City of MaderaLocal Government

Finding 2025-001 Special Tests and Provision – Internal Control and Compliance over Environmental Reviews (Significant Deficiency) Information on the Federal Program: Assistance Listing Number: 14.218 Federal Program Name: CDBG‐Entitlement Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: B-20-MW-06-0053 – FY20-21 B-21-MC-06-0053 – FY21-22 B-22-MC-06-0053 – FY22-23 B-23-MC-06-0053 – FY23-24 B-24-MC-06-0053 – FY24-25 Criteria: Title 24 U.S. Code of Federal Regulations sections 58.1, 58.22, 58.34, 58.35, and 570.604 require projects to have an environmental review unless they meet criteria specified in the regulations that would exempt or exclude them from environmental certification requirements. For projects where the environmental review was not performed, a written documentation that the review was not required must be prepared. Condition and Context: The City could not provide support that there was pre-award or post-award review of grant projects to determine if a project requires an environmental review or is categorically excluded from the environmental review requirements. The City did not have adequate internal controls to ensure compliance with the special test – environmental review requirements. Testing was performed over each requirement for the City. Out of a total population of twelve (12) projects, we selected a sample of four (4) projects to test for environmental reviews. Four (4) out of the four (4) projects tested did not have an exemption report prepared in a timely manner. The sample was not intended to be, and was not, a statistically valid sample. Cause: The Planning Department experienced turnover and vacancies in key positions responsible for performing the environmental reviews and determination of exception as required by the grant for the fiscal year 2025. The required HUD document ‘Environmental Review for Activity/Project that is Exempt or Categorically Excluded Not Subject to Section 58.5’ was not completed timely for all CDBG Projects with expenditures during the grant year. The document and related supporting documentation were not retained on file by the Responsible Entity in an Environmental Review Record (ERR) for the activity/project (24 CFR Part 58.38) and in accordance with recordkeeping requirements for the HUD program. Section III – Federal Award Findings (Continued) Finding 2025-001 Special Tests and Provision – Internal Control and Compliance over Environmental Reviews (Significant Deficiency) (Continued) Effect: The City was not in compliance with 24 CFR §58.1, 58.22, 58.34, 58.35, and 570.604. Questioned Costs: None noted. Identification as a Repeat Finding, If Applicable: Yes. See finding 2024-002. Recommendation: The City should dedicate time and resources to the Planning Department to ensure that key compliance documents are prepared and maintained as required by the program. Management’s View and Corrective Action Plan: The City concurs with the auditor’s finding. The City will reinforce its standard operating procedure concerning Environmental Reviews (ER) and will reinsure that environmental reviews are properly completed for every awarded grant project.

Finding 2024-001 Reporting – Internal Control and Compliance over Reporting (Significant Deficiency) Information on the Federal Program: Assistance Listing Number: 14.218 Federal Program Name: CDBG‐Entitlement Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: B-20-MW-06-0053 – FY20-21 B-21-MC-06-0053 – FY21-22 B-22-MC-06-0053 – FY22-23 B-23-MC-06-0053 – FY23-24 Criteria: Code of Federal Regulations, Title 2 – Federal Financial Assistance, Subtitle A – Office of Management and Budget Guidance for Federal Financial Assistance, Chapter II – Office of Management and Budget Guidance, Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post Federal Award Requirements: Performance and Financial Monitoring and Reporting Section § 200.328 Financial reporting. (a) The Federal agency must require only OMB-approved government-wide data elements on recipient financial reports. At the time of publication, this consists of the Federal Financial Report (SF-425); however, this also applies to any future OMB-approved government-wide data elements available from the OMB-designated standards lead. (b) The Federal agency or pass-through entity must collect financial reports no less than annually. The Federal agency or pass-through entity may not collect financial reports more frequently than quarterly unless a specific condition has been implemented in accordance with § 200.208. To the extent practicable, the Federal agency or pass-through entity should collect financial reports in coordination with performance reports. (c) The recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. (d) The final financial report submitted by the recipient must be due no later than 