County of FresnoLocal Government

Finding 2025-002 – HOME Loans Affordable Period Monitoring Program: Home Investment Partnerships Program (HOME) Assistance Listing No.: 14.239 Federal Agency: Department of Housing and Urban Development (HUD) Passed Through: N/A – Direct Program Award Year: Fiscal Year 2024-2025 Compliance Requirement: Special Tests and Provisions Questioned Costs: $0 Criteria According to 24 Code of Federal Regulations (CFR) § 92.252, participating jurisdictions must enforce affordability requirements during the specified period through mechanisms such as regulatory agreements, deed restrictions, or similar instruments. This includes conducting on-site inspections of HOME-assisted rental housing to determine compliance with property standards and to verify information submitted by owners. Condition Seven instances were identified where the affordable period monitoring procedures were not performed by the County. Cause of Condition The Department experienced 100% staff turnover for HOME in 2023, and historical knowledge and organizational experience were lost at that time. Additionally, the United States Department of Housing and Urban Development (HUD) released a new final rule, the Housing Opportunity Through Modernization Act of 2016 (HOTMA), on February 14, 2023, which fundamentally changed monitoring requirements, but HUD did not issue any additional guidance for its grantees. As of today’s date, the guidance from HUD is promised, but still forthcoming. The new staff had difficulties interpreting how often monitoring must occur under the new regulations. Due to this fact, current staff incorrectly applied a three-year cycle to all monitoring activities, when the three-year cycle was specific to physical inspections. Repeat Finding Yes. Effect of Condition Noncompliance with timely monitoring may put the County into a higher risk category for monitoring from HUD. No new funds are expended with monitoring activities, so there is no risk of improperly misused funds; but monitoring each property to ensure HOME regulations are met is a requirement of the funding source. If a jurisdiction fails to ensure affordability requirements are being met, HUD can increase its oversight activities on the County or ultimately if affordability is lost and no remedies are viable, HUD could require repayment of all funding associated with the project. Recommendation Management should develop and implement a system and sufficient staffing levels to ensure HOME-assisted projects are properly monitored during the period of affordability. Each procedure performed should be documented and reviewed to ensure compliance with HOME regulations. The County should develop a standardized monitoring checklist for recordkeeping reviews, physical inspections, and regulatory compliance. A cloud-based tracking system (or similar options) should be used to maintain compliance records and send alerts for inspections. The County should continue to support staff’s efforts to identify and participate in relevant trainings, as they become available, to expand staff’s understanding of HUD regulations. If monitoring results in any corrective action plans, the County should consider providing technical assistance to property owners to support long-term compliance.

Finding 2024-002 – HOME Loans Affordable Period Monitoring Program: Home Investment Partnerships Program (HOME) Assistance Listing No.: 14.239 Federal Agency: Department of Housing and Urban Development (HUD) Passed Through: N/A – Direct Program Award Year: Fiscal Year 2023-2024 Compliance Requirement: Special Tests and Provisions Questioned Costs: $0 Criteria According to 24 Code of Federal Regulations (CFR) § 92.252, participating jurisdictions must enforce affordability requirements during the specified period through mechanisms such as regulatory agreements, deed restrictions, or similar instruments. This includes conducting on-site inspections of HOME-assisted rental housing to determine compliance with property standards and to verify information submitted by owners. Condition Five instances were identified where the affordable period monitoring procedures were not performed by the County. Cause of Condition The Department experienced 100% staff turnover for HOME in 2023 and historical knowledge and organizational experience were lost at that time. Due to this fact current staff were unaware of this requirement. Repeat Finding No. Effect of Condition Noncompliance may necessitate the repayment of misused or improperly monitored HOME funds to HUD. For instance, if a county fails to enforce affordability requirements, HUD can demand the return of funds associated with the noncompliant units. Persistent noncompliance can jeopardize a county's eligibility for future HOME allocations. HUD may withhold or reduce funding until compliance issues are resolved, impacting the county's ability to finance affordable housing projects. Recommendation Management should develop and implement a system to ensure the HOME Loans under the Affordability Period are properly monitored. Each procedure performed should be documented and reviewed to ensure monitoring procedures were performed. The County should develop standardized monitoring checklist aligned with HUD’s HOME program guide for file reviews, inspections, and affordability compliance. A cloud-based tracking system (or similar options) should be used to maintain compliance records and send alerts for inspections. The County should provide annual training for monitoring staff to ensure they stay updated on HUD regulations. Additionally, offer technical assistance to property owners and homebuyers to support compliance. Management Response and Corrective Action Plan The Department will provide training to staff on HOME monitoring requirements, updating policies and procedures, as necessary, to address all current regulatory requirements. The Department’s multifamily monitoring for all projects in the HOME period of affordability will be completed prior to June 30, 2025. As part of the monitoring process, the Department will document all records requiring annual or semi-annual oversight and review for compliance with HOME requirements. Should the monitoring result in any findings requiring corrective action, the Department will ensure all findings are addressed by September 30, 2025.

