City of RedmondLocal Government

Specific Steps to Correct: Management is aware of the specific changes that need to be made to its reporting to HUD. Management will continue its efforts to monitor/administer the program in accordance with HUD. Anticipated Completion Date: Will incorporate auditor recommendations into the next quarterly/annual reporting provided to HUD, which will occur before June 30, 2024. Name(s) and Title(s) of Responsible Person(s): James Wood, Finance Director

Specific Steps to Correct: Management has already corrected how it records interest earned on CDBG cash on-hand. Management will review program income on-hand throughout the year to assess its responsibility to return funds to the line of credit. Anticipated Completion Date: Will incorporate the auditor's recommendation into year end processing for fiscal year 2024, which will occur around June 30, 2024. Name(s) and Title(s) of Responsible Person(s): James Wood, Finance Director

CORRECTIVE ACTION PLAN FOR FISCAL YEAR ENDED JUNE 30, 2021 The audit of the financial statements of City of Redmond, Oregon, for the fiscal year ended June 30, 2021 identified the findings below. The City of Redmond has created a corrective action plan to remediate each finding as follows: Audit Finding: 2021-001 Condition and Criteria: In our review of the Urban Renewal Agency loans receivable, it was discovered that there were prior year costs of $428,948 towards private redevelopment paid under the forgivable loan program, which should have been reported as a receivable in the prior year. Effect: A prior period adjustment on the full accrual basis is needed to correct beginning net position and the receivable at the beginning of the year. Cause: The development project was an ongoing project that started in the prior fiscal year and it was not noticed that there were reimbursements expected until the final note was signed in the current fiscal year. Auditor?s Recommendation: We recommend that costs be reviewed in more detail to determine if receivables should be recorded for expected reimbursements. Specific Steps to Correct: Management has already corrected the error and incorporated the correction into the audited financial statements. Management will review all loan and grant expenses in mor detail to identify amounts that should be recorded as receivables. Anticipated Completion Date: Completed and incorporated into the June 30, 2021 audited financial statements. Names(s) and Title(s) of Responsible Person(s): Brooks Slyter, Accounting & Financial Reporting Director Audit Finding: 2021-002 Condition and Criteria: The City is working on a project funded with grant funding and developer reimbursements for the 6th Street extension project and at the end of the fiscal year the fund was reporting a deficit fund balance and most of the receivables for reimbursable costs had not been recorded. Effect: An adjustment was recorded during the audit to accrue accounts receivable from the developers and a related deferred inflow since the funds were not received in the measurable and available period to be included as revenue. Cause: Management was aware of the project but had not worked out the final amounts due from the grant funds and developers nor received final information form Public Works to complete the accrual. Auditor?s Recommendation: We recommend that costs be reviewed in more detail to determine if receivables should be recorded for expected reimbursements. Specific Steps to Correct: Management has already corrected the error and incorporated the correction into the audited financial statements. Management will review all projects and grants to ensure all receivables are recorded for expected reimbursements. Anticipated Completion Date: Completed and incorporated into the June 30, 2021 audited financial statements. Names(s) and Title(s) of Responsible Person(s): Brooks Slyter, Accounting & Financial Reporting Director Audit Finding: 2021-003 Condition and Criteria: The City is required to account for program income from the Community Development Block Grant program and report it along with other activity to HUD. In addition, program income should be used before drawing additional funds. The City received repayments of two loans and additional program income that had not been reported or included in the notes to the Schedule of Expenditures of Federal Awards due to an oversight. Effect: Program income was not property reported or utilized during the year and additional program income will be available to spend in the next fiscal year. $62,476 should have been used from program income in the current year, rather than drawing additional funds. Cause: When the City received repayments of the loans, the payment was posted to the receivable account and was not reflected in the revenue account until reconciling the final deferred inflows for the audit. Management?s normal process focuses on revenues and expenses when reporting under the program. Auditor?s Recommendation: We recommend that program income be reviewed in more detail in the future and that a review of the receivable and deferred inflows be included in the process. Specific Steps to Correct: Management has reported the program income to HUD and will implement more regular reconciliation of loans receivable to ensure the program income is recognized and reported in a timely manner. With recent turnover in the CDBG program administrator position, the Finance department will also continue to coordinate with contracted service provider Resource Consultants and Deputy City Manager, John Roberts to ensure timely reporting of program income and train the new program administrator. Anticipated Completion Date: Will implement at least quarterly reconciliations of loans receivable by March 31, 2022 and will plan to have a new CDBG program administrator onboarded and trained by June 30, 2022. Names(s) and Title(s) of Responsible Person(s): Brooks Slyter, Accounting & Financial Reporting Director; John Roberts, Deputy City Manager Audit Finding: 2021-004 Condition and Criteria: ORS 457.470 requires urban renewal agencies to share tax increment when certain thresholds are met. The threshold is tied to annual tax increment collections in relation to the area?s initial maximum indebtedness. It was discovered during the year that the Agency had over collected property taxes and owed a refund back to other entities. Effect: The Agency has over-collected approximately $1.6 million of tax from fiscal year 2018 to fiscal year 2021, of which $869,040 was from prior fiscal years and considered a correction of an error and prior period adjustment by management. The remaining $708,041 was reported as a special item to refund property taxes collected in the current year. Future taxes will be assessed with the limitation already imposed. Cause: The URA plan was substantially amended in 2012 and became subject to the revenue sharing requirements. At the time of the amendment the new revenue sharing requirements were not identified in the plan or included in financial models. City staff became aware of the requirement while setting up the South Highway 97 Urban Renewal District and hired a consultant to confirm the requirements and calculate the over-collection of tax. Auditor?s Recommendation: The condition was corrected, but we recommend that the City and Agency continue to work with their consultants and the County. Specific Steps to Correct: Management has already corrected the error and incorporated the correction into the audited financial statements. The City will continue to work with consultants and Deschutes County to ensure the property taxes are accurately assessed, collected, and shared, as applicable in compliance with ORS 457.470 in the existing Downtown Urban Renewal District and the newly formed South Highway 97 Urban Renewal District. Anticipated Completion Date: Completed and incorporated into the June 30, 2021 audited financial statements. Names(s) and Title(s) of Responsible Person(s): Brooks Slyter, Accounting & Financial Reporting Director Audit Finding: 2021-005 Condition and criteria: The City was required to file the 5100-126 Operating and Financial Summary by the December 27, 2020 extended deadline. In our review of the report, it was filed shortly after the extended due date and contained errors in the amounts reported due to additional audit entries posted after the filing date and some errors in the reconciliation schedule. Cause: The prior year audit was performed remotely and was not completed until March 31, 2021 due to COVID-19 and the report was filed with the information available at the time when it discovered that the extension date had passed. Effect: The late reporting of financial information provides inaccurate information to the public. Auditor?s Recommendation: We recommend that the report be filed on time in the future and that a secondary review of the amounts and items reported be performed prior to posting. We also recommend that the 2020 report be resubmitted with corrected information, which management has already completed with the filing of their 2021 report. Specific Steps to Correct: Management and City staff have submitted a corrected report for 2020 as well as the 2021 report and have implemented a secondary review of the amounts and items reported prior to and following the submission this report. Anticipated Completion Date: Completed December 28, 2021. Names(s) and Title(s) of Responsible Person(s): Brooks Slyter, Accounting & Financial Reporting Director; Zachary Bass, Airport Director Audit Finding: 2021-006 Condition and criteria: Airlines are required to submit PFC payments to the City?s airport by the end of the following month after they are collected from passengers and reports shall be provided to the airport on or before the last day of the calendar month following the calendar quarter. Boutique Air started providing air service in October 2020 and the City noted in September 2021 that no payments had been made or quarterly reports received. Cause: The air carrier was new to the City and the requirement for payment and tracking of payments was not noticed until the annual reconciliation was performed. Effect: The late submission of payments and reports by Boutique Airlines was not in compliance with PFC requirements. Auditor?s Recommendation: We recommend that Boutique Airlines prepare their reports and submit payment with the report by the last day of the following calendar month and that the airport add procedures to monitor new airlines compliance with requirements. Specific Steps to Correct: The City has worked with Boutique Airlines and in October 2021 received all reports and payments required. As of July 2021, Boutique Airlines is

