responsible for the inventory should be trained to ensure understanding of the Uniform Guidance requirements relevant to equipment and real property management. Periodic review should also be designed to evaluate compliance with relevant requirements. Views of Responsible Officials and Planned Corrective Action: The City agrees with this finding. In FY25, The City contracted with a vendor to assist the Airport with federal compliance and provide training for Airport staff on relevant Uniform Guidance requirements. The vendor’s scope of work included helping with developing and documenting policies and standard operating procedures related to equipment management. Additionally, in late FY25, the Airport Department added a Grant Accountant position which is responsible for reconciling grant expenditures monthly. The Grant Accountant is also tasked to work with the Airport Heavy Equipment Mechanic to ensure that the inventory listing includes the funding source used for the purchase (i.e. federal or non-federal). In CY26 the Finance Director, the Accounting Officer, and the Grants team will work with the Airport team to improve internal controls over equipment purchased with federal funds. Based on the policies developed for the Airport, additional tools will be developed to facilitate tracking and maintaining equipment purchased with federal funds. These tools will be developed to ensure that an accurate physical inventory contains the information required by the Uniform Guidance is conducted at year-end. Responsible Official: Finance Director, Airport Manager, Airport Heavy Equipment Mechanic, Accounting Officer, Grants Manager. Timeline and Estimated Completion Date: June 30, 2026

Equipment and Real Property Management (Material Weakness over Internal Controls over Compliance) (Repeated/Modified) The City agrees with this finding. In FY25, The City contracted with a vendor to assist the Airport with federal compliance and provide training for Airport staff on relevant Uniform Guidance requirements. The vendor’s scope of work included helping with developing and documenting policies and standard operating procedures related to equipment management. Additionally, in late FY25, the Airport Department added a Grant Accountant position which is responsible for reconciling grant expenditures monthly. The Grant Accountant is also tasked to work with the Airport Heavy Equipment Mechanic to ensure that the inventory listing includes the funding source used for the purchase (i.e. federal or non-federal). In CY26 the Finance Director, the Accounting Officer, and the Grants team will work with the Airport team to improve internal controls over equipment purchased with federal funds. Based on the policies developed for the Airport, additional tools will be developed to facilitate tracking and maintaining equipment purchased with federal funds. These tools will be developed to ensure that an accurate physical inventory contains the information required by the Uniform Guidance is conducted at year-end. Due Date of Completion: June 30, 2026 Responsible Official: Finance Director, Emily K. Oster; Airport Manager, Jimmy Gunn; Airport Heavy Equipment Mechanic (various staff members); Accounting Officer, Matthew Bonifer; Grants Manager, Erika Lujan.

2023-006

2024-005 (2023-006) – Equipment and Real Property Management (Material Weakness over Internal Controls over Compliance) (Repeated/Modified) Federal Program Information Federal Award Title and ALN: Airport Improvement Program, 20.106 Federal Awarding Agency: Department of Transportation, Federal Aviation Administration Federal Award ID Number: SAF-SWG-3-35-0037-051-2020 Federal Award Year: 2024 Condition: The City’s approved annual inventory was not complete. There was no information to identify the funding source of the equipment and/or property. Management’s Progress on Repeat Findings: Some progress made from prior year. Criteria: Per 2 CFR 200.303(a), 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. These internal controls should be in compliance with 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). Per 2 CFR 200.313(d)(1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Cause: Turnover in related positions resulted in delays in making revisions to the listing to incorporate information on Federal participation in the purchases. Questioned Cost: None. Effect: The City could dispose of federally funded equipment without following federal guidelines.

