City of Santa RosaLocal Government

Reference Number: 2025-002 Category of Finding: Allowable Costs/Cost Principles and Federal Expenditure Reporting (SEFA) Type of Finding: Material Weakness and Instance of Noncompliance Federal Agency: U.S. Department of Homeland Security City Administering Department: Santa Rosa Fire Department Federal Program Title: Staffing for Adequate Fire and Emergency Response (SAFER) Assistance Listing Number: 97.083 Federal Award Number and Year: EMW-2022-FF-00347; 2022 Criteria Under 2 CFR 200.403 and 200.405, the City is responsible for ensuring that only allowable costs that are reasonable, necessary, and allocable to the federal program are charged to federal awards. In addition, 2 CFR 200.510(b) requires the Schedule of Expenditures of Federal Awards (SEFA) to accurately reflect the total federal expenditures for each program based on allowable costs incurred during the fiscal year. Condition During our testing of the SAFER program administered by the U.S. Department of Homeland Security through the Federal Emergency Management Agency, we noted the City submitted a reimbursement request that included unallowable costs. FEMA subsequently reviewed the request and adjusted the reimbursement to exclude the unallowable costs, reimbursing the City only for allowable expenditures. However, the City’s SEFA reported federal expenditures based on the originally submitted reimbursement amount rather than the corrected allowable amount approved by FEMA. Cause The City did not have sufficient internal control procedures to ensure that reimbursement requests submitted under the SAFER program were reviewed for allowability prior to submission. In addition, the City’s process for preparing the SEFA did not include procedures to verify that reported federal expenditures reflected the final reimbursed amounts after federal agency adjustments. This condition was further affected by insufficient coordination between program personnel responsible for the reimbursement request and finance personnel responsible for SEFA preparation. Effect The submission of unallowable costs represents noncompliance with the federal Allowable Costs/Cost Principles requirement. Additionally, the SEFA overstated federal expenditures for the SAFER program, resulting in inaccurate federal financial reporting. The City corrected the reported amounts on the SEFA . Questioned Costs No questioned costs are reported because FEMA identified and removed the unallowable costs prior to reimbursement.Recommendation We recommend that the City strengthen internal controls over federal grant administration and reporting related to the SAFER program. Specifically, the City should implement procedures to: • Perform a documented review of reimbursement requests prior to submission to ensure all costs meet federal allowability requirements. • Ensure program staff communicate any federal agency adjustments or disallowances to finance personnel responsible for financial reporting. • Enhance SEFA preparation and review procedures to verify that reported federal expenditures reflect allowable costs and reconcile to final reimbursement documentation or federal agency approvals. These procedures would help ensure compliance with federal cost principles and improve the accuracy of federal expenditure reporting. Views of Management Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.

Reference Number: 2023-001 Category of Finding: Special Tests and Provisions – HQS Enforcement Type of Finding: Significant Deficiency and Instance of Noncompliance Federal Agency: U.S. Department of Housing and Urban Development City Administering Department: Housing and Community Services Federal Program Title: Section 8 Housing Choice Vouchers Assistance Listing Number: 14.871 Federal Award Number and Year: CA088; 2022 Criteria: Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. 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. Standards for Financial and Program Management. §200.303 - Internal controls. (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). Title 24 - Housing and Urban Development. Subtitle B - Regulations Relating to Housing and Urban Development. Chapter IX - Office of Assistant Secretary for Public and Indian Housing, Department of Housing and Urban Development. Part 982 - Section 8 Tenant-Based Assistance: Housing Choice Voucher Program. Subpart I - Dwelling Unit: Housing Quality Standards, Subsidy Standards, Inspection and Maintenance. §982.404 - Maintenance: Owner and family responsibility; PHA remedies. (24 CFR 982.404): (a) Owner obligation. (1) The owner must maintain the unit in accordance with HQS. (2) If the owner fails to maintain the dwelling unit in accordance with HQS, the PHA must take prompt and vigorous action to enforce the owner obligations. PHA remedies for such breach of the HQS include termination, suspension