120 calendar days after the conclusion of the period of performance. A subrecipient must submit a final financial report to a pass-through entity no later than 90 calendar days after the conclusion of the period of performance. See also § 200.344. The Federal agency or pass-through entity may extend the due date for any financial report with justification from the recipient or subrecipient. Section § 200.303 Internal Controls The recipient and subrecipient must: (a) 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal award. Condition and Context: For the Community Development Block Grants/Entitlement Grants Cluster, the City did not submit the reports within the required deadline: Report Type Award Number Period Date Due Date Submitted SF-425 Financial Program-wide reporting 7/1/2023 - 9/30/2023 10/30/2023 1/16/2024 SF-425 Financial Program-wide reporting 1/1/2024 - 3/31/2024 3/30/2024 7/24/2024 Four (4) quarterly financial reports were tested, and two (2) reports were not submitted by the required deadline. Cause: During the audit period, the City did not possess the operational processes/procedures necessary to guarantee timely submission of the SF-425 report. Effect: Failure to submit the SF-425 reports timely results in noncompliance with the reporting requirements in the grant agreement. Questioned Costs: None noted. Identification as a Repeat Finding, If Applicable: No. Recommendation: We recommend that the City strengthen their report submission process and procedures to ensure all required reports are properly reviewed and approved and submitted timely. When a report cannot be submitted by the due date, the City should request an extension from the funding agency and maintain a record of the approval. Management’s View and Corrective Action Plan: The City agrees with this finding. The City has already taken steps to improve its processes/procedures to insure timely submission of all required SF-425 reports.

Finding 2024-002 Special Tests and Provision – Internal Control and Compliance over Environmental Reviews (Significant Deficiency) Information on the Federal Program: Assistance Listing Number: 14.218 Federal Program Name: CDBG‐Entitlement Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: B-20-MW-06-0053 – FY20-21 B-21-MC-06-0053 – FY21-22 B-22-MC-06-0053 – FY22-23 B-23-MC-06-0053 – FY23-24 Criteria: Title 24 U.S. Code of Federal Regulations sections 58.1, 58.22, 58.34, 58.35, and 570.604 require projects to have an environmental review unless they meet criteria specified in the regulations that would exempt or exclude them from environmental certification requirements. For projects where the environmental review was not performed, a written documentation that the review was not required must be prepared. Condition and Context: The City could not provide support that there was pre-award or post-award review of grant projects to determine if a project requires an environmental review or is categorically excluded from the environmental review requirements. The City did not have adequate internal controls to ensure compliance with the special test – environmental review requirements. Testing was performed over each requirement for the City. Out of a total population of twelve (12) projects, we selected a sample of four (4) projects to test for environmental reviews. Four (4) out of the four (4) projects tested did not have an exemption report prepared in a timely manner. The sample was not intended to be, and was not, a statistically valid sample. The Planning Department experienced turnover and vacancies in key positions responsible for performing the environmental reviews and determination of exception as required by the grant for the fiscal year 2024. The required HUD document ‘Environmental Review for Activity/Project that is Exempt or Categorically Excluded Not Subject to Section 58.5’ was not completed until March 2025 for all CDBG Projects with expenditures during the grant year. The document and related supporting documentation were not retained on file by the Responsible Entity in an Environmental Review Record (ERR) for the activity/project (24 CFR Part 58.38) and in accordance with recordkeeping requirements for the HUD program. Effect: The City was not in compliance with 24 CFR §58.1, 58.22, 58.34, 58.35, and 570.604. Questioned Costs: None noted. Identification as a Repeat Finding, If Applicable: No. Recommendation: The City should dedicate time and resources to the Planning Department to ensure that key compliance documents are prepared and maintained as required by the program. Management’s View and Corrective Action Plan: The City concurs with the auditors’ finding. The City will reinforce its standard operating procedure concerning Environmental Reviews (ER) and will reinsure that environmental reviews are properly completed for every awarded grant project.

