CITY OF WOODLANDLocal Government

Evaluation of Finding: Material Weakness/Material Noncompliance. Criteria: Financial reports are intended to meet the needs of decision makers, including the governing board, bondholders, Federal and State oversight agencies, and constituents. Accordingly, timeliness was identified as one of the characteristics of information in financial reporting in GASB Concepts Statement No. 1 of the Governmental Accounting Standards Board (GASB), Objectives of Financial Reporting. To accomplish this objective, financial reports must be available in time for informed decision making. Therefore, financial reports should be published as soon as possible after the end of the reporting period. Sometimes the need for timeliness has to be balanced against the need for reliability, which also was identified as one of the characteristics of information in financial reporting identified in GASB Concepts Statement No. 1. While governments certainly should not sacrifice reliability for timeliness, minor gains in precision ought not to be purchased at the price of indefinite delay (e.g., accounting estimates). Legislative deadlines for submitting financial statements should be viewed as a minimum standard rather than as an ideal objective. The same holds true for the submission deadlines used by various award programs such as the Government Finance Officers Association's (GFOA) Certificate of Achievement for Excellence in Financial Reporting Program. The additional cost of more timely financial reporting (e.g., additional staff and overtime) also needs to be considered. Condition: While conducting our audit, we noted that the City experienced difficulties and delays in accurately preparing the City’s financial statements. Additionally, the City’s financial statements were not ready to be issued by the required Single Audit Reporting Package deadlines of March 31, 2024, 2025 and 2026. As a result of these conditions, the financial statements were not available to meet the needs of decision makers, including governing boards, bondholders, Federal and State oversight agencies, and constituents in a timely manner. Effect or Potential Effect of Condition: Untimely financial statement reporting can alter the value of those financial statements to the users, as well as jeopardize relationships with bondholders, and granting agencies. Repeat Finding Yes (2024-005) Recommendation: Management should establish a well-defined process for its annual financial reporting. The process and its key attributes (e.g., overall timing, methodology, communication with component units, segregation of duties, frequency of analyses and review by City management) should be formally documented, approved, and reviewed on a regular basis. In addition, the City should develop more resources capable of assisting in the preparation of its annual financial reporting package.

Reference Number: 2023-005 – Timeliness in Financial Reporting (repeat finding) Evaluation of Finding: Material weakness/material noncompliance Assistance Listing Number: All Federal Programs reported on the SEFA Condition: The City lacks procedures to ensure the single audit report is completed timely and discrepancies between accounting records are researched and resolved. Criteria: A non-Federal entity that expends $750,000 or more in Federal grant awards during its fiscal year must have a single or program-specific audit conducted in accordance with the provisions set forth in CFR 200.500 subpart F. The audit must be completed and submitted to the Federal Audit Clearinghouse within nine months after the end of the entity’s fiscal year end or before the extended due date allowed by the Office of Management and Budget (OMB). Cause of Condition: Delays in reconciling of the accounting records resulted in delays of the completion of the audit and issuance of the annual comprehensive financial report. Effect or Potential Effect of Condition: Delays in the completion of the audit and issuance of the annual comprehensive financial report resulted in the single audit being completed and submitted after the extended due date of September 30, 2022, for the City’s fiscal year ending June 30, 2023, and therefore being out of compliance with OMB requirements. Questioned Costs None. Context The City’s financial statements and single audit reports are used by the federal awarding agencies and pass-through entities to assess the non-federal entity's financial condition, internal controls, and compliance with federal requirements. Repeat Finding Yes. Recommendation: LSL recommends that the City establish procedures to ensure all reporting requirements are completed timely. Management’s Response and Corrective Action: The City recently went through implementation of a new financial software, which has allowed for development of some documentation and assignment of roles and responsibilities with the new system. Staff will make efforts to enhance and update this documentation to provide specific details about the annual financial reporting. The City has also struggled with vacancies in key positions, as well as challenges in completing successful recruitments to fill the positions; staff exploring options for third party assistance with financial reporting functions.