or reduction of housing assistance payments and termination of the HAP contract. (3) The PHA must not make any housing assistance payments for a dwelling unit that fails to meet the HQS, unless the owner corrects the defect within the period specified by the PHA and the PHA verifies the correction. If a defect is life threatening, the owner must correct the defect within no more than 24 hours. For other defects, the owner must correct the defect within no more than 30 calendar days (or any PHA-approved extension). (4) The owner is not responsible for a breach of the HQS that is not caused by the owner, and for which the family is responsible (as provided in § 982.404(b) and § 982.551(c)). (However, the PHA may terminate assistance to a family because of HQS breach caused by the family.) Title 24 - Housing and Urban Development. Subtitle B - Regulations Relating to Housing and Urban Development. Chapter IX - Office of Assistant Secretary for Public and Indian Housing, Department of Housing and Urban Development. Part 985 - Section 8 Management Assessment Program (SEMAP) and Small Rural PHA Assessments. Subpart A - General. §985.3 - Indicators, HUD Verification Methods and Ratings. (24 CFR 985.3): (f) HQS Enforcement (1) This indicator shows whether, following each HQS inspection of a unit under contract where the unit fails to meet HQS, any cited life-threatening HQS deficiencies are corrected within 24 hours from the inspection and all other cited HQS deficiencies are corrected within no more than 30 calendar days from the inspection or any PHA-approved extension. In addition, if HQS deficiencies are not corrected timely, the indicator shows whether the PHA stops (abates) housing assistance payments beginning no later than the first of the month following the specified correction period or terminates the HAP contract or, for family-caused defects, takes prompt and vigorous action to enforce the family obligations. (24 CFR 982.404) Condition: We noted the following 3 exceptions during our testing of 40 HQS inspection reports: • One HQS inspection report indicated a life-threatening (emergency) repair which was required to be repaired within 24 hours by the owner (landlord). The City did not have documentation that the emergency repair work was completed within the required 24-hour period. The City’s only documentation of communications with the landlord regarding the required repairs from the failed inspection indicated that all repairs, both the emergency and non-emergency, were completed within the required 30-day non-emergency repair timeframe. • One of the City’s failed inspection memo noted all repairs were made, however, the City did not have documentation supporting the repair for one of the failed items included in the HQS inspection report. • For one inspection report, there was no evidence of review by the City’s housing program inspector on the failed inspection memo. The failed inspection memo documents the City’s review of all corrective action documentation for the failed inspection. Cause: The City’s established process for documenting correction of emergency repairs is reliant on the housing program personnel to document verbal and/or video meeting calls where landlords will provide visual confirmation of the corrective action. In addition, due to the temporary suspension of all HQS inspections by HUD during the COVID-19 pandemic, there was a significant increase in the number of inspections during FY2023, as HUD issued guidance that all units must have catch-up inspections that were missed during the temporary suspension. Effect: Housing Assistance Payments (HAP) may not be properly abated to owners that fail to make required repairs within the specified timeframe. Questioned Costs: There was a HAP payment of $1,102 made to the owner on the first of the month following the 24-hour repair for which there was no documentation of corrective action within the required 24-hour timeframe. Context: HAP for the Section 8 Housing Choice Vouchers program (excluding Emergency Choice Vouchers and Portability Vouchers) totaled $23,638,920 for the fiscal year ended June 30, 2023. The sample was not a statistically valid sample. Identification as a Repeat Finding: This was not a repeat finding from the immediate prior year. Recommendation: The City should evaluate its current tracking method of 24-hour repairs and consider including written confirmation via email with the landlords or tenants of verbal communications. In addition, the City should ensure to appropriately abate the owner’s monthly HAP payment beginning the first month following the date by which corrective action was required for any failed inspections where corrective action is not confirmed within the required timeframe. Views of Responsible Officials and Corrective Action Plan: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.