Finding 2023-001 Reporting – Internal Control and Compliance over Reporting (Significant Deficiency) Information on the Federal Program: Assistance Listing Number: 20.106 Federal Program Name: Airport Improvement Program Federal Agency: Department of Transportation Pass-Through Entity: N/A Federal Award Number and Award Year: 3-06-0144-029-2020 - FY20-21 Criteria: CODE OF FEDERAL REGULATIONS, Title 49 – TRANSPORTATION, Part 18 – UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS, Subpart C – Post-Award Requirements: 18.41 Financial Report (a) General (4), Due date. When reports are required on a quarterly or semiannual basis, they will be due 30 days after the reporting period. When required on an annual basis, they will be due 90 days after the grant year. Final reports will be due 90 days after the expiration or termination of grant support. 18.58 (a) General. The Federal agency will close out the award when it determines that all applicable administrative actions and all required work of the grant has been completed. 18.50 (b) Reports. Within 90 days after the expiration or termination of the grant, the grantee must submit all financial, performance, and other reports required as a condition of the grant. Upon request by the grantee, Federal agencies may extend this time frame. These may include but are not limited to: (1) Final performance or progress report, (2) Financial Status Report (SF 269) or Outlay Report and Request for Reimbursement for Construction Programs (SF-271) (as applicable), (3) Final request for payment (SF-270) (if applicable), and (4) Invention disclosure (if applicable). U.S. OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-133—AUDITS OF STATES, LOCAL GOVERNMENTS, AND NON-PROFIT ORGANIZATIONS (OMB Circular A-133), Subpart C— Auditees, Section .300—Auditee Responsibilities (b) Maintain internal control over federal programs that provides reasonable assurance that the auditee is managing federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its federal programs. Condition and Context: For the Airport Improvement Program (AIP), the City did not submit the reports within the required deadline: Report Type Award Number Period Date Due Date Submitted SF-425 Financial 3-06-0034-018-2020 1/1/2022 - 12/31/2022 12/31/2022 Not submitted SF-270 Financial 3-06-0034-018-2020 1/1/2022 - 12/31/2022 12/31/2022 Not submitted FAA Form 5370-1 3-06-0034-018-2020 7/1/2022 - 9/30/2022 10/30/2022 Not submitted FAA Form 5370-1 3-06-0034-018-2020 10/1/2022 - 12/31/2022 1/30/2023 Not submitted FAA Form 5370-1 3-06-0034-018-2020 1/1/2023 - 3/31/2023 4/30/2023 Not submitted FAA Form 5370-1 3-06-0034-018-2020 4/1/2023 - 6/30/2023 7/30/2023 Not submitted Four (4) financial reports were tested and all reports were not submitted by the required deadline. Cause: Due to the effects of grant staff turnover, the City’s procedures did not consistently ensure that the reports were submitted timely in accordance with the timelines in the Uniform Guidance, or properly reviewed and approved prior to submission. Effect: Failure to submit the SF-425 reports, SF-271 reports, and FAA Form 5370-1 reports timely results in noncompliance with the reporting requirements in the grant agreement. Questioned Costs: None noted. Identification as a Repeat Finding, If Applicable: No. Recommendation: We recommend that the City strengthen their report submission process and procedures to ensure all required reports are properly reviewed and approved and submitted timely. When a report cannot be submitted by the due date, the City should request an extension from the funding agency and maintain a record of the approval. Management’s View and Corrective Action Plan: The City concurs with the auditors’ finding. The City will take steps to improve identification and monitoring of required grantor reporting deadlines.