Finding 2023-002 – Review of Income Eligibility and Verification System (IEVS) Reports Program: Temporary Assistance for Needy Families (TANF) Assistance Listing No.: 93.558 Federal Agency: U.S. Department of Health and Human Services Passed Through: State of California, Department of Social Services Award Year: Fiscal Year 2022-2023 Compliance Requirement: Special Tests and Provisions Questioned Costs: $0 Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.303 states that the non-Federal entity (County) must 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. This includes timely reviews of the IEVS reports for the TANF program. Condition Three instances were identified where the IEVS reports were not reviewed within forty-five days of receipt, in violation of program regulations. Cause of Condition Eligibility staff did not process and review IEVS reports timely due to departmental staffing shortages, high vacancy rates, and training and preparation efforts of the statewide migration into the CalSAWS System. There was an average of 18% vacancy rate during this rating period. Also, the Department of Health Care Services (DHCS) stopped transmitting Applicant IEVS files to CalWIN on March 2, 2023, through June 2023. This was due to the Franchise Tax Board (FTB) annual data not being available. The stoppage during this timeframe incurred contradictory information to staff who thought they were not supposed to process all reports. Repeat Finding No. Effect of Condition The County is not in compliance with the IEVS special tests and provisions requirement related to the program. Recommendation Management should develop and implement a system to ensure that IEVS reports are reviewed within the required timeframe. This may include: • Updating internal policies and procedures to clearly define the timeframe for IEVS review. • Implementing a tracking system to monitor the receipt and review of IEVS reports. • Providing training to staff on the importance of timely IEVS review procedures. Management Response and Corrective Action Plan A reminder message will be sent to the appropriate staff to process Applicant IEVS within 45 days of application processing and renewals to ensure compliance of review of IEVS report. Internal policies such as Workflows will be reviewed and updated with IEVS report processing if possible. Also, an annual IEVS refresher training will be issued to staff who are required to process them. We also intend to have multiple Eligibility Worker recruitments throughout the year to address staffing shortages/reducing vacancy rate.