Auditor recommendation: The auditor recommends the City enhance the design of its control activities and create a tool to assist in tracking and maintaining equipment purchased with federal funds. Additionally, the employees responsible for the inventory should be trained to ensure understanding of the Uniform Guidance requirements relevant to equipment and real property management. Periodic review should also be designed to evaluate compliance with relevant requirements. Views of Responsible Officials and Planned Correc􀀁ve Ac􀀁on: The City agrees with this finding. During FY24 the Airport Manager hired a Heavy Equipment Mechanic. This posi􀀁on is responsible for tracking, maintaining, and repairing Airport equipment. Logbooks are now being kept for all equipment. In CY25 the Finance Director, the Accoun􀀁ng Officer, and the Grants team will work with the Airport team to improve internal controls over equipment purchased with federal funds. Policies and procedures will be developed to ensure that an accurate physical inventory that contains the informa􀀁on required by the Uniform Guidance is conducted at year-end. The City is in the process of contrac􀀁ng with a vendor to assist the Airport with federal compliance and provide training for Airport staff on relevant Uniform Guidance requirements. The vendor’s scope of work will include helping with developing and documen􀀁ng policies and standard opera􀀁ng procedures related to equipment management. Tools will be developed to facilitate tracking and maintaining equipment purchased with federal funds. Addi􀀁onally, the Airport Department plans to create a Grant Accountant posi􀀁on which will be responsible for reconciling grant expenditures monthly. The Grant Accountant will also work with the Airport Heavy Equipment Mechanic to ensure that the inventory lis􀀁ng includes the funding source used for the purchase (i.e. federal or non-federal). In CY25 the City plans to provide Uniform Guidance to staff which will include capital assets and equipment informa􀀁on, and the specific requirements for the year-end inventory. Responsible Official: Emily Oster, Finance Director, James Harris, Airport Manager, Airport Heavy Equipment Mechanic, Matthew Bonifer, Accounting Officer, Erika Lujan, Grants Manager Timeline and Es􀀁mated Comple􀀁on Date: June 30, 2025

2023-006

2021-008 (previously 2020-015) ? Equipment and Real Property Management (Material Weakness) (repeated/modified) Federal Program Information Funding Agency: U.S. Department of Transportation ? Federal Aviation Administration Federal Award Agreement Number: SAF-SWG-3-35-0037-043-2016, SAF-SWG-3-35-007-49- 2019, SAF-SWG-3-35-0037-056-2021, SAF-SWG-3-35- 0037-052-2020, SAF-SWG-3-35-0037-053-2020 Award Year: 2021 Title: Airport Improvement Program Assistance Listing Number: 20.106 Pass-through Agency: Not Applicable, Direct Program Pass-through Identification Number: Not Applicable, Direct Program Condition: The City was not able to provide an equipment listing tracking all items purchased with federal funding nor did the City conduct a physical inventory. Management?s Progress on Repeat Findings: ? No progress in FY2021. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, non-federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non- Federal entities is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). Per 2 CFR 200.313(d)(1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Per 2 CFR 200.313(d)(2), a physical inventory of program property must be taken and the results reconciled with the property records at least once every 2 years. Questioned costs: Not applicable Effect: The City could dispose of or lose federally funded equipment without following federal guidelines. Cause: The City is not following policy and procedures to ensure that equipment purchased with federal funds is maintained and tracked and the City performing a physical inventory at a minimum of every two years. Auditor recommendation: We recommend the City enhance the design of its control activities and policies and procedures should be developed to ensure physical inventories are taken at least once every two years and that they create a tool to assist in tracking and maintaining equipment purchased with federal funds. Views of Responsible Officials and Planned Corrective Action: The City agrees with this finding. In November 2022 the City hired a new Airport Manager with substantial experience managing municipal airports and federal funding for airports. During FY23 the long-time Administrative Manager at the Airport separated without notice from the City and other staff were unable to access needed files which included the equipment inventory. During FY24 the Finance Director, the Controller will work with the Airport Manager to improve the internal controls over equipment purchased with federal funds. Policies and procedures will be developed to ensure that a physical inventory is conducted at least once every two years. Tools will be developed to facilitate tracking and maintaining equipment purchased with federal funds. In FY24 the Grants Manager will provide Uniform Guidance training to City staff which will include capital assets and equipment information. Responsible Official: Finance Director, Airport Manager, Controller (in-process of hiring), Grants Manager Timeline and Estimated Completion Date: June 30, 2024