Finding 2023-001 Reporting – Internal Control and Compliance over Reporting (Significant Deficiency) Information on the Federal Program: Assistance Listing Number: 20.106 Federal Program Name: Airport Improvement Program Federal Agency: Department of Transportation Pass-Through Entity: N/A Federal Award Number and Award Year: 3-06-0144-029-2020 - FY20-21 Criteria: CODE OF FEDERAL REGULATIONS, Title 49 – TRANSPORTATION, Part 18 – UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS, Subpart C – Post-Award Requirements: 18.41 Financial Report (a) General (4), Due date. When reports are required on a quarterly or semiannual basis, they will be due 30 days after the reporting period. When required on an annual basis, they will be due 90 days after the grant year. Final reports will be due 90 days after the expiration or termination of grant support. 18.58 (a) General. The Federal agency will close out the award when it determines that all applicable administrative actions and all required work of the grant has been completed. 18.50 (b) Reports. Within 90 days after the expiration or termination of the grant, the grantee must submit all financial, performance, and other reports required as a condition of the grant. Upon request by the grantee, Federal agencies may extend this time frame. These may include but are not limited to: (1) Final performance or progress report, (2) Financial Status Report (SF 269) or Outlay Report and Request for Reimbursement for Construction Programs (SF-271) (as applicable), (3) Final request for payment (SF-270) (if applicable), and (4) Invention disclosure (if applicable). U.S. OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-133—AUDITS OF STATES, LOCAL GOVERNMENTS, AND NON-PROFIT ORGANIZATIONS (OMB Circular A-133), Subpart C— Auditees, Section .300—Auditee Responsibilities (b) Maintain internal control over federal programs that provides reasonable assurance that the auditee is managing federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its federal programs. Condition and Context: For the Airport Improvement Program (AIP), the City did not submit the reports within the required deadline: Report Type Award Number Period Date Due Date Submitted SF-425 Financial 3-06-0034-018-2020 1/1/2022 - 12/31/2022 12/31/2022 Not submitted SF-270 Financial 3-06-0034-018-2020 1/1/2022 - 12/31/2022 12/31/2022 Not submitted FAA Form 5370-1 3-06-0034-018-2020 7/1/2022 - 9/30/2022 10/30/2022 Not submitted FAA Form 5370-1 3-06-0034-018-2020 10/1/2022 - 12/31/2022 1/30/2023 Not submitted FAA Form 5370-1 3-06-0034-018-2020 1/1/2023 - 3/31/2023 4/30/2023 Not submitted FAA Form 5370-1 3-06-0034-018-2020 4/1/2023 - 6/30/2023 7/30/2023 Not submitted Four (4) financial reports were tested and all reports were not submitted by the required deadline. Cause: Due to the effects of grant staff turnover, the City’s procedures did not consistently ensure that the reports were submitted timely in accordance with the timelines in the Uniform Guidance, or properly reviewed and approved prior to submission. Effect: Failure to submit the SF-425 reports, SF-271 reports, and FAA Form 5370-1 reports timely results in noncompliance with the reporting requirements in the grant agreement. Questioned Costs: None noted. Identification as a Repeat Finding, If Applicable: No. Recommendation: We recommend that the City strengthen their report submission process and procedures to ensure all required reports are properly reviewed and approved and submitted timely. When a report cannot be submitted by the due date, the City should request an extension from the funding agency and maintain a record of the approval. Management’s View and Corrective Action Plan: The City concurs with the auditors’ finding. The City will take steps to improve identification and monitoring of required grantor reporting deadlines.