Finding 2023-003 – Coronavirus State and Local Fiscal Recovery Funds – Activities Allowed or Unallowed Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing No.: 21.027 Federal Agency: U.S. Department of the Treasury Passed Through: N/A – Direct Program Award Year: Fiscal Year 2022-2023 Compliance Requirement: Activities Allowed or Unallowed Questioned Costs: $988,387 Criteria As a condition to receiving Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award payments from the U.S. Department of the Treasury (Treasury), the County agreed that the funds disbursed under this award may only be used in compliance with sections 602 and 603 of the Social Security Act (the Act), Treasury’s regulations implementing that section, and guidance issued by Treasury regarding the SLFRF. Under the Treasury’s guidance, recipients may use SLFRF payments to respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers. Accordingly, recipients may not use SLFRF funds to provide premium pay to essential workers for work performed after the end of the National Emergency on April 10, 2023. Condition During our testing of expenditures charged to the program, we noted the County provided bi-weekly payments of $150 to County employees who work in congregate settings; the payments began on December 26, 2022, and will continue through the end of June 2025. Per inquiry of staff, the total amount of congregate settings payments for work performed after April 10, 2023, totaled $988,387. Cause of Condition The County’s existing internal control system is not operating effectively to provide reasonable assurance that charges to the program are allowable. Repeat Finding No. Effect of Condition The County is not in compliance with the activities allowed or unallowed requirements related to the program. Recommendation Management should develop an understanding of the compliance requirements for SLFRF and COVID-19 related programs. This can be achieved through the following actions: • Reviewing the Single Audit Compliance Supplement and program-specific guidance documents issued by the awarding agencies. • Consulting with qualified professionals specializing in federal grant compliance. • Attending relevant trainings offered by the U.S. Department of the Treasury or the specific federal agencies managing the COVID-19 programs in which the County participates. Management Response and Corrective Action Plan At the time of approval, the Board Agenda Item for the Congregate Setting Payment (CSP) program did not clearly state under which expenditure category this expense would fall under. Upon further research and as identified in the County’s Recovery Plan Annual Report, the CSP program should have been classified under the expenditure category for Public Health and Negative Economic Impacts (EC 3) as it addressed the negative impacts of the COVID-19 pandemic experienced by the County, by providing a retention incentive to specific positions working in congregate settings. The County will be working with the Treasury to properly categorize the payments to its correct Expenditure Category. The County will be in communication with the CAO’s office to ensure that expenditures reported in the Project and Expenditure Quarterly Reports (P&E) are in agreement with the intended expenditure categories as specified in the County’s Recovery Plan. The County will revise the CSP program to properly reflect its correct expenditure category in the next P&E Report, due July 31, 2024, for Quarter 1 2024. An agenda item will be submitted for approval to the County Board of Supervisors which will memorialize the CSP program by April 2024.

Finding 2023-004 – Coronavirus State and Local Fiscal Recovery Funds – Allowable Cost/Cost Principles Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing No.: 21.027 Federal Agency: U.S. Department of the Treasury Passed Through: N/A – Direct Program Award Year: Fiscal Year 2022-2023 Compliance Requirement: Allowable Cost/Cost Principles Questioned Costs: $1,734,018 Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.403 states that, except where otherwise authorized by stature, in order to be allowable under Federal awards, costs must be incurred during the approved budget period. Condition During our testing of expenditures charged to the program, we identified $1,734,018 in questioned costs related to cybersecurity improvements recorded during the audit period ending June 30, 2023. Our procedures revealed that these costs were actually incurred outside the audit period, with evidence indicating dates after June 30, 2023. Cause of Condition The County’s existing internal control system is not operating effectively to provide reasonable assurance that charges to the program are allowable. Repeat Finding Yes. See prior year finding 2022-002. Effect of Condition The County is not in compliance with the allowable cost/cost principles requirements under the Uniform Guidance. Recommendation Management should review the identified transactions and reclassify them to the appropriate period. Additionally, management should strengthen internal controls to ensure that only allowable costs incurred by the County’s fiscal year end period are charged to the program. This may include procedures for reviewing invoices and approving expenditures to verify the date the cost was incurred. For ongoing Department claims, management should ensure that proper documentation exists for each expenditure, including receipts, invoices, and proof of payment prior to processing. Management Response and Corrective Action Plan The County agrees with the finding. The County processed a transfer of revenues to ISD in anticipation of the expenses to be incurred for cybersecurity improvements in FY 2022-2023; however, the fund was not fully spent. The Auditor-Controller’s office will work with the CAO’s office to review and address the inefficiencies in the County’s internal control system. We will review the identified transactions and will work with ISD to reclassify the identified expenditures to the appropriate period. Going forward, the County will ensure that proper documentation, such as receipts, invoices, and proof of payments, are received from departments prior to processing. This implementation will be effective immediately.