2021-008 (previously 2020-015) ? Equipment and Real Property Management (Material Weakness) (repeated/modified) Recommendation: We recommend the City enhance the design of its control activities and policies and procedures should be developed to ensure physical inventories are taken at least once every two years and that they create a tool to assist in tracking and maintaining equipment purchased with federal funds. Action Taken: The City agrees with this finding. In November 2022 the City hired a new Airport Manager with substantial experience managing municipal airports and federal funding for airports. During FY23 the long-time Administrative Manager at the Airport separated without notice from the City and other staff were unable to access needed files which included the equipment inventory. During FY24 the Finance Director, the Controller will work with the Airport Manager to improve the internal controls over equipment purchased with federal funds. Policies and procedures will be developed to ensure that a physical inventory is conducted at least once every two years. Tools will be developed to facilitate tracking and maintaining equipment purchased with federal funds. In FY24 the Grants Manager will provide Uniform Guidance training to City staff which will include capital assets and equipment information. Anticipated Completion Date: June 30, 2024 Responsible Official: Emily Oster - Finance Director, James Harris - Airport Manager, Controller (in-process of hiring), Cheryl James - Grants Manager

2020-015

2021-010 ? Special Test and Provision, Wage Rate Requirement (Significant Deficiency) Federal Program Information Funding Agency: U.S. Department of Transportation ? Federal Aviation Administration Federal Award Agreement Number: SAF-SWG-3-35-0037-043-2016, SAF-SWG-3-35-007-49- 2019, SAF-SWG-3-35-0037-056-2021, SAF-SWG-3-35- 0037-052-2020, SAF-SWG-3-35-0037-053-2020 Award Year: 2021 Title: Airport Improvement Program Assistance Listing Number: 20.106 Pass-through Agency: Not Applicable, Direct Program Pass-through Identification Number: Not Applicable, Direct Program Condition: The City contract to contractor Albuquerque Asphalt, Inc. did not provide the required clauses by the Wage Rate Requirement, previously known as the Davis-Bacon Act. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, non-federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non- Federal entities is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). Per Title 2 US Code of Federal Regulations Appendix II to Part 200, all contracts made by the non-Federal entities under the federal award must contain provisions covering the following, (D) Davis-Bacon Act, as amended (40 U.S.C. 3141?3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141?3144, and 3146?3148) as supplemented by Department of Labor regulations (29 CFR Part 5, ?Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction?). Questioned costs: Not applicable Effect: The City could enter into a contract agreement with contractors who are not familiar with the Davis- Bacon act and not follow requirements to pay laborers a prevailing wage weekly. This could lead to disallowed costs charged to the grant and/or repayment to the Grantor agency. Cause: The City did not have sufficient controls in place to ensure the required clauses related to the Wage Rate requirement were listed in the contractor?s contract.Auditor recommendation: We recommend the City strengthen the controls in place to provide assurance that contract agreements entered into with subcontractors contain the required clauses set by the Davis- Bacon act. Views of Responsible Officials and Planned Corrective Action: The City agrees with this finding. In September of 2022, the City hired a highly qualified Grants Manager who has been continuously working with City Departments that receive grant funding to raise awareness of requirements such as the need to include specific contract clauses in agreements funded with federal dollars. In February 2023, the City hired a certified Chief Procurement Officer (CPO) with over ten years of experience in the State General Services Department?s State Purchasing Division. The CPO is working to increase awareness of the City?s Procurement policies and procedures through trainings for City departments and the development of checklists and guides to ensure compliance. During FY24 the Finance Director, the Grant Manager, and the Purchasing Officer will work with the Assistant City Attorney responsible for contract review to improve the internal controls over contracts funded with federal funds. Policies and procedures will be developed to ensure that all contract agreements entered into with federal funds contain the required clauses set by the Davis-Bacon act. Responsible Official: Finance Director, Grant Manager, Purchasing Officer, Assistant City Attorney Timeline and Estimated Completion Date: December 31, 2023

