City of MantecaLocal Government

Finding #SA2025-001 Cash Management and Accuracy of Federal Financial Reports Assistance Listing Number: 20.507, 20.526 Assistance Listing Title: COVID-19 – Federal Transit Cluster Name of Federal Agency: Department of Transportation Federal Award Identification Number: CA-2022-083-00, 2020-206, 2020-212 Criteria: The 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Related to these requirements, the City should submit drawdown requests to the Department of Transportation throughout the fiscal year as costs are incurred and Federal Financial Reports should agree with those drawdown requests and supporting accounting records. Drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the Department of Transportation unless specifically authorized by the grantor, and costs included in the Federal Financial Reports should be the same as those included in requests for reimbursement. Condition: During our review of the Federal Financial Reports related to grant CA-2022-083-00, we noted that for the first quarter of fiscal year 2025, the report included expenditures in the amount of $515,988, but the City requested reimbursement in the amount of $110,408, during that same time period. In addition, the reports for the third and fourth quarters of fiscal year 2025 included expenditures of $430,210 and $1,944,112, but the City requested reimbursement in the amounts of $1,898,135 and $744,817, respectively during that same time period. In addition to our review of the Federal Financial Reports, we also reviewed the timing of expenditures in relation to the associated reimbursement requests and noted that for the grants listed above, the City did not file for and receive reimbursement for the associated grant expenditures until four months after the activity took place for the first and third quarters. The grant drawdowns took place as follows: Cause: We understand that the City fell behind on drawing down grant funds on a timely basis due to employee turnover and this in turn caused the inaccuracies in the Federal Financial Reports. Effect: The City is not in compliance with the internal control requirements of 2 CFR Section 200.303. The City is not matching expenditures with associated grant revenues throughout the fiscal year by filing timely reimbursement requests as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the grant. In addition, the late filing of reimbursement requests resulted in inaccurate Federal Financial Reporting to the grantor. Identification as a Repeat Finding: Yes, see prior year finding 2024-001. Recommendation: The City must develop procedures to ensure grant reports are accurate and agree with supporting accounting records prior to being submitted to the grantor. The City must also develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2025-002 Unallowable Expenditures Charged to the Grant Assistance Listing Number: 20.507, 20.526 Assistance Listing Title: COVID-19 – Federal Transit Cluster Name of Federal Agency: Department of Transportation Federal Award Identification Number: CA-2022-083-00, 2020-206, 2020-212 Criteria: Any expenditures charged to a grant should be reviewed thoroughly to ensure it is allowable under the terms of the grant agreement and the requirements of the Uniform Guidance. Condition: We selected forty samples of expenditures that were charged to the grant to determine if the expenditures were allowable and properly supported with documentation and noted that one sample included expenditures for special cleaning fees for the transit center in the amount of $575. City staff stated that the special cleaning fees should not have been charged to the grant as they are related to cleaning fees for the rental of the transit center for events and the cleaning fees were covered as part of the rental costs. Cause: We understand that the City meant to deduct the special cleaning costs from the final reimbursement request, but all grant funds had already been spent. Questioned Costs: We question costs of $4,615, which consists of the total amount of special cleaning costs charged to the grant because they were paid for through the cost of the rental of the transit center for the event. Effect: The City is not in compliance with the allowable expenditures under the terms of the grant. Recommendation: The City must develop procedures to ensure that expenditures charged to the grant are allowable prior to requesting reimbursement from the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2025-003 Citizen Participation Plan Compliance Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Section II, Part E of the City’s grant agreement with San Joaquin County includes requirements that the City has a Citizen Participation Plan in place that includes the following: • Provide citizens with information concerning the amount of CDBG funds expected to be available; and • Provide citizens with the range of activities that may be undertaken with CDBG funds; and • Hold at least one public hearing to obtain citizen views on community needs; and • Publish community-wide, its proposed statement of community development objectives and projected use of CDBG funds so as to afford affected citizens the opportunity to comment. Condition: City staff stated that they did not have a Citizen Participation Plan in place and did not complete the requirements listed above. Effect: The City is not in compliance with the requirements of the grant agreement with the County. Cause: The City was not aware of the requirement in the grant agreement. Recommendation: The City should review the grant agreement with the County to ensure that all compliance requirements are met. In addition, the City should establish a Citizen Participation Plan that complies with the requirements of the agreement. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2025-004 Reporting Compliance Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Section II, Part H of the City’s grant agreement with San Joaquin County requires the City to submit the following performance and or evaluation reports to the County to facilitate mandated reporting to HUD: • A quarterly calendar report of progress and accomplishments for all funded activities, to include a quantitative list of activity beneficiary type(s); and • An annual equal employment opportunity report (HUD/EE-04) on recipient employment, containing data as of June 30th; and • A semi-annual Minority Business Enterprise Report by March 30th, indicating contract and subcontract activity during the first half of the fiscal year and, by September 30th, a report on such activity during the second half of the year; and • The recipients may be required to submit such other reports and information as HUD determines are necessary to carry out its responsibilities. Condition: City staff stated that they had not completed and submitted any reporting to the County during fiscal year 2025. Effect: The City is not in compliance with the requirements of the grant agreement. Cause: The City was unaware of the reporting requirements of the grant agreement. Recommendation: The City should review the grant agreement with the County in order to ensure that all the requirements of the agreement are understood and that reporting requirements are completed and submitted timely to the County. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2025-005 Timely Completion of Environmental Reviews Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Code of Federal Regulations (CFR) Chapter 24 Section 58.22 states, “Neither a recipient nor any participant in the development process, including public or private nonprofit or for-profit entities or any of their contractors, may commit HUD assistance on an activity or project until HUD or the state has approved the recipient’s Request for Release of Funds (RROF) and the related environmental certification from the responsible entity.” Condition: The City did not obtain the environmental review certification for the Navigation Center until November 16, 2025 which is after work began on the project. Effect: The City is not in compliance with the requirements of CFR Chapter 24, Section 58.22. Cause: City staff stated that there was a prior environmental assessment completed for the Navigation Center, however it was for a different location in the City. Subsequent to that environmental assessment, the City moved where the Navigation Center would be located to a different location. Due to this the new site required a new environmental assessment that was not completed until November 2025 after the work had started on the project. Recommendation: The City should ensure that all environmental assessments are completed prior to the start of any projects to ensure they are in compliance with the requirements of 24 CFR, Section 58.22. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City

Finding #SA2024-001 Cash Management and Accuracy of Federal Financial Reports Assistance Listing Number: 20.507 Assistance Listing Title: COVID-19 – Federal Transit Formula Grants (Urbanized Area Formula Program) – Federal Transit Cluster Name of Federal Agency: Department of Transportation Federal Award Identification Number: CA-2022-083-00 Criteria: The 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Related to these requirements, the City should submit drawdown requests to the Department of Transportation throughout the fiscal year as costs are incurred and Federal Financial Reports should agree with those drawdown requests and supporting accounting records. Drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the Department of Transportation unless specifically authorized by the grantor, and costs included in the Federal Financial Reports should be the same as those included in requests for reimbursement. Condition: During our review of the Federal Financial Reports related to grant CA-2022-083-00, we noted that for the first quarter of fiscal year 2024, the report included expenditures in the amount of $364,837, but the City only requested reimbursement in the amount of $265,281 during that same time period. In addition to our review of the Federal Financial Reports, we also reviewed the timing of expenditures in relation to the associated reimbursement requests and noted that for both of the grants listed above, the City did not file for and receive reimbursement for the associated grant expenditures until four to over eight months after the activity took place. The grant drawdowns took place as follows: Period of Federal Expenditures Date of Filing for Reimbursement July 1, 2023 to September 30, 2023 May 20, 2024 October 1, 2023 to December 31, 2023 May 20, 2024 January 1, 2024 to March 31, 2024 September 9, 2024 April 1, 2024 to June 30, 2024 November 25, 2024 Cause: We understand that the City fell behind on drawing down grant funds on a timely basis due to employee turnover and this in turn caused the inaccuracies in the Federal Financial Reports. Effect: The City is not in compliance with the internal control requirements of 2 CFR Section 200.303. The City is not matching expenditures with associated grant revenues throughout the fiscal year by filing timely reimbursement requests as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the grant. In addition, the late filing of reimbursement requests resulted in inaccurate Federal Financial Reporting to the grantor. Recommendation: The City must develop procedures to ensure grant reports are accurate and agree with supporting accounting records prior to being submitted to the grantor. The City must also develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2024-002 Compliance with Grant Documentation Requirements Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: A-00216-01 Criteria: The California Extended Water and Wastewater Arrearage Payment Program Guidelines include the following requirements: • Section F.2.1, Notification to Customers requires that the City must make best efforts to notify customers that they have applied for arrearage assistance from the State Water Board, and that this funding may be applied to customer debt accrued during the COVID-19 pandemic relief period, or the modified COVID-19 pandemic relief period, whichever is appropriate. Best efforts include notices on internet webpages, notices on social media sites, and signage at offices or payment centers. The modified COVID-19 pandemic relief period is the period beginning with the first billing period on or after June 16, 2021, that does not contain June 15, 2021, to December 31, 2022, inclusive, and includes any customer billing period that includes these dates. Condition: We selected forty customer credits (water and wastewater) for testing of the documentation of the date the credit was calculated. Although we understand the City calculated the customer arrearages and credits to be applied based on the total amount due from