Finding 2022-002 ? Allowable Costs/Cost Principles Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing No.: 21.027 Federal Agency: U.S. Department of the Treasury Passed Through: N/A ? Direct Program Award Year: Fiscal Year 2021-2022 Compliance Requirement: Allowable Costs/Cost Principles Questioned Costs: $376,777 Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) ?200.303 states that the non- Federal entity (County) must 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). Condition During our testing of expenditures charged to the program, we noted one payment in the amount of $494,988 for emergency rental assistance; the amount was a supplemental payment for the month of September 2021 and, based on the invoices provided, the amount should have been $118,211. Cause of Condition The County?s existing internal control system is not operating effectively to provide reasonable assurance that charges to the program are accurate and allowable. The supplemental amount was incorrectly calculated based on a prior processed payment for August 2021 instead of September 2021. Repeat Finding No. Effect of Condition The County is not in compliance with the allowable cost/cost principles requirements related to the program. Recommendation We recommend that the County adhere to its payment procedures and review invoices and other related source documents for completeness, reasonableness, and accuracy. We also recommend the County ensure that source documents match the payment document and that supervisors review payment 19 documents for accuracy and match pertinent information with invoice, contract, and other related payment source documents with the PeopleSoft voucher that was created. Management Response and Corrective Action Plan The County issued reimbursement based on actuals. The voucher created by the department was for $494,988 and the County reimbursed this amount back to the department. ARPA over claiming started with the payment of the supplemental September 21 invoice that was miscalculated by reducing the Revised September 21 invoice with the Original August 21 invoice, instead of the Original September 21 invoice. This miscalculation was not immediately recognized when the supplemental payment was paid in November 2021. The need to return funds to ARPA was recognized after the DSS Admin completed a reconciliation at end of 2022. This was communicated to DSS Finance in January 2023, thus the discussion between DSS Finance and DSS Admin to finalize the amount. DSS is already in the process of finalizing the amount that needs to be returned to the County ARPA funds. For the corrective action, DSS will be submitting a memo signed by the DSS Director addressed to the CAO for the return of $376,777 to the County ARPA funds.

Finding 2022-003 ? Subrecipient and Contractor Determinations Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing No.: 21.027 Federal Agency: U.S. Department of the Treasury Passed Through: N/A ? Direct Program Award Year: Fiscal Year 2021-2022 Compliance Requirement: Subrecipient Monitoring Questioned Costs: $0 Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) ?200.303 states that the non- Federal entity (County) must 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). Per ?200.331, a pass-through entity (the County) must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. A pass-through entity (the County) with subrecipients is required to evaluate each subrecipient?s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. Depending upon the pass-through entity?s assessment of risk posed by the subrecipient, the entity must develop techniques/tools to ensure proper accountability and compliance with program requirements and achievement of performance goals by the subrecipient. Condition During our testing of compliance with the subrecipient monitoring requirement, we noted that the County did not have formal, written subrecipient monitoring policies or procedures in place, as the Subrecipient Monitoring Policy document was adopted on June 21, 2022. In addition, management did not conduct pre-award evaluations of whether the agreements made by the County for the disbursement of CSLFRF payments cast the party receiving the funds in the role of a subrecipient or contractor, as four out of four CSLFRF recipients were missing documentation regarding the characteristics which support the classifications and the judgments used to make such determinations. Also, the County did not evaluate each subrecipient?s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward. 20 Cause of Condition The County?s existing internal control system is not properly designed to meet the control objectives under subrecipient monitoring. Repeat Finding No. Effect of Condition There is increased risk of noncompliance with the subrecipient monitoring requirement as set forth in the U.S. Office of Management and Budget (OMB) Compliance Supplement, which can jeopardize future federal funding as well as result in the payback of federal awards. Failure to perform a comprehensive risk assessment prior to executing subaward agreements may result in an incomplete understanding of a subrecipient?s risk profile, and insufficient monitoring or only relying on self-reporting can allow certain risks to go unaddressed and lead to noncompliance with grant requirements. In addition, an incorrect determination could have a significant impact on whether the party receiving federal funds is required to have an audit. Recommendation We recommend the County design and implement internal control activities over the subrecipient monitoring compliance requirement under the Uniform Guidance. We also recommend the County establish policies and procedures, especially documentation requirements, to make pre-award determinations of whether each agreement it makes for the disbursement of Federal award funds casts the party receiving the funds in the role of a subrecipient or a contractor. In addition, we recommend the County implement a training program for all staff directly involved in the administration of Federal award funds to become knowledgeable of the cost principles and requirements under the Uniform Guidance. Management Response and Corrective Action Plan Management agrees with the findings and has provided the following corrective action plan. 1. County will assess existing policies, design, and implement additional internal control activities over the subrecipients to improve monitoring compliance requirements under the Uniform Guidance. 2. County will establish policies and procedures to document pre-award determinations of whether each agreement it makes for the disbursement of Federal award funds casts the party receiving the funds in the role of a subrecipient or a contractor. 3. County will implement a training program for all staff directly involved in the administration of Federal award funds to become knowledgeable of the cost principles and requirements under the Uniform Guidance.