2021-010 ? Special Test and Provision, Wage Rate Requirement (Significant Deficiency) Recommendation: We recommend the City strengthen the controls in place to provide assurance that contract agreements entered into with subcontractors contain the required clauses set by the Davis- Bacon act. Action Taken: The City agrees with this finding. In September of 2022, the City hired a highly qualified Grants Manager who has been continuously working with City Departments that receive grant funding to raise awareness of requirements such as the need to include specific contract clauses in agreements funded with federal dollars. In February 2023, the City hired a certified Chief Procurement Officer (CPO) with over ten years of experience in the State General Services Department?s State Purchasing Division. The CPO is working to increase awareness of the City?s Procurement policies and procedures through trainings for City departments and the development of checklists and guides to ensure compliance. During FY24 the Finance Director, the Grant Manager, and the Purchasing Officer will work with the Assistant City Attorney responsible for contract review to improve the internal controls over contracts funded with federal funds. Policies and procedures will be developed to ensure that all contract agreements entered into with federal funds contain the required clauses set by the Davis-Bacon act. Anticipated Completion Date: December 31, 2023 Responsible Official: Emily Oster - Finance Director, Cheryl James - Grant Manager, Travis Dutton-Leyda - Purchasing Officer, Marcos Martinez - Assistant City Attorney

During our testing, we noted that there is not a process to track capital assets that have been purchased with federal funds.

2020-015 Property and Equipment Federal Agency: U.S. Department of Transportation/Federal Aviation Administration (FAA) Federal Program: Airport Improvement Program (AIP) CFDA Number: 20.106 Award Period: Various Type of Finding: ? Significant Deficiency in Internal Control over Compliance ? Other Matters Corrective Action Plan: The City agrees with the finding and will update its capital asset accounting policies, procedures and detailed records to identify the source of funding (including federal award identification number) and percentage of federal participation in any equipment and property purchases. Person(s) Responsible, including Position Title: Accounting Officer (in-process of hiring), Clayton Pelletier, CPA, Controller and Lisa M. Storey, Accounting Financial Analyst Estimated Completion Date: February 1, 2022

? The City was unable to provide one of three subrecipient folders for us to test program income. ? For two of the five receipts and one of the draws with a corresponding receipt, we noted the subrecipient folder did contain the quarterly reports submitted by the subrecipient to the City. However, the folder did not contain other documentation as specified by HUD to verify that the amount of program income receipted and drawn corresponds to the information reported in the quarterly reports. ? The City did not record the program income amounts included in the IDIS - PR09 Program Income Details by Fiscal Year and Program for time period of 07-01-2019 to 06-30-2020 in the financial records. Total CDBG Receipts and Total CDBG Draws against Receipts of approximately $541,773 and $357,034, respectively. Of the approximate $541,773, local account receipts accounted for approximately $183,274. ? The City is not reporting program income in a timely manner to HUD in IDIS. Our review of subrecipient quarterly reports submitted to the City for the fiscal year end 6/30/2020 has total program income generated and used of approximately $487,735 and $509,137, respectively. The City reported program income for the fiscal year end 6/30/2019 in the IDIS - PR09 Program Income Details by Fiscal Year and Program for time period of 07-01-2019 to 06-30-2020.

2020-018 Program Income Federal Agency: U.S. Department of Housing and Urban Development (HUD)/Assistance Secretary for Community Planning and Development Federal Program: Community Development Block Grants/Entitlement Grants (CDBG) CFDA Number: 14.218 Award Period: 7/1/2019 ? 9/1/2026 Type of Finding: ? Material Weakness in Internal Control over Compliance ? Material Noncompliance (Modified Opinion) Corrective Action Plan: The CDBG Program Personnel will perform a complete inventory of all records pertaining to its subrecipients to compile a complete master listing of all subrecipients and will review all subrecipient folders from the master list to ascertain that all required documentation has been obtained and on file. Additionally, the Finance Department staff and CDBG Program staff will receive training on the reporting requirements for the federal reporting system. The City will perform periodic procedural reviews regarding the noted Program audit compliance issues. Person(s) Responsible, including Position Title: Alexandra Ladd, Housing Director, Clayton Pelletier, CPA, Controller and Grants Manager (inprocess of hiring), and Grants Financial Analyst (in-process of hiring) Estimated Completion Date: February 1, 2022

2019-015

During our testing, we noted costs charged to the grant prior to the start date of the award. Also, the annual time certifications were not provided to us. For one of three costs charged to the grant in the first month of the start of the grant, totaling an approximate amount of $507, we noted the costs incurred in June 2018, which is prior to the start date of the grant of 7/1/2018. The City did not provide the annual time certifications submitted to HUD by the program manager.