Finding 2023-001 Reporting – Internal Control and Compliance over Reporting (Significant Deficiency) Information on the Federal Program: Assistance Listing Number: 20.106 Federal Program Name: Airport Improvement Program Federal Agency: Department of Transportation Pass-Through Entity: N/A Federal Award Number and Award Year: 3-06-0144-029-2020 - FY20-21 Criteria: CODE OF FEDERAL REGULATIONS, Title 49 – TRANSPORTATION, Part 18 – UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS, Subpart C – Post-Award Requirements: 18.41 Financial Report (a) General (4), Due date. When reports are required on a quarterly or semiannual basis, they will be due 30 days after the reporting period. When required on an annual basis, they will be due 90 days after the grant year. Final reports will be due 90 days after the expiration or termination of grant support. 18.58 (a) General. The Federal agency will close out the award when it determines that all applicable administrative actions and all required work of the grant has been completed. 18.50 (b) Reports. Within 90 days after the expiration or termination of the grant, the grantee must submit all financial, performance, and other reports required as a condition of the grant. Upon request by the grantee, Federal agencies may extend this time frame. These may include but are not limited to: (1) Final performance or progress report, (2) Financial Status Report (SF 269) or Outlay Report and Request for Reimbursement for Construction Programs (SF-271) (as applicable), (3) Final request for payment (SF-270) (if applicable), and (4) Invention disclosure (if applicable). U.S. OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-133—AUDITS OF STATES, LOCAL GOVERNMENTS, AND NON-PROFIT ORGANIZATIONS (OMB Circular A-133), Subpart C— Auditees, Section .300—Auditee Responsibilities (b) Maintain internal control over federal programs that provides reasonable assurance that the auditee is managing federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its federal programs. Condition and Context: For the Airport Improvement Program (AIP), the City did not submit the reports within the required deadline: Report Type Award Number Period Date Due Date Submitted SF-425 Financial 3-06-0034-018-2020 1/1/2022 - 12/31/2022 12/31/2022 Not submitted SF-270 Financial 3-06-0034-018-2020 1/1/2022 - 12/31/2022 12/31/2022 Not submitted FAA Form 5370-1 3-06-0034-018-2020 7/1/2022 - 9/30/2022 10/30/2022 Not submitted FAA Form 5370-1 3-06-0034-018-2020 10/1/2022 - 12/31/2022 1/30/2023 Not submitted FAA Form 5370-1 3-06-0034-018-2020 1/1/2023 - 3/31/2023 4/30/2023 Not submitted FAA Form 5370-1 3-06-0034-018-2020 4/1/2023 - 6/30/2023 7/30/2023 Not submitted Four (4) financial reports were tested and all reports were not submitted by the required deadline. Cause: Due to the effects of grant staff turnover, the City’s procedures did not consistently ensure that the reports were submitted timely in accordance with the timelines in the Uniform Guidance, or properly reviewed and approved prior to submission. Effect: Failure to submit the SF-425 reports, SF-271 reports, and FAA Form 5370-1 reports timely results in noncompliance with the reporting requirements in the grant agreement. Questioned Costs: None noted. Identification as a Repeat Finding, If Applicable: No. Recommendation: We recommend that the City strengthen their report submission process and procedures to ensure all required reports are properly reviewed and approved and submitted timely. When a report cannot be submitted by the due date, the City should request an extension from the funding agency and maintain a record of the approval. Management’s View and Corrective Action Plan: The City concurs with the auditors’ finding. The City will take steps to improve identification and monitoring of required grantor reporting deadlines.