Finding 2022-004 ? Reporting Program: Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Assistance Listing No.: 93.323 Federal Agency: U.S. Department of Health and Human Services Passed Through: State of California, Department of Public Health (CDPH) Award Year: Fiscal Year 2021-2022 Compliance Requirement: Reporting Questioned Costs: $0 Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) ?200.303 states that the non- Federal entity (County) must establish and maintain effective internal control over the Federal award that 21 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). As a subrecipient of the COVID-19 ELC funding, the Centers for Disease and Control Prevention (CDC) requires timely submission of quarterly progress reports, quarterly expenditure reports, and monthly expenditure reports to the pass-through entity, CDPH. Condition During our testing of compliance with the reporting requirement, we selected two quarterly progress reports, two quarterly expenditure reports, and two monthly reports, and noted that the County did not submit the six required reports on a timely basis. Cause of Condition The County?s existing internal control system is not properly designed to meet the control objectives under reporting requirements. Repeat Finding No. Effect of Condition The County did not comply with ELC reporting requirements. Recommendation We recommend the County design and implement proper internal control activities over the reporting compliance requirement to ensure fiscal accountability and reporting requirements are met in a timely manner. Management Response and Corrective Action Plan The quarterly reports were managed under Department administration resources during the COVID pandemic response. During this time there were significant vacancies with the Department and consistent turnover that required for staff to be constantly retrained in their duties. As Department administration was able to stabilize its resources the analyst compiling the information from multiple divisions still had the challenge of managing the collection of responses with a highly impacted department staff. The department administration analyst leading the compiling of the information for ELC quarterly reports was also assisting with COVID response duties in ensuring contracts and resources were in place to maintain or adjust COVID response resources. In addition, there was significant turnover and addition of staff at the State level that didn?t allow for timely responses to local inquiries that affect contract management and report. After the stabilization of the workforce at both levels there has been significant improvement in meeting timelines.