June 16, 2021 through December 31, 2022, City staff was unable to locate documentation to show the actual dates the credits were calculated for each customer and how the credits applied were calculated. Cause: We understand that the documentation of how the customer credits were calculated, including the period covered by the credit, could not be located due to staff turnover and due to the approach of the adjustments being entered manually into the system by one staff member. Questioned Costs: We question costs of $660,387, which consists of the amounts charged to the Arrearage Program, because we were unable to verify the dates the credits were calculated. Effect: The City is not in compliance with the terms and conditions of the California Arrearage Payment Programs related to Notification of Customer Credits and Payment Plans. Recommendation: The City should determine if reports can be generated from the utility billing system to show the amounts due from the customers during the eligible period of June 16, 2021 through December 31, 2022 and how the customer credits were calculated. In addition, the City must develop procedures to ensure compliance with all grant award terms and conditions and retain documentation to demonstrate such compliance until the grantor has closed-out the grant award program. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2024-003 Compliance with Grant Reporting Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: A-00216-01 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) agreement with the Department of the Treasury requires that the City “agrees to comply with any reporting obligations established by Treasury as they relate to this award.” The SLFRF Compliance and Reporting Guidance require the filing of a quarterly Project and Expenditure Report that is due by the end of the month following each quarter. Condition: We selected the Q4 2023 (October–December 2023) and Q2 2024 (April–June 2024) Project and Expenditure Reports for testing of timely filing. Although we noted the Q2 2024 report was filed timely on July 31, 2024, the Q4 2023 report was filed on March 4, 2024, which was not timely. Cause: Due to staffing shortages, the City was not able to complete reporting timely. Effect: The City is not in compliance with the award terms and conditions of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with the timely reporting provisions of the grant award terms and conditions and the SLFRF Compliance and Reporting Guidance. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2024-004 Compliance with Procurement Requirements Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: A-00216-01 Criteria: Section I, Procurement and Suspension and Debarment, of the May 2024 OMB Compliance Supplement includes the following: In July 2022, Treasury released Final Rule FAQ 13.15, which explains that only a subset of the requirements in Subparts D and E of the Uniform Guidance apply to recipients’ use of award funds under the revenue loss eligible use category. The requirements of 2 CFR sections 200.318 through 200.327 are not included in the list of requirements applicable to such funds. The FAQ 13.15 referenced indicates “In general, these requirements provide that recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient’s own funds.” Condition: We selected seven services and supplies transactions under the revenue loss category to test for allowability under the program and compliance with the City’s procurement policies and noted two vehicle purchases in the amounts of $60,762 and $54,383 were accompanied by sole source purchase documentation, in lieu of formal bidding, but the sole source forms were not signed as approved by the Department Director. Cause: We understand City staff could not locate the authorized forms for the two vehicle purchases. Effect: The City is not in compliance with the procurement requirements of the CSLFRF program. Recommendation: The City must develop procedures to ensure that the procurement files contain documentation to demonstrate compliance with the bidding/quote, contract and sole source requirements, as well as City Council approval requirements, to ensure compliance not only with its own policies, but with the procurement requirements of the CSLFRF grant. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2023-001 Cash Management and Accuracy of Federal Financial Reports Assistance Listing Number: 20.507 Assistance Listing Title: COVID-19 – Federal Transit Formula Grants Name of Federal Agency: Department of Transportation Federal Award Identification Number: CA-2020-212-00 and CA-2022-083-00 Criteria: The 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Related to these requirements, the City should submit drawdown requests to the Department of Transportation throughout the fiscal year as costs are incurred and Federal Financial Reports should agree with those drawdown requests and supporting accounting records. Drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the Department of Transportation unless specifically authorized by the grantor, and costs included in the Federal Financial Reports should be the same as those included in requests for reimbursement. Condition: During our review of the Federal Financial Reports related to the grants listed above, we noted the following: • For the annual report for the period of October 1, 2022 to September 30, 2023 related to grant #CA-2020-212-00, the report included expenditures of $508,871, but the City only requested reimbursement in the amount of $228,995 during that same time period. • For the third quarter of fiscal year 2023 for grant #CA-2022-083-00, the report included expenditures in the amount of $385,675, but the City only requested reimbursement in the amount of $364,837 during that same time period. • For the fourth quarter of fiscal year 2023 for grant #CA-2022-083-00, there were no current expenditures included in the report although the City had incurred grant expenditures during that period and was reimbursed $745,899 for the associated quarter. In addition to our review of the Federal Financial Reports, we also reviewed the timing of expenditures in relation to the associated reimbursement requests and noted that for both of the grants listed above, the City did not file for and receive reimbursement for the associated grant expenditures until four to ten months after the activity took place. The grant drawdowns took