City of Phoenix, Arizona

Finding: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Eligibility Federal Program: COVID-19 - Emergency Rental Assistance Program Assistance Listing No.: 21.023 Federal Agency: Department of Treasury Criteria or specific requirement: In accordance with the Consolidated Appropriations Act, 2021, sections 501(c)(2)(C)(ii) of the Act grantees should establish and adhere to reasonable policies for evaluating household applications within Treasury?s framework providing for the use of self-attestation, categorical eligibility, and fact-specific proxies in qualifying circumstances. Condition: Required eligibility determinations were found to be incomplete (including obtaining required documentation/verification). Eligibility could not be determined for select individual program recipients as the required documentation was missing for the files to determine eligibility. Cause: Internal protocols over eligibility determinations were not adhered to, to ensure that individual program recipients were eligible for the program. Effect or Potential Effect: Amounts provided to or on behalf of eligible participants are in question due to missing documentation to base eligibility determinations. As such, certain eligibility costs provided to participants have been deemed questioned costs. Questioned Costs: $56,235. Questioned costs were determined by reviewing the amounts provided to participants that have been deemed ineligible due to missing documentation to base an eligibility determination. Context: During our testing, the City made us aware of a complaint provided through the City's Integrity Line. As a result of the complaint, an internal investigation was conducted, where certain participant files were missing documentation to base an eligibility determination. Identification as a Repeat Finding: N/A Recommendation: Management should review existing procedures to ensure that required eligibility determinations are consistently made (including obtaining required documentation/verification) and verified by supervisory staff prior to program participants receiving financial assistance/benefits. Views of Responsible Officials: We agree with the finding. See separate report for planned corrective actions.

Finding: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Matching Federal Programs: National Infrastructure Investments, Transit Services Program Cluster, Highway Planning and Construction Cluster, and Airport Improvement Program CFDA Nos.: 20.933, 20.513, 20.205, 20.106 Federal Agency: Department of Transportation (DOT) Pass-Through Entity, applicable only to Highway Planning and Construction Cluster: Arizona Department of Transportation Criteria: In accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Appendix V, the City is required to submit a central service cost allocation plan (CAP) to its cognizant agency for indirect costs annually. In addition, the central service CAP must include all central service costs that will be claimed (either as an allocated or a billed cost) under federal awards. All plans and related documentation used as a basis for claiming costs under federal awards must be retained for audit. Condition: The City does not have a formally documented and approved central service CAP. As a result, cost allocations were not in accordance with central service CAPs approved by the cognizant agency for indirect costs. Questioned costs: Questioned costs were determined by reviewing the 2020 expenditures that occurred for the issue noted above, with the exception of the Highway Planning and Construction Cluster. For the Highway Planning and Construction Cluster, questioned costs were determined by reviewing the 2020 expenditures that occurred for the issue noted above, less actual salaries and pension costs. See costs by applicable assistance listing number below: Cluster/Program Assistance Listing No. Questioned Costs National Infrastructure Investments 20.933 $340,395 Transit Services Program Cluster 20.513 93,941 Highway Planning and Construction Cluster 20.205 443,530 Airport Improvement Program 20.106 1,474,902 $2,352,768 Context: Out of 75 expenditures selected for testing under the programs, 17 of the expenditures contained the issue noted above. The sample was not intended to be, and was not, a statistically valid sample. Total federal expenditures during the fiscal year under the applicable programs and known questioned costs are as follows: Cluster/Program Assistance Listing No. Total Federal Expenditures Questioned Costs Applicable Compliance Requirement(s) National Infrastructure Investments 20.933 $2,821,422 $340,395 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Matching Transit Services Program Cluster 20.513 3,880,286 93,941 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Highway Planning and Construction Cluster 20.205 4,775,570 443,530 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Airport Improvement Program 20.106 37,959,600 1,474,902 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Matching $49,436,878 $2,352,768 Effect: Absent a formally documented and approved central service CAP, indirect cost expenditures are not allowable costs pursuant to CFR Part 200 and therefore are considered questioned costs. Cause: Internal controls over indirect costs were not in place to ensure the City had a formally approved central service CAP. Identification as a repeat finding: A similar finding was reported for the National Infrastructure Investments Program in the prior year?s audit as finding number 2019-002. Recommendation: Management should implement procedures to ensure that a formal central service CAP is prepared and submitted to its cognizant agency on an annual basis. Views of Responsible Officials: We agree with the finding. See separate report for planned corrective actions.

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