Finding 2021-004 ? Coronavirus Relief Fund Subrecipient Monitoring (Significant Deficiency) Program: Coronavirus Relief Fund (CRF) Assistance Listing No.: 21.019 Federal Agency: U.S. Department of the Treasury (Treasury) Passed Through: N/A ? Direct Program Award Year: Fiscal Year 2020-2021 Compliance Requirement: Subrecipient Monitoring Questioned Costs: $0 Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) ?200.303 states that the non-Federal entity (County) must 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). Per ?200.331, a pass-through entity (the County) must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. A pass-through entity (the County) with subrecipients is required to evaluate each subrecipient?s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. Depending upon the pass-through entity?s assessment of risk posed by the subrecipient, the entity must develop techniques/tools to ensure proper accountability and compliance with program requirements and achievement of performance goals by the subrecipient. In addition, ?200.510(b) states that the auditee (the County) must prepare a schedule of expenditures of federal awards for the period covered by the auditee?s financial statements, which must include the total federal awards expended as determined in accordance with ?200.502. Condition During our testing of compliance with the subrecipient monitoring requirement, we noted the County did not have formal, written subrecipient monitoring policies or procedures in place during FY 2021. In addition, management did not determine whether the agreements made by the County for the disbursement of CARES Act funds cast the party receiving the funds in the role of a subrecipient or contractor, as five out of five subrecipient samples selected for testing were missing documentation regarding the determinations. Cause of Condition The County?s existing internal control system is not properly designed to meet the control objectives under subrecipient monitoring. Repeat Finding No. Effect of Condition There is increased risk of noncompliance with the subrecipient monitoring requirement as set forth in the U.S. Office of Management and Budget (OMB) Compliance Supplement, which can jeopardize future federal funding as well as result in the payback of federal awards. In addition, as a result of the audit procedures performed, an adjustment was made to correct the overstatement of the amounts passed through to subrecipients by $426,136. Recommendation We recommend the County design and implement internal control activities over the subrecipient monitoring compliance requirement under the Uniform Guidance. We also recommend the County establish policies and procedures in its determinations whether each agreement it makes for the disbursement of CARES Act funds casts the party receiving the funds in the role of a subrecipient or a contractor. Additionally, we recommend the County establish a recordkeeping system to ensure that accounting records and documentation are retained for the time period required in the statutes, regulations, and the terms and conditions applicable to the program. Management Response and Corrective Action Plan Management agrees with the finding and recommendation. The Auditor-Controller/Treasurer-Tax Collector?s Office will work in conjunction with the County Administrative Office to implement policies, procedures, and controls over subrecipient monitoring and determining whether parties involved are contractors or subrecipients. The County currently has a designated area where all CARES related records and documentation are kept and will be maintained for the time period required by applicable program terms and conditions, statues, and regulations.

Finding 2021-005 ? Emergency Rental Assistance Subrecipient Monitoring (Significant Deficiency) Program: Emergency Rental Assistance (ERA) Assistance Listing No.: 21.023 Federal Agency: U.S. Department of the Treasury (Treasury) Passed Through: N/A ? Direct Program Award Year: Fiscal Year 2020-2021 Compliance Requirement: Subrecipient Monitoring Questioned Costs: $0 Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) ?200.303 states that the non-Federal entity (County) must 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 Controller General of the United States or the ?Internal Control Integrated Framework,? issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per ?200.331, a pass-through entity (the County) must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. A pass-through entity (the County) with subrecipients is required to evaluate each subrecipient?s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. Depending upon the pass-through entity?s assessment of risk posed by the subrecipient, the entity must develop techniques/tools to ensure proper accountability and compliance with program requirements and achievement of performance goals by the subrecipient. Condition During our testing of compliance with the subrecipient monitoring requirement, we noted monitoring performed by the County Department of Social Services (DSS) did not provide reasonable assurance that the subrecipient complied with laws, regulations, and provisions of the grant agreement as the subrecipient sample selected for testing was missing sufficient documentation. Cause of Condition The County?s existing internal control system is not properly designed to meet the control objectives under subrecipient monitoring as a result of staffing issue and increased workload due to COVID pandemic. Repeat Finding No. Effect of Condition There is increased risk of noncompliance with the subrecipient monitoring requirement as set forth in the U.S. Office of Management and Budget (OMB) Compliance Supplement, which can jeopardize future federal funding as well as result in the payback of federal awards. Recommendation We recommend the County design and implement internal control activities over the subrecipient monitoring compliance requirement under the Uniform Guidance. We also recommend the County establish a recordkeeping system to ensure that accounting records and documentation are retained for the time period required in the statutes, regulations, and the terms and conditions applicable to the program. Management Response and Corrective Action Plan The DSS performs the following internal control activities to meet the subrecipient monitoring requirements: ? DSS has an in-depth contract compliance process and affiliated procedures as demonstrated by its Policy and Procedures Guide (PPGs) and accompany documents, established in 2019. In 2020 and 2021, the formal contract compliance procedures were temporarily suspended due to the significantly increased workload and staffing issues as a result of the COVID pandemic. However, contract monitoring was still occurring via regular monitoring meetings, in-depth financial invoice review including review of supporting financial documentation, development of a grievance process for the newly established program and completed extensive Federal monthly reports requiring program data. The DSS has since re-established the in-depth contract monitoring process and activities which includes internal control activities to ensure compliance under the Uniform Guidance. The DSS will review the recordkeeping system and quality control process to ensure all required documents are completed and retained for the required time period. ? The County?s ERA program began in April 2021. As this was a new program with continually changing process as directed by the US Treasury, DSS was in weekly contact with the subrecipient on all things including policies and procedures, program implementation and reporting. Because of this weekly contact, the DSS did not hold a formal contract monitoring meeting with the subrecipient until October 2021 and followed up with meetings in early 2022. As DSS staff was in contact with the subrecipient on a weekly basis, contract monitoring was occurring regularly during the program start up stage with the formal meetings beginning in 2022.