2019-014 Period of Performance (Significant Deficiency and Other Matters) Federal Program: Community Development Block Grants/Entitlement Grants (CDBG) CFDA Number: 14.218 Recommendation We recommend the City design controls to ensure an adequate review process is in place related to costs charged to the grant. The review process should include a review of cost incurred date to ensure costs charged to the grant are within the award's start and end date. Explanation There is no disagreement with this audit finding. Action Plan The City concurs with the finding. The City of Santa Fe is in the process of implementing a Grants Service Division to oversee the financial and accounting management of all City federal grant programs and their awarded funds per 2 CFR 200 Uniform Administrative, Cost Principals, and Audit Requirements for Federal Awards, Federal Program Handbooks & Guidelines, and State & City policies and procedures in regards to grant financial management, government accounting standards, and required reports for submission. The newly created Grants Division will consist of an experienced and professional grant accounting staff that are knowledgeable with the Federal Grant Lifecycle (Pre-Award Phase, Award Phase, and Post Award Phase). The newly created Grants Bureau will prepare monthly grant fund reconciliations, track allowable grant expenditures and revenue reimbursements as it pertains to the grant?s period of performance, ensure federal compliance, and prepare timely required federal reports. The City of Santa Fe is also in the process of upgrading their current accounting, finance, and grant system. The upgrade of the Tyler Munis Financial system will provide much improved grant accounting tracking and reporting capabilities for all City federal programs and their funds. The Munis upgrade contains modules for project grant accounting, general billing/invoicing, and cash management. The new Grants Division will have internal controls and separation of duties in place regarding federal reimbursements and drawdowns which can be tracked in Munis Financials. This process will be documented in the City?s policies and procedures. The described process will be implemented by June 2021. Responsible Party (s) Alexandra Ladd Affordable Housing Director, Regina Wheeler Public Works Director, Mary McCoy, Finance Director, Bradley Fluetsch, CFA, Financial Planning and Reporting Officer, Debra Harris-Garmendia, Accounting Officer. Planned completion date June 2021

During our testing, we noted the City did not have adequate internal controls in place to ensure compliance with program income. ? The City was unable to provide two of five subrecipient folders for us to test program income. ? For one of the draws with a corresponding receipt, we noted the subrecipient folder did contain the quarterly reports submitted by the subrecipient to the City. However, the folder did not contain other documentation as specified by HUD to verify that the amount of program income corresponds to the information reported in the quarterly reports. ? Three of three subrecipient folders did not contain evidence of an annual site visit of the subrecipient by the City. ? We were provided with a Program Income Report submitted by a subrecipient to the City noting program income amounts for quarters 3 and 4 totaling an approximate of $239,482 were not included in the IDIS - PR09 Program Income Details by Fiscal Year and Program for time period of 07-01-2018 to 06-30-2019. Also, we did not note the program income amounts included in the IDIS - PR09 Program Income Details by Fiscal Year and Program for time period of 07-01-2019 to 12-31-2019.