Reference Number: 2022-002 Evaluation of Finding: Significant deficiency Condition: The City lacks procedures to ensure the single audit report is completed timely and discrepancies between accounting records are researched and resolved. Criteria: A non-Federal entity that expends $750,000 or more in Federal grant awards during its fiscal year must have a single or program-specific audit conducted in accordance with the provisions set forth in CFR 200.500 subpart F. The audit must be completed and submitted to the Federal Audit Clearinghouse within nine months after the end of the entity’s fiscal year end or before the extended due date allowed by the Office of Management and Budget (OMB). Cause of Condition: Delays in reconciling of the accounting records resulted in delays of the completion of the audit and issuance of the annual comprehensive financial report. Effect or Potential Effect of Condition: Delays in the completion of the audit and issuance of the annual comprehensive financial report resulted in the single audit being completed and submitted after the extended due date of September 30, 2021, for the City’s fiscal year ending June 30, 2022, and therefore being out of compliance with OMB requirements. Recommendation: LSL recommends that the City establish procedures to ensure all reporting requirements are completed timely. Management’s Response and Corrective Action: The City recently went through implementation of a new financial software, which has allowed for development of some documentation and assignment of roles and responsibilities with the new system. Staff will make efforts to enhance and update this documentation to provide specific details about the annual financial reporting. The City has also struggled with vacancies in key positions, as well as challenges in completing successful recruitments to fill the positions; staff exploring options for third party assistance with financial reporting functions.

Reference Number: 2021-002 Evaluation of Finding: Significant Deficiency Federal Award Information: Assistance Listing Number: 14.267 Program Title: Continuum of Care Federal Award Number: 1250L9T211905, 1423L9T211904 Federal Award Year: 2020, 2021 Name of Federal Agency: US Department of Housing and Urban Development Condition: Through review of grant activity and subrecipient agreements, the City is not receiving quarterly reports from the subrecipient in accordance with the format set forth by the U.S. Department of Housing and Urban Development. Therefore, the City did not maintain responsibility over monitoring the subrecipient as outlined in the subrecipient agreement. Criteria: According to Title 2 CFR, Subpart D, Subrecipient Monitoring and Management, Section 200.332 Requirements for pass-through entities, all pass-through entities must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that the subaward performance goals are achieved. Pass through entity monitoring of the subrecipient must include, among other requirements: ? Reviewing financial and performance reports required by the pass-through entity ? Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews and other means Cause of Condition: The City has not received quarterly reports from the subrecipient as outlined in the subrecipient agreement to ensure that the subrecipient is conforming to the federal grant requirements. Effect or Potential Effect of Condition: The subrecipient is funding activities that are ineligible per the subrecipient agreement and is not meeting compliance requirements of the grant award. Questioned Costs: No questioned costs identified. Recommendation: LSL recommends that the City establish procedures and implement processes to ensure all subrecipient monitoring requirements as outlined in the subrecipient agreement are adhered to.

Reference Number: 2020-004 Evaluation of Finding: Significant Deficiency Condition: The City lacks procedures to ensure the single audit report is completed timely and discrepancies between accounting records are researched and resolved. Criteria: A non-Federal entity that expends $750,000 or more in Federal grant awards during its fiscal year must have a single or program-specific audit conducted in accordance with the provisions set forth in CFR 200.500 subpart F. The audit must be completed and submitted to the Federal Audit Clearinghouse within nine months after the end of the entity?s fiscal year end or before the extended due date allowed by the Office of Management and Budget (OMB). Cause of Condition: Delays in reconciling of the accounting records resulted in delays of the completion of the audit and issuance of the annual comprehensive financial report. Effect or Potential Effect of Condition: Delays in the completion of the audit and issuance of the annual comprehensive financial report resulted in the single audit being completed and submitted after the extended due date of September 30, 2021, for the City?s fiscal year ending June 30, 2020, and therefore being out of compliance with OMB requirements.

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