City of San BrunoState Government

2025-01 – Special Tests and Provisions – Wage Rate Requirements (Significant Deficiency) Program: Highway Planning and Construction, Assistance Listing Number 20.205, U.S. Department of Transportation, Indirect Program passed through California Department of Transportation Criteria: Per federal regulations in 29 CFR Part 5(a)(3)(ii)(A), the contractor or subcontractor must submit certified payrolls to the City for each week they perform construction work applicable to the Davis-Bacon Act. The regulations allow submissions through an electronic system that requires a legally valid electronic signature. Importantly, the regulations state that in the case that the contractor is unable or limited in its use of the electronic system, the City must permit other methods of submission. Condition: The City did not obtain or retain all the certified payrolls from the contractor and subcontractors for the project. Cause: In June 2024, the State’s electronic submission system for certified payrolls malfunctioned. Requirements to submit through the system were paused for a minimum of 6 months. Effect: The lack of certified payrolls prevented the City from timely reviewing the certified payroll data, and complying with the requirements of 29 CFR Part 5. Questioned Costs: None noted Repeat Finding: No Recommendation: We recommend the City review its policies and grant requirements when issues arise in the way data is processed. Management’s Response: The prime contractor and all subcontractors are responsible for submitting Certified Payroll Records (CPR) to the Department of Industrial Relations (DIR). The PW project manager (Harry Yip & Ibraheem Mosa) will review CPR’s prior to approving monthly progress payments to confirm compliance with prevailing wage requirements. Federal review timelines require review prior to the approval of monthly progress payments. The delay in CPR review was due to extended outages and accessibility issues with the DIR electronic submission system during most of the project. This issue was identified through ongoing PW coordination with the contractor during weekly progress meetings where missing or inaccessible CPR’s were consistently discussed and tracked. The City obtained and reviewed available CPR’s while continuing to request outstanding records during weekly progress meetings. PW developed and implemented a new formal review checklist & Standard Operating Procedure (SOP) in late February 2026. The new review checklist & SOP will help to streamline & standardize the review process while improving efficiency. Contractors are required to submit wet signed hard copies of CPR’s if those records are not available via DIR.

2024-01 – Reporting (Significant Deficiency) Program: Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number 21.027, U.S. Department of Treasury, Direct Program Criteria: Per the State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, metropolitan cities with a population below 250,000 that are allocated more than $10 million in State and Local Fiscal Recovery Funds are required to submit Performance and Expenditure Reports (P&E Reports) quarterly. Internal controls over reporting compliance should ensure accurate, complete, and timely submission of all required reports. Condition: Management that tracked and submitted the P&E Reports left the City in August 2022, and new management was not aware of the requirement nor received correspondence from the U.S. Department of Treasury (Treasury). Effect: The City did not submit any of the required quarterly P&E Reports to the Treasury for the period that covered July 1, 2023 through September 30, 2023. Questioned Costs: None Repeat Finding: This is the continuation of finding 2023-04. Correction was implemented January 31, 2024. Recommendation: None Management’s Response: This is resolved.

2024-02 – Allowable Costs (Significant Deficiency) Program: Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number 21.027, U.S. Department of Treasury, Passed through the State Water Resources Control Board Criteria: Grant expenditures should be for costs that are allowable per the grant requirements. Internal controls over grant expenditures should ensure compliance over the grant requirements. The State Water Resources Control Board (State) grant allows credits to customer water and wastewater accounts for unpaid bills from the period July 1, 2021 through December 31, 2022. Additionally, customer accounts should be credited only for bills for services that remain unpaid as of the date the account credit is applied. Condition: The City calculated the unpaid bills as of December 2023 when applying for the grant but did not re-calculate those unpaid amounts as of the date the accounts were received from the State and credited with the grant funds in April 2024. Effect: Customers who paid down their liabilities to the City between the date the City applied for the grant and the date the grant funds were received from the State ended with accounts that had credit balances, thus pre-paying for future bills. Credits for future bills is not allowable per the grant. Questioned Costs: 10 of the 25 credited accounts we tested were over-credited by a total of $10,467. Some of the other credited accounts tested could have been credited more, resulting in a net over-credit of $6,921 for the selections as known questioned costs. Likely questioned costs for the program totaled $116,900, which includes the corresponding allowable administrative overhead charge of 3%. Repeat Finding: This is not a repeat finding. Recommendation: We recommend the City read and summarize grant requirements for all grants that the City participates in, as well as implementing controls over those grant requirements to prevent errors from occurring. Management’s Response: The City agrees that the absence of a structured data review and analysis process sufficient to fulfill reporting requirements creates a risk of noncompliance with federal statutes, regulations, and terms and conditions of the grant awards. The City will develop, document, and implement formal grant summary requirements review process and audit preparedness policy and procedures. The responsibilities, deliverables, and deadlines will be clearly outlined and communicated to all staff members. The City will remedy the customer account credit balances by October 2025. Management intends to review and adjust the customer account balances.