Finding 2020-003 ? Incorrect Expenditures Reported on the Schedule of Expenditures of Federal Awards (SEFA) (Material Weakness) Program: COVID-19 Coronavirus Relief Fund (CRF) CFDA No.: 21.019 Federal Agency: U.S. Department of the Treasury Passed Through: N/A ? Direct Program Award Year: Fiscal Year 2019-2020 Compliance Requirement: Allowable Cost/Cost Principles Questioned Costs: None Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) ?200.510(b) states that the auditee (the County) must prepare a SEFA for the period covered by the auditee?s financial statements, which must include the total federal awards expended as determined in accordance with ?200.502. In addition, ?200.303 of the Uniform Guidance states that the County must establish and maintain effective internal control over the federal awards, including controls over the accuracy of program information and expenditure amounts.Condition During our audit procedures performed over the SEFA and CRF expenditures, it was noted that the County did not properly identify the amount expended for CRF CDFA No. 21.019 on its SEFA. The expenditures reported by the County were underreported by $16,471,768. Cause of Condition The County?s existing internal control system within the Auditor-Controller/Treasurer Tax Collector?s (ACTTC) Office is not designed to provide an accurate and complete SEFA. The procedures currently in place did not include sufficient review of the information and supporting documentation relating to federal awards before the SEFA was provided to the external auditors. The preliminary SEFA provided by the County reported CRF expenditures of $155,249; after material audit adjustments, CRF expenditures totaled $16,627,017. Repeat Finding No. Effect of Condition The inability to properly identify and track federal expenditures or to detect material misstatements in the SEFA increases the likelihood that federal expenditures would not be fairly reported. There is increased risk of noncompliance with the requirements set forth in the U.S. Office of Management and Budget (OMB) Compliance Supplement, which can jeopardize future federal funding as well as result in the payback of federal awards. In addition, as a result of the procedures performed over the SEFA and CRF expenditures, we proposed material audit adjustments to the County?s financials issued on December 30, 2020. The County?s Annual Financial Report for the fiscal year ended June 30, 2020, was restated to correct the overstatement of $64,953,000 in Federal grant revenue and the understatement of $64,953,000 in unearned revenue in the County?s Disaster Claiming Fund; in accordance with Government Auditing Standards, we also reissued our report dated April 26, 2021.Recommendation We recommend the County?s ACTTC?s Office strengthen its year-end closing procedures to ensure that all transactions and federal awards related to the fiscal year are properly captured and recorded in the general ledger to ensure the accuracy and completeness of the financial statements and supplementary schedules. We also recommend that the County provide sufficient resources and adequate oversight within the ACTTC?s Office to oversee the year-end closing procedures and preparation of the financial statements and supporting schedules. Lastly, we recommend the ACTTC?s Office provide training on an as needed basis for employees with financial reporting responsibilities. Management Response and Corrective Action Plan Management agrees with the finding and recommendation. Corrective action was performed, and a restated Financial Report was issued on April 26, 2021. Year-end processes will be reviewed to ensure all significant year-end transactions are captured. During the last year, because of the pandemic and various staff being in quarantine, accounting staff was limited. Additional training will be provided to those staff with financial reporting responsibilities.

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