2019-015 Program Income (Material Weakness and Material Noncompliance) Federal Program: Community Development Block Grants/Entitlement Grants (CDBG) CFDA Number: 14.218 Recommendation We recommend the City review the HUD's Monitoring Correspondence to gain an understanding of HUD's requirements related to program income. We recommend the City design controls to ensure the City meets compliance with the HUD's requirements of program income. Explanation There is no disagreement with this audit finding. Action Plan The City concurs with the finding. The City of Santa Fe is in the process of implementing a Grants Service Division to oversee the financial and accounting management of all City federal grant programs and their awarded funds per 2 CFR 200 Uniform Administrative, Cost Principals, and Audit Requirements for Federal Awards, Federal Program Handbooks & Guidelines, and State & City policies and procedures in regards to grant financial management, government accounting standards, and required reports for submission. The newly created Grants Division will consist of an experienced and professional grant accounting staff that are knowledgeable with the Federal Grant Lifecycle (Pre-Award Phase, Award Phase, and Post Award Phase). The newly created Grants Bureau will prepare monthly grant fund reconciliations, track allowable grant expenditures and revenue reimbursements as it pertains to the grant?s period of performance, ensure federal compliance, and prepare timely required federal reports. The City of Santa Fe is also in the process of upgrading their current accounting, finance, and grant system. The upgrade of the Tyler Munis Financial system will provide much improved grant accounting tracking and reporting capabilities for all City federal programs and their funds. The Munis upgrade contains modules for project grant accounting, general billing/invoicing, and cash management. The new Grants Division will have internal controls and separation of duties in place regarding federal reimbursements and drawdowns which can be tracked in Munis Financials. This process will be documented in the City?s policies and procedures. The described process will be implemented by June 2021. Responsible Party (s) Alexandra Ladd Affordable Housing Director, Regina Wheeler Public Works Director, Mary McCoy, Finance Director, Bradley Fluetsch, CFA, Financial Planning and Reporting Officer, Debra Harris-Garmendia, Accounting Officer. Planned completion date June 2021

During our testing, we noted the City did not have adequate internal controls in place to ensure compliance with special tests and provisions. Citizen Participation Plan ? The City does not have a Citizen Participation Plan (the Plan). The City has a summary of and reference to the Plan in its 2018 ? 2022 Consolidated Plan. However, it does not have a separate written Citizen Participation Plan setting forth the City?s policies and procedures for citizen participation. Required Certifications and HUD Approvals ? For three of four projects, we were not provided with the Request for Release of Funds (RROF) or HUD's approval of the RROF. For one of four projects, we were provided with the RROF. However, we did not note HUD's approval on the RROF. Environmental Reviews ? For five of five subrecipient folders reviewed, we did not note a completed environmental review. We noted a reference to a 2018-2019 ERR Binder. However, the 2018-2019 ERR Binder was not provided to us. ? For five of five subrecipient folders reviewed, we did not note written documentation that the review was not required.

2019-016 Special Tests and Provisions (Material Weakness and Material Noncompliance) Federal Program: Community Development Block Grants/Entitlement Grants (CDBG) CFDA Number: 14.218 Recommendation We recommend the City review the Compliance Supplement published by the Office of Management and Budget (OMB) and referenced Federal regulations to gain an understanding of the Federal requirements related to applicable special tests and provisions. Explanation There is no disagreement with this audit finding. Action Plan The City concurs with the finding. The City of Santa Fe is in the process of implementing a Grants Service Division to oversee the financial and accounting management of all City federal grant programs and their awarded funds per 2 CFR 200 Uniform Administrative, Cost Principals, and Audit Requirements for Federal Awards, Federal Program Handbooks & Guidelines, and State & City policies and procedures in regards to grant financial management, government accounting standards, and required reports for submission. The newly created Grants Division will consist of an experienced and professional grant accounting staff that are knowledgeable with the Federal Grant Lifecycle (Pre-Award Phase, Award Phase, and Post Award Phase). The newly created Grants Bureau will prepare monthly grant fund reconciliations, track allowable grant expenditures and revenue reimbursements as it pertains to the grant?s period of performance, ensure federal compliance, and prepare timely required federal reports. The recommendation to review the Compliance Supplement for each program where available will be incorporated into the updated grant procedures. The City of Santa Fe is also in the process of upgrading their current accounting, finance, and grant system. The upgrade of the Tyler Munis Financial system will provide much improved grant accounting tracking and reporting capabilities for all City federal programs and their funds. The Munis upgrade contains modules for project grant accounting, general billing/invoicing, and cash management. The new Grants Division will have internal controls and separation of duties in place regarding federal reimbursements and drawdowns which can be tracked in Munis Financials. This process will be documented in the City?s policies and procedures. The described process will be implemented by June 2021. Responsible Party (s) Alexandra Ladd Affordable Housing Director, Regina Wheeler Public Works Director, Mary McCoy, Finance Director, Debra Harris-Garmendia, Accounting Officer. Planned completion date June 2021

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