Finding 2023-001 Reporting – Internal Control and Compliance over Reporting (Significant Deficiency) Information on the Federal Program: Assistance Listing Number: 20.106 Federal Program Name: Airport Improvement Program Federal Agency: Department of Transportation Pass-Through Entity: N/A Federal Award Number and Award Year: 3-06-0144-029-2020 - FY20-21 Criteria: CODE OF FEDERAL REGULATIONS, Title 49 – TRANSPORTATION, Part 18 – UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS, Subpart C – Post-Award Requirements: 18.41 Financial Report (a) General (4), Due date. When reports are required on a quarterly or semiannual basis, they will be due 30 days after the reporting period. When required on an annual basis, they will be due 90 days after the grant year. Final reports will be due 90 days after the expiration or termination of grant support. 18.58 (a) General. The Federal agency will close out the award when it determines that all applicable administrative actions and all required work of the grant has been completed. 18.50 (b) Reports. Within 90 days after the expiration or termination of the grant, the grantee must submit all financial, performance, and other reports required as a condition of the grant. Upon request by the grantee, Federal agencies may extend this time frame. These may include but are not limited to: (1) Final performance or progress report, (2) Financial Status Report (SF 269) or Outlay Report and Request for Reimbursement for Construction Programs (SF-271) (as applicable), (3) Final request for payment (SF-270) (if applicable), and (4) Invention disclosure (if applicable). U.S. OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-133—AUDITS OF STATES, LOCAL GOVERNMENTS, AND NON-PROFIT ORGANIZATIONS (OMB Circular A-133), Subpart C— Auditees, Section .300—Auditee Responsibilities (b) Maintain internal control over federal programs that provides reasonable assurance that the auditee is managing federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its federal programs. Condition and Context: For the Airport Improvement Program (AIP), the City did not submit the reports within the required deadline: Report Type Award Number Period Date Due Date Submitted SF-425 Financial 3-06-0034-018-2020 1/1/2022 - 12/31/2022 12/31/2022 Not submitted SF-270 Financial 3-06-0034-018-2020 1/1/2022 - 12/31/2022 12/31/2022 Not submitted FAA Form 5370-1 3-06-0034-018-2020 7/1/2022 - 9/30/2022 10/30/2022 Not submitted FAA Form 5370-1 3-06-0034-018-2020 10/1/2022 - 12/31/2022 1/30/2023 Not submitted FAA Form 5370-1 3-06-0034-018-2020 1/1/2023 - 3/31/2023 4/30/2023 Not submitted FAA Form 5370-1 3-06-0034-018-2020 4/1/2023 - 6/30/2023 7/30/2023 Not submitted Four (4) financial reports were tested and all reports were not submitted by the required deadline. Cause: Due to the effects of grant staff turnover, the City’s procedures did not consistently ensure that the reports were submitted timely in accordance with the timelines in the Uniform Guidance, or properly reviewed and approved prior to submission. Effect: Failure to submit the SF-425 reports, SF-271 reports, and FAA Form 5370-1 reports timely results in noncompliance with the reporting requirements in the grant agreement. Questioned Costs: None noted. Identification as a Repeat Finding, If Applicable: No. Recommendation: We recommend that the City strengthen their report submission process and procedures to ensure all required reports are properly reviewed and approved and submitted timely. When a report cannot be submitted by the due date, the City should request an extension from the funding agency and maintain a record of the approval. Management’s View and Corrective Action Plan: The City concurs with the auditors’ finding. The City will take steps to improve identification and monitoring of required grantor reporting deadlines.

Finding 2020-002 Reporting ? Internal Control and Compliance over Reporting Information on the Federal Program: Federal Catalog Number: 14.218 Federal Program Name: Community Development Block Grants/Entitlement Grants Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: B-15-MC-06-0053 ? FY 15-16; B-16-MC-06-0053 ? FY 16-17 B-17-MC-06-0053 ? FY 17-18; B-18-MC-06-0053 ? FY 18-19 B-19-MC-06-0053 ? FY 19-20 Criteria: Pursuant to the Part 4 CDBG ? Entitlement Grants Cluster and financial and performance reporting requirements in the cooperative agreement provisions, and 2 CFR 200.327: SF-425 Federal Financial Report: Program award recipients must submit SF 425 reports to HUD quarterly, 30 days after the reporting period end date. Each report must cover all expenditures on the cooperative agreement from the start date of the reporting period to the reporting period end date. The following federal fiscal year quarter reporting period will be used for all quarterly reports, are due to HUD 30 days after the period end dates. Integrated Disbursement and Information System (IDIS) (OMB No. 25060077): Grantees may include reports generated by IDIS as part of their annual performance and evaluation report that must be submitted for the CDBG Entitlement program 90 days after the end of a grantee?s program year. Auditors are only expected to test information extracted from IDIS in the following system-generated reports: (1) C04PR03 ? Activity Summary Report, (2) C04PR26 ? CDBG Financial Summary. HUD 60002, Section 3 Summary Report, Economic Opportunities for Low- and Very Low-Income Persons (OMB No. 2529-0043): Each recipient that administers covered public and Indian housing assistance, regardless of the amount expended, and each recipient that administers covered housing and community development assistance in excess of $200,000 in a program year, must submit HUD 60002 information using the automated Section 3 Performance Evaluation and Registry System (SPEARS) (24 CFR sections 135.3(a)(1) and 135.90). The Section 3 Summary Report must be submitted for the CDBG Entitlement program 90 days after the end of a grantee?s program year. Condition: For the Community Development Block Grants/Entitlement Grants program, the City did not submit the reports within the required deadline: Cause: The City did not have internal controls in place to ensure that financial and performance reports are filed timely. Effect or Potential Effect: Delay in filing the reports resulted in non-compliance with the compliance requirements. Questioned Costs: None. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommend that the City strengthen internal controls by implementing procedures to ensure the timely filing of financial and performance reports.