Program: Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number 21.027, U.S. Department of Treasury, Direct Program Criteria: Per the State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, metropolitan cities with a population below 250,000 that are allocated more than $10 million in State and Local Fiscal Recovery Funds are required to submit Performance and Expenditure Reports (P&E Reports) quarterly. Internal controls over reporting compliance should ensure accurate, complete, and timely submission of all required reports. Condition: Management that tracked and submitted the P&E Reports left the City in August 2022, and new management was not aware of the requirement nor received correspondence from the U.S. Department of Treasury (Treasury). Effect: The City did not submit any of the required quarterly P&E Reports to the Treasury for the period that covered July 1, 2022 through June 30, 2023. Questioned Costs: None. Repeat Finding: This is not a repeat finding. Recommendation: We recommend the City update policies and procedures for grant reporting and administration such as keeping a listing of grant reporting requirements in their records. Management’s Response: The City agrees that the absence of a structured data collection and analysis process sufficient to fulfill reporting requirements creates a risk of noncompliance with federal statutes, regulations, and terms and conditions of the grant awards. The City will develop, document, and implement a formal year-end closing process and audit preparedness policy and procedures. The responsibilities, deliverables, and deadlines will be clearly outlined and communicated to all staff members. The City remedied the delinquent ARPA SLFRF quarterly P&E Report to the Treasury in January 2024, covering July 1, 2022, through December 31, 2023. Management intends to fully expend the remaining ARPA SLFRF award in FY24 and file the required quarterly P&E Reports in April 2024 and the final report in July 2024.

Finding SA2019-001: Deficiency of Procurement Policy Toward Uniform Guidance CFDA number: 20.205 CFDA Title: Highway Planning and Construction Name of Federal Agency: Department of Transportation Federal Award Identification number Name of pass-through Entity: California Department of Transportation Criteria: According to the Uniform Guidance (UG), the implementation of the procurement standards in 2 CFR sections 200.317 through 200.326 is now required for auditee fiscal years beginning on or after December 26, 2017. 2 CFR section 200.110(a), effective date amended on May 17, 2017, allow non-Federal entities to continue to comply with the procurement standards in OMB Circular A-110 or the A-102 common rule, as applicable, through December 25, 2017, extending the grace period from 2 years to 3 years. The provisions in 2 CFR 200.110 also required non-federal entities to document their decision to choose to use the previous procurement standards during the extension period. Condition: Per review City?s Procurement Policy, the City has lastly updated its Policy on 05/01/2019, However no documentation regarding Uniform Guidance Compliance. It appeared that the City staff was unaware of such UG requirement. Effect: the City?s Procurement Policy was not in compliance with the Uniform Guidance in 2 CFR section 200.317 through 200.326. Cause: It appeared that the relevant City staffs have not received proper training in Uniform Guidance. Recommendation: The City should ensure that it has reviewed the procurement standards in the Uniform Guidance, and update its procurement policy for fiscal year 2020 to be in compliance with Uniform Guidance in 2 CFR sections 200.317 through 200.326. Key related staffs to the grants management should receive proper training in Uniform Guidance.

Finding SA2019-002: Accurate Preparation of the schedule of Expenditures Federal Awards CFDA number: 20.600 and 20.608 CFDA Title: Selective Traffic Enforcement Program (STEP) Name of Federal Agency: Department of Transportation Federal Award Identification number PT19107 Name of pass-through Entity: State of California Office of Traffic Safety Criteria: In accordance with the requirements of OMB Circular A-133, the City should report all Federal expenditures in the Schedule of Expenditures of Federal Awards (SEFA) each fiscal year. In addition, eligible federal expenditures should be included on the SEFA regardless of whether funds have been received from the grantor as of the SEFA preparation date. Condition: When the SEFA was provided to us for audit, we noted that the City reported expenditures for CFDA 20.600 of $20,913 and none for CFDA 20.608. However, per review of supporting documentation for each program and after inquiry with City staff, we determined that the expenditures of federal awards should have only been $7,502 and $13,411 respectively, for each program. Effect: Overstating of understating program expenditures in the SEFA not only misstates the SEFA, it results in noncompliance with the requirements of individual grants agreements and OMB Circular A-133. As a result, future federal funding could be adversely affected. Cause: It appears City staff is not familiar with the reporting requirements of OMB Circular A-133 and how to determine the expenditures that should be reported in the SEFA. It is the first time the City is subject to Single Audit. Recommendation: The City should develop procedures to ensure that annual federal expenditures for all grant agreements are accurately included on the SEFA.