CITY OF HANFORDLocal Government

2025-002 Non-reimbursable Expenditures on PR26 CDBG Financial Summary Report Reporting Noncompliance and Significant Deficiency Federal Program Community Development Block Grants/Entitlement Grants ALN 14.218 Criteria Management is responsible for ensuring that Federal awards are expended only for allowable activities in accordance with applicable Federal statutes, regulations, and the terms and conditions of the award, and that required Federal reports are accurate and supported. Condition During the audit, management identified seven transactions previously reported in the financial statements and on the CDBG Financial Summary Report that were determined to be non-reimbursable due to exceeding the public service expenditure cap of 15%. The City is expecting a revision to that cap, which would result in the City repaying anything expended over the new amount. Cause The City’s internal controls over CDBG compliance and reporting were not sufficiently designed or implemented to verify the allowability of expenditures prior to drawdown and to reconcile and review amounts reported on the PR26. Effect Non-reimbursable costs were charged to the CDBG program and reported in the financial statements and CDBG Financial Summary Report, resulting in questioned costs and noncompliance with Federal requirements. Questioned Costs $43,191.76 in likely questioned costs. Identification as a repeat finding This is a new finding in fiscal year 2025. Recommendation We recommend that the City formally document procedures to verify the allowability of expenditures prior to drawdown and reporting, including supervisory review and reconciliation. Management’s response Management acknowledges the deficiency regarding expenditures exceeding the 15% public service cap under the CDBG program. During the fiscal year audit, it was discovered that the overage was the result of differences in reporting and calculation methods. To address this issue, the City has implemented corrective actions. Staff will receive training on CDBG compliance, including public service and administrative cap calculations, and review procedures will be strengthened to ensure all CDBG expenses are verified prior to drawdown. A secondary review and approval process will be implemented for all CDBG financial reporting, along with periodic budget reviews to detect potential overspending or misallocation. In addition, oversight of budgets, expenditures, and program performance will be conducted by designated personnel. Management believes these corrective actions will improve compliance, prevent similar discrepancies in future reporting periods, and ensure alignment between internal records and federal reporting requirements. Anticipated Completion Date June 30, 2026

2025-003 Reporting Subaward and Executive Compensation Information Reporting Noncompliance and Significant Deficiency Federal Program Community Development Block Grants/Entitlement Grants ALN 14.218 Criteria Management is responsible for establishing, maintaining, and monitoring internal controls to ensure compliance with subaward reporting requirements of the Federal Funding Accountability and Transparency Act (FFATA), including reporting qualifying subawards in accordance with 2 CFR Appendix A to Part 170(a). Condition During the audit, multiple subawards exceeding the $30,000 threshold in 2 CFR Appendix-A-to- Part-170(a)(1) during the fiscal year were identified but were not reported on SAM.gov by the end of the month following the award as required by 2 CFR Appendix A to Part 170(a)(2)(ii). Cause The City did not report subaward information in accordance with 2 CFR Appendix A to Part 170(a)(2). Effect The City is not in compliance with FFATA subaward reporting requirements, which may jeopardize future grant funding. Questioned Costs No questioned costs. Identification as a repeat finding This is a new finding in fiscal year 2025. Recommendation We recommend that the City implement and document procedures to identify subawards that require FFATA reporting, and ensure timely reporting to SAM.gov. Management’s response Management acknowledges the deficiency related to compliance with FFATA subaward reporting requirements. During the fiscal year under audit, certain subawards exceeding the reporting threshold were not reported to SAM.gov within the required timeframe. To address this issue, the City has implemented corrective actions. The City has developed and documented procedures to identify subawards subject to FFATA reporting and established a centralized tracking process to monitor reporting deadlines. In addition, responsibility for reporting has been assigned to designated personnel to ensure timely and accurate submission to SAM.gov. Management believes these corrective actions will improve compliance with FFATA reporting requirements and prevent similar issues in future reporting periods. Anticipated Completion Date June 30, 2026