Reference Number: 2023-002 Category of Finding: Special Tests and Provisions – Wage Rate Requirements Type of Finding: Significant Deficiency and Instance of Noncompliance Federal Agency: U.S. Department of Transportation Pass-through Entity: California Department of Transportation City Administering Department: Transportation and Public Works Federal Program Title: Highway Planning and Construction Assistance Listing Number: 20.205 Federal Award Number and Year: 04-5028F15; 2022 Criteria: Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. 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. Standards for Financial and Program Management. §200.303 - Internal controls. (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). Title 29 - Labor. Subtitle A - Office of the Secretary of Labor. Part 5 - Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction (Also Labor Standards Provisions Applicable to Nonconstruction Contracts Subject to the Contract Work Hours and Safety Standards Act). Subpart A - Davis-Bacon and Related Acts Provisions and Procedures. §5.5 - Contract provisions and related matters. (29 CFR 5.5): (a) The Agency head shall cause or require the contracting officer to insert in full in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part from Federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution (except where a different meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts listed in §5.1, the following clauses (or any modifications thereof to meet the particular needs of the agency, Provided, That such modifications are first approved by the Department of Labor): (3) Payrolls and basic records (ii)(A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on weekly transmittals. Instead the payrolls shall only need to include an individually identifying number for each employee (e.g., the last four digits of the employee's social security number). The required weekly payroll information may be submitted in any form desired. Optional Form WH–347 is available for this purpose from the Wage and Hour Division Web site at: http://www.dol.gov/esa/whd/forms/wh347instr.htm or its successor site. The prime contractor is responsible for the submission of copies of payrolls by all subcontractors. Contractors and subcontractors shall maintain the full social security number and current address of each covered worker, and shall provide them upon request to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit them to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency), the contractor, or the Wage and Hour Division of the Department of Labor for purposes of an investigation or audit of compliance with prevailing wage requirements. It is not a violation of this section for a prime contractor to require a subcontractor to provide addresses and social security numbers to the prime contractor for its own records, without weekly submission to the sponsoring government agency (or the applicant, sponsor, or owner). (ii)(B) Each payroll submitted shall be accompanied by a “Statement of Compliance,” signed by the contractor or subcontractor or his or her agent who pays or supervises the payment of the persons employed under the contract and shall certify the following: (1) That the payroll for the payroll period contains the information required to be provided under § 5.5 (a)(3)(ii) of Regulations, 29 CFR part 5, the appropriate information is being maintained under § 5.5 (a)(3)(i) of Regulations, 29 CFR part 5, and that such information is correct and complete; (2) That each laborer or mechanic (including each helper, apprentice, and trainee) employed on the contract during the payroll period has been paid the full weekly wages earned, without rebate, either directly or indirectly, and that no deductions have been made either directly or indirectly from the full wages earned, other than permissible deductions as set forth in Regulations, 29 CFR part 3; (3) That each laborer or mechanic has been paid not less than the applicable wage rates and fringe benefits or cash equivalents for the classification of work performed, as specified in the applicable wage determination incorporated into the contract. Title 29 - Labor. Subtitle A - Office of the Secretary of Labor. Part 5 - Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction (Also Labor Standards Provisions Applicable to Nonconstruction Contracts Subject to the Contract Work Hours and Safety Standards). Subpart A - Davis-Bacon and Related Acts Provisions and Procedures. §5.6 - Enforcement. (29 CFR 5.6): (a) Agency responsibilities (2)(i) Certified payrolls submitted pursuant to § 5.5(a)(3)(ii) must be preserved by the Federal agency for a period of 3 years after all the work on the prime contract is completed, and must be produced at the request of the Department of Labor at any time during the 3-year period, regardless of whether the Department of Labor has initiated an investigation or other compliance action. Condition: The City had one of three federally funded projects, STPL-5028(085), with an active construction contract during fiscal year 2022-2023, for which the contractor was required to submit weekly certified payrolls to the City. The City was unable to locate the weekly certified payroll records submitted by the contractor for inspection. In addition, the City does not have a formally established written process and/or policy concerning the collection, review, and retention of certified weekly payroll records. Cause: Because there was a change in personnel responsible for the secure storage of the weekly certified payroll records during the fiscal year, and the recipient of the contractors weekly certified payroll records did not maintain a log or record of the information, it is possible that the records were misplaced. Effect: The City’s contractor could be out of compliance with the requirement to pay prevailing wages and the City would not detect the potential noncompliance. Also, with the misplacement of the weekly certified payroll records, the City would not be able to preserve the information for a period of 3 years. Questioned Costs: No questioned costs were identified. Context: The federally funded ratio for project STPL-5028(085) is 59.74%. Total payments made to the contractor for the audit period were $2,531,939, and the federal portion was approximately $1,512,580. The sample was not a statistically valid sample. Identification as a Repeat Finding: This was not a repeat finding from the immediate prior year. Recommendation: While the City lacks a formal written process and policy concerning administering weekly certified payroll records submitted by contractors, the City does have an informal process established, and personnel involved with the federal requirement concerning contractor weekly certified payroll submission are aware and knowledgeable of the requirements. The City should develop a formal written policy and procedure regarding receiving, reviewing, and maintaining certified weekly payroll records and certifications submitted by contractors to mitigate the potential for misplacing information when there are changes in personnel. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.