CORRECTIVE ACTION PLAN FOR FISCAL YEAR ENDED JUNE 30, 2019 The audit of the financial statements of City of Redmond, Oregon, for the fiscal year ended June 30, 2019 identified the findings below. The City of Redmond has created a corrective action plan to remediate each finding as follows: Audit Finding: 2019-002 Condition and Criteria: The City is required to submit quarterly SF425 Federal Financial Reports and to report expenditures on an ongoing basis into the HUD IDIS system. The City did not require reimbursement of the expenditure due to a large amount of program income on hand, but is still required to report the expenditures and apply them against program income on hand. These reporting requirements were not performed for the last two fiscal quarters of the year until November of 2019. Effect: The late reporting of quarterly financial information and expenditures provides inaccurate information to the grantor during the year and increases the risks related to reimbursable expenditures. Cause: There were changes in staff administering the program during the year and confusion on which team member was responsible for the reporting requirements. The City was allowed to transfer program income of $250,862 from NSP3 to the CDBG Entitlement program and due to the program income on hand, the City did not need reimbursement of expenditures and did not submit the expenditures to the IDIS system. In addition, it takes two people to submit expenditure information into the IDIS system and the second staff did not receive access until October 2019. Auditor?s recommendation: The City should enhance its procedures to ensure that quarterly reports are filed within the timeframe required and that expenditures are reported on an ongoing basis in the HUD IDIS system. An internal secondary review of the reporting should also be performed to verify accuracy of the amounts reported. Specific Steps to Correct: Management acknowledges and understands the importance of timely and accurate reporting of financial information related to grants. The CDBG program has continued to experience staff turnover since its inception. The City is contracting with an external consultant to assist with administration of the CDBG program and is working to provide consistent and knowledgeable staffing to administer the CDBG program through the upcoming budget process. Anticipated Completion Date: The City should have an external consultant on contract in early January 2020 to administer the CDBG program. This should enable the City to get current on all reporting and reimbursement requests through the IDIS system in early 2020 and continue compliance through the remainder of the fiscal year and the program. The new consultant will work with Finance staff for reconciliation to the general ledger and accuracy of the amounts reported. Names(s) and Title(s) of Responsible Person(s): Brooks Slyter, Accounting & Financial Reporting Director; Jason Neff, Budget & Financial Planning Director; John Roberts, Assistant City Manager; Keith Witcosky, City Manager

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