Finding 2019-003 Allowable Costs/Cost Principles? Internal Control and Compliance over Payroll Expenditures Information on the Federal Program: Federal Catalog Number: 14.218 Federal Program Name: Community Development Block Grants/Entitlement Grants Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: B-10-MC-06-0053 ? FY 10-11; B-11-MC-06-0053 ? FY 11-12 B-15-MC-06-0053 ? FY 15-16; B-16-MC-06-0053 ? FY 16-17 B-17-MC-06-0053 ? FY 17-18; B-18-MC-06-0053 ? FY 18-19 Federal Catalog Number: 20.507 Federal Program Name: Federal Transit Formula Grants Federal Agency: Department of Transportation Pass-Through Entity: N/A Federal Award Number and Award Year: CA-90-Z193-02 ? FY 18-19 CA-2018-054-00 ? FY 18-19 CA-2018-061-00 ? FY 18-19 Criteria: Total salaries charged to Federal awards (including extra service pay) are subject to the Standards of Documentation as described by 2 CFR ?200.430(i). Per this section, salaries and wages charged to Federal awards must be based on records that accurately reflect the work performed. These records must: ? Be incorporated into the organization?s official records; ? Reasonably reflect the total activity for which the employee is compensating across all grant related and non-grant related activities (100% effort); ? Support the distribution of employee salary across multiple activities or cost objectives (for example, effort spent on multiple federal awards, spent on general/or administrative activities, vacation, sick leave, leave without pay, etc.); and ? Utilize an "after-the-fact" review of the employee?s actual hours worked during the reporting period for identifying and correcting significant changes (as defined by the organization?s written policies). Condition and Context: We determined the City did not comply with federal requirements for direct payroll charges. Payroll costs for all three employees tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation methods/plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on these grants. Community Development Block Grants/Entitlement Grants (CDBG) ? 14.218 During our testing of payroll expenditures, 5 of the 5 payroll charges non-statistically sampled were based on payroll budget allocations. Federal Transit Formula Grants ? 20.507 During our testing of payroll expenditures, 10 of the 10 payroll charges non-statistically sampled were based on payroll budget allocations. Questioned Costs: Community Development Block Grants/Entitlement Grants (CDBG) - $126,818* Federal Transit Formula Grants ? $288,756* *This consisted of the entire budgeted payroll that was charged to the grants. Cause: The City did not have policies and procedures for ensuring employees? compensation charged to federal programs was supported by contemporaneous time record or an after-the-fact distribution of employees? actual time and effort expended on federal program activities. Effect: The City did not comply with the program?s requirements for allowable costs. There is an increased risk that employees? compensation charged to the program may not have represented an actual time and effort expended on the program?s activities. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommend the City comply with federal regulation requiring that any employee funded by federal grant document the actual time they spend working on the grant?s objectives. Documentation must reflect ?actual? time spent by employees on awards being charged. The City should develop and implement policies and procedures that ensure that employees? compensation charged to federal programs reflect a contemporaneous or after-the-fact distribution of employees? actual time and effort expended on federal programs. View of Responsible Officials: Management agrees with this finding. During the preparation of the budget, an estimate of staff time allocated to grant programs is prepared based on project assignments. Payroll expenditures are allocated to grant programs based on the budgeted amount and recorded in the accounting system on a monthly basis. The actual time spent by staff on grant programs is not tracked on the payroll system. Management is working