place as follows: Period of Federal Expenditures Date of Filing for Reimbursement July 1, 2022 to September 30, 2022 July 13, 2023 October 1, 2022 to December 31, 2022 July 13, 2023 January 1, 2023 to March 31, 2023 September 26, 2023 April 1, 2023 to June 30, 2023 February 26, 2024 Cause: We understand that the City fell behind on drawing down grant funds on a timely basis due to employee turnover and this in turn caused the inaccuracies in the Federal Financial Reports. Effect: The City is not in compliance with the internal control requirements of 2 CFR Section 200.303. The City is not matching expenditures with associated grant revenues throughout the fiscal year by filing timely reimbursement requests as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the grant. In addition, the late filing of reimbursement requests resulted in inaccurate Federal Financial Reporting to the grantor. Recommendation: The City must develop procedures to ensure grant reports are accurate and agree with supporting accounting records prior to being submitted to the grantor. The City must also develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-002: Timely Submission of Financial and Performance Reports Assistance Listing Number 97.083 Assistance Listing Title Staffing for Adequate Fire and Emergency Responses (SAFER) Name of Federal Agency Department of Homeland Security Federal Award Identification number: EMW-2018-FH-00543 Criteria: Financial and performance reports should be filed with the grantor timely. Financial reports (SF-425) are required to be submitted semi-annually within 90 days of the reporting period end and performance progress reports are required to be submitted within 30 days of the reporting period end. Condition: City staff stated that the SF-425 report for the period ending June 30, 2022 was never submitted, and the performance progress reports for the periods ending December 31, 2021 and June 30, 2022 were not submitted until February 2, 2024. Effect: Without timely submission of reports the City is not in compliance with the reporting requirements of the grant agreement. Cause: We understand City staff did not submit the financial and performance reports timely due to continuous staff turnover and the lack of workforce availability contributed to the shifting of grant responsibilities between different employees. Recommendation: The City must implement procedures to ensure financial and performance reports are submitted in a timely manner in compliance with grant requirements. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-003 Compliance with Grant Management Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: California Water and Wastewater Arrearage Payment Program Guidelines Section F.2.1, Notification of Customer Bill Credits, requires that the City allocate Water Arrearage Program payments as bill credits to customer accounts within 60 days of receiving payment or March 17, 2022, and Appendix A, Section 6.2.1, Notification of Customer Bill Credits, requires that the City allocate Wastewater Arrearage Program payments as bill credits to customer accounts within 60 days of receiving payment or July 7, 2022. In addition, sections F.3 and Appendix A, 6.3, Return of Funds Not Credited to Customers, require that any unexpended funds are to be returned to the grantor within six months of receipt. Condition: We understand the City calculated the customer arrearages and credits to be applied based on the total amount due from March 4, 2020 to June 15, 2021, but did not apply the water and wastewater credits to the customer accounts until dates ranging from March 30, 2022 to September 8, 2022. As noted in Finding #SA2022-006, we were not able to confirm the dates on which the credit calculations were based. In addition, unexpended water funds were due to the grantor by July 15, 2022, but the City did not return the funds to the grantor until October 4, 2022. Cause: We understand that the delay in posting the credits to customer accounts was caused by the adjustments being entered manually into the system by one staff member, which took much longer than anticipated. However, City staff could not provide documentation that the delay was communicated to the grantor. That delay, in turn, caused the delay in the return of unexpended funds to the grantor for the water program. Effect: The City is not in compliance with the terms and conditions of payment related to the required program deadlines of the California Arrearage Payment Programs. As a result, the City could have been required to return moneys to the grantor. Recommendation: Although it does not appear that the grantor disallowed any of the program costs, the City must develop procedures to ensure compliance with grant award terms and conditions of payment, including timely use of grant funds. In the event the City encounters delays that affect timely compliance, the City should communicate with the grantor and retain documentation of any such communications to show that they occurred timely and the grantor was aware of the delay. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-004 Compliance with Grant Reporting Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) agreement with the Department of the Treasury requires that the City “agrees to comply with any reporting obligations established by Treasury as they relate to this award”. The SLFRF Compliance and Reporting Guidance require the filing of a quarterly Project and Expenditure Report that is due by the end of the month following each quarter. Condition: We selected the Q1 2022 (Jan-Mar 2022) and Q2 2022 (April-June 2022) Project and Expenditure Reports for testing of timely filing and noted the Q1 2022 report was filed timely on April 28, 2022 but the Q2 2022 report was not filed until September 1, 2022. Cause: Due to staffing shortages, the City was not able to complete reporting timely. Effect: The City is not in compliance with the award terms and conditions of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with the timely reporting provisions of the grant award terms and conditions and the SLFRF Compliance and Reporting Guidance. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-005 Suspension and Debarment Documentation for Contracts and Subcontracts Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) agreement with the Department of the Treasury requires that the City comply with OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), 2 C.F.R. Part 180, including the requirement to include a term or condition in all lower tier covered transactions (contracts and subcontracts described in 2 C.F.R. Part 180, subpart B) that the award is subject to 2 C.F.R. Part 180 and Treasury’s implementing regulation at 31 C.F.R. Part 19. In addition, the OMB Compliance Supplement for the Program requires that prior to entering into subawards and contracts with award funds, recipients must verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded pursuant to 31 CFR section 19.300. Condition: The City was unable to provide support showing that suspension and debarment checks were completed during the fiscal year and prior to disbursement to the vendors. We did note that the two vendors we selected for testing were not listed as suspended or debarred on the SAM.gov system as of July 7, 2024. Cause: Due to turnover in staffing, the City was not able to provide support showing that the City was in compliance with the requirement to verify the status of contractors prior to entering into agreements with the entities. Effect: The City is not in compliance with the award terms and conditions and the OMB Compliance Supplement requirements of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with debarment and suspension provisions of the grant award terms and conditions and the OMB Compliance Supplement of the CSLFRF program prior to expending additional funds. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-006 Compliance with Grant Documentation Requirements Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The California Water and Wastewater Arrearage Payment Program Guidelines include the following requirements: • Section F.2.1, Notification of Customer Bill Credits, and Appendix A, Section 6.2.1, Notification of Customer Bill Credits require that the City notify water and wastewater customers, respectively, in writing of the amount credited. The acknowledgement must state that the credited amount is being provided through the California Water and Wastewater Arrearage Payment Program through funding from the State Water Resources Control Board using federal ARPA funds. • Section F.2.2, Payment Plans, requires that the City offer any residential and commercial water customers with remaining balances after the credits have been applied the option to enroll in a payment plan. The notice offering the payment plan must provide the customer with 30 days to enroll in the plan from the date of the notice. Condition: We selected forty-one customer credits (water and wastewater) for testing of the documentation of the date the credit was calculated and whether the notification included the required elements noted in the Guidelines. Although we understand the City calculated the customer arrearages and credits to be applied based on the total amount due from March 4, 2020 to June 15, 2021, City staff was unable to locate documentation to show the actual dates the credits were calculated for each customer and how the credits applied were calculated. We did note that the customers we tested had amounts due during the eligible period in excess of the credits applied. As for the notifications to the customers, City staff could not provide the notifications sent to the customers selected for testing. City staff did provide an example notification for a different water customer credit dated April 28, 2022 that included the required Notification and Payment Plan elements noted above. Cause: We understand that the documentation of how the customer credits were calculated, including the period covered by the credit, could not be located due to staff turnover and due to the approach of the adjustments being entered manually into the system by one staff member. In addition, we understand the notification letters to the individual customers were not retained – only the one example letter was retained in the City’s files. Questioned Costs: We question costs of $735,218, which consists of the amounts charged to the Arrearage Program, because we were unable to verify the dates the credits were calculated. Effect: The City is not in compliance with the terms and conditions of the California Arrearage Payment Programs related to Notification of Customer Credits and Payment Plans. Recommendation: The City should determine if reports can be generated from the utility billing system to show the amounts due from the customers during the eligible period of March 4, 2020 to June 15, 2021 and how the customer credits were calculated. In addition, the City must develop procedures to ensure compliance with all grant award terms and conditions and retain documentation to demonstrate such compliance until the grantor has closed-out the grant award program. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-007: Cash Management Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: The City should submit drawdown requests to San Joaquin County throughout the fiscal year as costs are incurred. Those drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the County, unless specifically authorized by the grantor, and costs reported on the SEFA should be the same as those included in requests for reimbursement. Condition: The City reported expenditures under the COVID-19 - CDBG-CV Program totaling $378,077 in fiscal year 2021. As noted in prior year finding SA2021-005, the City had not requested reimbursement for all of those costs during fiscal year 2021 or subsequent to fiscal year 2021. When we began our work on the fiscal year 2022 single audit, we noted that the COVID-19 - CDBG-CV Program was not included on the SEFA. The grant award was for $400,000 and we inquired about whether the remaining funding of $21,923 had been expended or reimbursed during the fiscal year 2022. In response to that question, City staff provided the grant drawdown information which totaled to $400,000, but only $40,200 of those costs had been included on the prior year SEFA. The remaining costs drawn down from the grant during fiscal year 2022 of $359,800 were different costs than were incurred during fiscal year 2021. Effect: The City is not matching expenditures with associated grant revenues throughout the fiscal year as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the County. In addition, when the City reports costs on the SEFA that are different from the costs requested for reimbursement from the grantor, it not only misstates the SEFA, but it could also mean ineligible costs are reported. Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to the late preparation of reimbursements and the inclusion of project expenditures on the reimbursement request that were different from those reported on the prior year SEFA. Identification as a repeat finding: Yes, since 2021 Recommendation: The City must develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year. In addition, City staff should ensure that program costs incurred are properly reported on the annual SEFA. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-008: Accurate Review and Payment of Vendor Reimbursement Requests Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Reimbursement requests received by the City from a vendor should be reviewed in detail to ensure that reimbursable expenditures are supported by documentation that is complete and clearly readable in order to ensure that any costs that will be reimbursed and charged to the grant are considered supported and allowable. In addition, the payment to the vendor should agree to the amount of eligible costs that are to be reimbursed. Condition: In our testing of expenditures related to the CDBG-CV grant we noted the following: • The City was invoiced for costs in the amount of $56,662, however the supporting documentation provided by the vendor totaled to $55,890 and the City issued a check to the vendor in the amount of $56,232, which did not agree to either the invoiced amount or the amount provided as support for the invoice. • The City was invoiced for the gross amount of payroll costs incurred by the vendor’s employees, however, the support provided for each of the invoices included the employee payroll checks which were net of the related payroll taxes. The City was unable to provide support to show that the vendor paid the payroll taxes to the applicable taxing entities. City staff determined that total gross payroll costs reimbursed to the vendor for fiscal year 2022 were $216,224 and supporting documentation for the net payroll totaled to only $178,538. The difference between the gross amount of payroll charged to the City by the vendor and the net amount of payroll support that was provided was $37,686. • One of the invoices included pages of support that were not readable with costs that totaled $347. We could not determine what the expenditures were for due to the condition of the scans of the supporting documentation. • The support for some of the payroll costs that were being charged to the grant by the vendor included timesheets that were not readable and therefore we could not agree the hours charged from the timesheet to the hours paid in the employees’ paycheck. Effect: Incorrect payments made to vendors or payments made with incomplete supporting documentation or based on documents that are not legible increases the risk that unallowable costs could be charged to the grant. Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to inaccurate reviews of reimbursements and payments to the vendor. In addition, City staff had noticed that some of the documentation was illegible or missing, but did not request the information from the vendor. Questioned Costs: We question costs of $38,033, which consist of $37,686 of payroll taxes paid for which support was not provided and the $347 that was supported by illegible documentation. Recommendation: The City should implement processes to ensure the review of any invoices or requests for reimbursement undergo a detailed review to ensure that all expenditures are supported by clearly legible documentation and that when payment is made to a vendor, the amount of the payment made agrees to the allowable and supported amount being requested by the vendor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2021-002: Support for Payroll Costs Charged to Grant Assistance Listing Number: 20.507 Assistance Listing Title: Federal Transit – Formula Grants (Urbanized Area Formula Program) Name of Federal Agency: Department of Transportation - Federal Transportation Administration Federal Award Identification Number: CA-2021-009-01, CA-2020-005-01, CA-2020-005-02 Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award. Section 200.430(i)(viii) indicates that budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that the system for establishing the estimates produces reasonable approximations of the activity actually performed, among other requirements. Condition: We noted that the payroll costs for one employee were charged to the program based on a flat rate of 25% of the payroll costs, rather than based on the actual hours worked. Payroll costs, including salary and benefits, charged to the program during fiscal year 2021 totaled $8,997. Questioned Costs: We question costs of $8,997, which consists of the payroll and fringe benefits charged to the grant for the employee based on the flat percentage of pay and benefits for the full fiscal year. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that grant program staff were not aware of the payroll documentation requirement and due to staff turnover, Finance staff cannot determine whether any such documentation exists. Identification as a repeat finding: Yes, since 2019 Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are documented in accordance with 2 CFR Part 200.430 for the Federal Transit-Formula Grants program and all federal grant programs. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2021-003: Pro-Rating Annual Payroll Costs Charged to Grant Assistance Listing Number: 21.019 Assistance Listing Title: COVID-19 - Coronavirus Relief Fund Name of Federal Agency: Department of Treasury Pass Through Entity: California Department of Finance Federal Award Identification Number: 390 Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award. Condition: The City charged a portion of three months of police and fire salaries to the Coronavirus Relief Fund program, and we noted one employee’s pay during that time included an annual stipend of $12,333, of which 33% was charged to the federal award, or $4,070. Although the pay was related to the employee’s gross pay under the applicable memorandum of understanding for the period, since it was an annual amount paid during the time charged to the grant, it should have been pro-rated to charge only 25% of the stipend to the federal award. Therefore, only 33% of that 25%, or $1,017 should have been charged to the federal award. After the issue was discovered, we reviewed the other payroll charges for amounts that did not appear to be in line with regular salaries and noted the payroll charges included annual stipends for three employees totaling $35,905 of which 67% was charged to the federal award, or $24,061. Those amounts should have been prorated as noted above, therefore only 67% of 25%, or $6,015 should have been charged to the federal award. And, one employee’s vacation buy back, compensatory time off buy back, furlough used and administrative leave pay totaling $50,679 was charged to the grant, which does not appear to be related to the three-month period of salaries charged to the grant. Questioned Costs: We question costs in the amounts of $3,053, $18,046 and $50,679, for total questioned costs of $68,724. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that City staff compiled the report of eligible public safety payroll costs to be charged to the federal award and did not analyze to see if it included annual pay amounts that should be pro-rated for the time period of salaries charged. Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are pro-rated when the costs cover a time period that is longer than that covered by or being charged to the grant award, to ensure that costs are allocated equitably between federal and non-federal funding sources. In addition, the City should work with the grantor to determine if other eligible public safety payroll costs are allowed to replace the ineligible costs, or if the questioned costs need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2021-004: Allowable Subrecipient and Contract Costs Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: The costs reimbursed to subrecipients and paid to vendors should not only be allowable under the grant program, the amounts paid should be supported by a contract or subgrant agreement with the entity. Condition: During our testing of program expenditures for compliance with grant limitations and allowability, we noted that the City had a contract with a subrecipient for the Student Success Program, which included the personnel costs for the program/client coordinator of the program that provides basic and human schooling needs for eligible low-income children enrolled in the program. However, the costs reimbursed under the subrecipient agreement during fiscal year 2021 of $3,892 were for the subrecipient’s rent costs and not for costs related to the Student Success Program. We also noted one vendor payment for costs related to running the Manteca Shelter in the amount of $50,000 that was supported by the vendor’s detail of expenses incurred for the period that totaled to only $47,292, a difference of $2,708. The contract with the vendor for the services provided indicated that it “shall not exceed” $225,000, and the first payment was to be a flat amount of $40,000, but it also indicated the “full payment of each task will only be made at such time as each task is completed” and did not indicate whether the remaining payments were to be on the reimbursement basis or a flat amount. City staff was not able to provide documentation to support the payment of the contract in “installments” as noted in the vendor invoice. Questioned Costs: We question the costs disbursed to the subrecipient for the fiscal year of $3,892 and we question the costs paid to the vendor in excess of the supporting documentation of $2,708. Effect: The City is not in compliance with the allowable costs requirements of the grant program. Cause: We understand that the City staff responsible for the grant reimbursements at the time are no longer with the City and current City staff could not determine if the original subrecipient agreement was amended to allow the change from personnel costs to rent and if the vendor contract payment had additional supporting documentation that totaled to the amount paid. Recommendation: The City should develop procedures to ensure that subrecipient costs reimbursed are related to the costs in the approved subgrant agreement. In addition, the City should work with the grantor to determine if the ineligible costs can be corrected on a future reimbursement request, or if the questioned costs need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2021-005: Cash Management Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: The City should submit drawdown requests to San Joaquin County throughout the fiscal year as costs are incurred. Those drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the County, unless specifically authorized by the grantor. Condition: During our testing of grant expenditures and the associated drawdown requests, we noted the following: • One program disbursement in May 2021 in the amount of $20,100 was not included on a reimbursement request until September 2021. • One program disbursement in November 2020 in the amount of $14,063 was not included on a reimbursement request until August 2021. • One disbursement on December 3, 2020 of $5,000 was included in an October 2020 reimbursement that was received on November 10, 2020. • One disbursement on September 17, 2020 of $3,892 was included in a July 2020 reimbursement that was received on September 8, 2020. • Three program disbursements totaling $123,693 under the CDBG-CV program were not included on a reimbursement request during fiscal year 2021 or subsequent. Effect: The City is not matching expenditures with associated revenues throughout the fiscal year as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the County. And, the City requested and received reimbursement nine to twenty-three days before making the associated payments to two of the vendors. Cause: We understand that both the variety of program expenditures incurred during the fiscal year, administrated by different departmental staff and staff turnover led to the late preparation of reimbursements and/or failure to file reimbursement requests. City staff was unable to determine why certain program costs were included on reimbursement requests prior to making the associated vendor payments. Recommendation: The City should develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year. In addition, City staff should ensure that costs are incurred prior to including them on a reimbursement request. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2020-001: Support for Payroll Costs Charged to Grant Assistance Listing number: 20.507 Assistance Listing Title: Federal Transit ? Formula Grants (Urbanized Area Formula Program) Name of Federal Agency: Department of Transportation - Federal Transportation Administration Federal Award Identification Number: CA-2016-104-02, CA-2020-005-00 Criteria: 2 CFR Part 200.430(i), ?Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards? requires that grantees adhere to the following, ?Payroll systems must be based on records that accurately reflect the work performed? and ?be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...? The payroll records must be a part of the official record, reflect the employee?s total activity and show if the specific activity of the person is being paid by more than one federal award. Section 200.430(i)(viii) indicates that budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that the system for establishing the estimates produces reasonable approximations of the activity actually performed, among other requirements. Condition: We noted that the payroll costs for one employee were charged to the program based on a flat rate of 24.7% and 22.5% of the payroll costs, rather than based on the actual hours worked. Payroll costs, including salary and benefits, charged to the program during fiscal year 2020 totaled $28,863. Questioned Costs: We question costs of $21,032, which consists of the payroll and fringe benefits charged to the grant for the employee based on the flat percentages of pay and benefits for the full fiscal year of $28,863, less additional eligible costs the City identified during our audit of $7,831. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that grant program staff were not aware of the payroll documentation requirement and due to staff turnover, Finance staff cannot determine whether any such documentation exists. Identification as a repeat finding: Yes, since 2019 Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are documented in accordance with 2 CFR Part 200.430 for the Federal Transit-Formula Grants program and all federal grant programs. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2020-002: Timely Submission of Invoices to Grantor or Filing of Required Written Communication Assistance Listing number: 20.205 Assistance Listing Title: Highway Planning and Construction Name of Federal Agency: Department of Transportation Name of Pass-Through Agency: California Department of Transportation Federal Award Identification Number: STPL-5242 (031), STPL-5242 (032) Criteria: Provision 1E of the Special Covenants or Remarks to the grant Program Supplement Agreements for STPL-5242 (031) and STPL-5242 (032) require that the City submit invoices at least once every six months. If no costs have been invoiced for a six-month period, the City agrees to submit a written explanation of the absence of project activity along with a target billing date and target billing amount. In addition, the grantor reserves the right to suspend future authorizations/obligations for Federal aid projects, or encumbrances for State funded projects, as well as suspend invoice payments for any ongoing or future project, if project costs have not been invoiced by the City for a six-month period. Condition: We noted that for STPL-5242 (031), reimbursement #7 was filed on May 19, 2019, #8 was filed on April 17, 2020, and #9 (final) was filed on November 19, 2020. For STPL-5242 (032), reimbursement #8 (included expenditures through June 20, 2019) was filed on April 17, 2020, #9 was filed on December 8, 2020, and #10 (final) was filed on July 27, 2021. Although the City did receive reimbursement from the grantor related to these requests, we understand the City did not file the required written explanations when invoices were not filed at least every six months. Effect: The City is not in compliance with provision 1E of the Special Covenants or Remarks to the grant Program Supplement Agreements. Cause: We understand that grant program staff were transitioning from one department to another and were unable to prepare the reimbursement requests timely. Identification as a repeat finding: No Recommendation: The City should establish procedures to ensure that reimbursement requests are prepared and filed with the grantor at least every six months for all projects, and in the event an invoice is not prepared timely, the required written explanation is filed with the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2019-001: Support for Payroll Costs Charged to Grant CFDA number: 20.507 CFDA Title: Federal Transit ? Formula Grants (Urbanized Area Formula Program) Name of Federal Agency: Department of Transportation - Federal Transportation Administration Federal Award Identification Number: CA-90-Z172, CA-2016-104-01, CA-2016-104-02 Criteria: 2 CFR Part 200.430(i), ?Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards? requires that grantees adhere to the following, ?Payroll systems must be based on records that accurately reflect the work performed? and ?be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...? The payroll records must be a part of the official record, reflect the employee?s total activity and show if the specific activity of the person is being paid by more than one federal award. Section 200.430(i)(viii) indicates that budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that the system for establishing the estimates produces reasonable approximations of the activity actually performed, among other requirements. Condition: We tested payroll charged to the Federal Transit program for three pay periods and noted that the payroll costs for one of the employees for all three pay periods were charged to the program based on a flat rate of 24.7% of the payroll costs, rather than based on the actual hours worked. Questioned Costs: We question costs of $22,787, which consists of the payroll and fringe benefits charged to the grant for the employee based on the flat percentages of pay and benefits for the full fiscal year. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that grant program staff were not aware of the payroll documentation requirement and due to staff turnover, Finance staff cannot determine whether any such documentation exists. Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are documented in accordance with 2 CFR Part 200.430 for the Federal Transit-Formula Grants program and all federal grant programs. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

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