with staff in the Grants Department to assess whether there is a feasible method for tracking hours worked on a grant through the timecard/payroll system. In the meantime, effective April 20, 2020 the staff have implemented an off-line time sheet that tracks actual hours worked on each grant program. The Grants Department will work with other departmental staff to provide them with the proper time coding to capture actual time spent on grant programs. Staff are working to reconcile current year actual staff hours spent on programs to amount budgeted based on staff work assignments. Additionally, in response to a U.S. Department of Housing and Urban Development (HUD) audit, the City has drafted Community Development Block Grant (CDBG) Policies and Procedures Manual, as well as a Grant?s Management Policies and Procedures Manual. Both manuals are designed to improve grant management and internal controls to increase accuracy of financial reports and ensure compliance with federal and state guidelines. It is management?s intent to formalize and incorporate the draft policies into the City?s Finance Procedures Manual.

Finding 2019-004 Special Tests and Provisions ? Internal Control and Compliance over Citizen Participation Information on the Federal Program: Federal Catalog Number: 14.218 Federal Program Name: Community Development Block Grants/Entitlement Grants Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: B-10-MC-06-0053 ? FY 10-11; B-11-MC-06-0053 ? FY 11-12 B-15-MC-06-0053 ? FY 15-16; B-16-MC-06-0053 ? FY 16-17 B-17-MC-06-0053 ? FY 17-18; B-18-MC-06-0053 ? FY 18-19 Criteria: Per 24 CFR 91.115 ?Citizen participation plan; States. (d) Performance Reports. (1) The citizen participation plan must provide citizens with reasonable notice and an opportunity to comment on performance reports. The citizen participation plan must state how reasonable notice and an opportunity to comment will be given. The citizen participation plan must provide a period, not less than 15 days, to receive comments on the performance report that is to be submitted to HUD before its submission. (2) The citizen participation plan shall require the state to consider any comments or views of citizens received in writing, or orally at public hearings in preparing the performance report. A summary of these comments or views shall be attached to the performance report. (e) Citizen participation requirements for local governments. The citizen participation plan must describe the citizen participation requirements for units of general local government receiving CDBG funds from the State in 24 CFR 570.486. The citizen participation plan must explain how the requirements will be met.? Condition and Context: During our audit, we noted that the City?s process of submitting the CDBG CAPER for public comment was not in compliance with the City?s citizen participation plan. The city's public notice of its CAPER was published 14 days instead of the required 15 days as required, prior to its submission to HUD. Questioned Costs: None. Cause: The City did not comply with the program?s requirements for Citizen Participation and the 15-day public comment period required prior to submitting the CAPER to HUD. Effect: Non-compliance with the program requirements increases the risk that federal grants will not be awarded to the City in future periods. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommend the City comply with federal regulations requiring The citizen participation plan must provide a period, not less than 15 days, to receive comments on the performance report that is to be submitted to HUD before its submission. View of Responsible Officials: Management agrees with the finding. Staff acknowledges that the public noticing for the citizen participation plan was for 14 days instead the required 15-day notice. This was also noted by HUD in their Annual Performance Assessment of the CDBG Block Grant Program. Staff will change its practices to ensure that future public noticing regarding the CDBG CAPER?s public comments are published, as required.

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