County of KingsLocal Government

Program: Community Development Block Grant (CDBG) Assistance Listing No.: 14.228 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Agency: State of California Department of Housing and Community Development Federal Award Year: FY 2024-25 Compliance Requirement: Eligibility Questioned Costs: $350,896 Condition: During our test of continuing loan compliance, the County was unable to provide supporting documentation relating to proof of insurance and occupancy for eleven out of sixteen selected loans. Criteria: Federal requirements applicable to the CDBG program obligate the County to maintain ongoing compliance monitoring for all disbursed loans. This includes verifying that borrowers maintain adequate insurance coverage and that current occupancy is documented throughout the loan term. Cause: The County’s system for tracking loan compliance documentation on an annual basis is outdated and has resulted in a lack of structural procedures sufficient to ensure that when borrowers fail to respond, follow up is done in a timely manner to ensure compliance with program requirements. Effect: The absence of required monitoring documentation impairs the County's ability to demonstrate adherence to federal grant provisions. If insurance coverage lapses or occupancy requirements are not met and go undetected, the California Department of Housing and Community Development (HCD) or the U.S. Department of Housing and Urban Development (HUD) may determine that the affected loans no longer satisfy program eligibility requirements, potentially resulting in disallowed costs and repayment obligations. Recommendation: The County should take the following steps: 1. Establish a formal compliance tracking log to document the status of required insurance and occupancy certifications for each active loan, updated no less than annually. 2. Develop a written escalation policy that specifies timelines for follow-up outreach to non-responsive borrowers and defines the circumstances under which a Notice of Default will be issued. 3. Implement monthly supervisory review of the compliance tracking log to ensure documentation gaps are identified and resolved on a timely basis, rather than through an annual review cycle alone. Management’s Response: See Corrective Action Pla

Program: Home Investments Partnerships Program (HOME) Assistance Listing No.: 14.239 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Agency: State of California Department of Housing and Community Development Federal Award Year: FY 2024-25 Compliance Requirement: Eligibility Questioned Costs: $405,084 Condition: During our test of continuing loan compliance, the County was unable to provide supporting documentation relating to proof of insurance and occupancy for six out of sixteen selected loans. Criteria: Federal requirements applicable to the HOME program obligate the County to maintain ongoing compliance monitoring for all disbursed loans. This includes verifying that borrowers maintain adequate insurance coverage and that current occupancy is documented throughout the loan term. Cause: The County’s system for tracking loan compliance documentation on an annual basis is outdated and has resulted in a lack of structural procedures sufficient to ensure that when borrowers fail to respond, follow up is done in a timely manner to ensure compliance with program requirements. Effect: The absence of required monitoring documentation impairs the County's ability to demonstrate adherence to federal grant provisions. If insurance coverage lapses or occupancy requirements are not met and go undetected, the California Department of Housing and Community Development (HCD) or the U.S. Department of Housing and Urban Development (HUD) may determine that the affected loans no longer satisfy program eligibility requirements, potentially resulting in disallowed costs and repayment obligations. Recommendation: The County should take the following steps: 1. Establish a formal compliance tracking log to document the status of required insurance and occupancy certifications for each active loan, updated no less than annually. 2. Develop a written escalation policy that specifies timelines for follow-up outreach to non-responsive borrowers and defines the circumstances under which a Notice of Default will be issued. 3. Implement monthly supervisory review of the compliance tracking log to ensure documentation gaps are identified and resolved on a timely basis, rather than through an annual review cycle alone. Management’s Response: See Corrective Action Plan

Subrecipient Monitoring (Significant Deficiency in Internal Controls over Compliance, Other Noncompliance) Federal agency – U.S. Department of Health and Human Services Federal program title – Foster Care – Title IV-E Assistance listing number – 93.658 Criteria – 2 CFR Part 200 Uniform Administrative Requirements, Post Federal Award Requirements and Cost Principles for Federal Award (Uniform Guidance) requires the grantee to monitor the activities of subrecipients to ensure the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and terms and conditions of the subaward. Additionally, when the County passes money through to subrecipients, the County must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes certain information at the time of the subaward.Condition and Context – During our testing, we selected 6 subrecipients from a population of 27 subrecipients for testing and the County was unable to provide us with documentation of their risk assessment and the County did not document their review of the single audit reports of the subrecipients as part of their monitoring procedures for all 6. Management does review the California Department of Social Services management decision letters and facility evaluation report on the California Department of Social Services website, but does not document their review. Questioned costs – None Cause – The County does not have the proper training regarding compliance Uniform Guidance for subrecipients. Effect – The County was not in compliance with federal award subrecipient monitoring requirements. Continued noncompliance could result in sanctions by the federal awarding agency, including withholding future funding. Repeat finding – Yes, prior year 2023-002 Recommendation – The County should establish policies and procedures to ensure risk assessment is documented. The County should also obtain the single audit reports for their subrecipients and issue management decision letters as part of their monitoring. Views of responsible officials – The County (Human Services Agency) acknowledges that, at the time of the FY 2023/24 audit, there was no documented process for completing risk assessments, obtaining copies of single audit reports for each FFA, group home, and STRTP subrecipient, or issuing management decision letters as part of a documented monitoring policy and procedure. The County (Human Services Agency) relies on CDSS to perform certain licensing and oversight functions as the single state agency for Title IV-E funds. The County (Human Services Agency) is responsible for and does review these audits and their findings. In response to this finding, the County (Human Services Agency) has established a documented process, implemented in FY 2024/25 documenting risk assessments, obtaining copies of the single audit reports for each FFA, group homes, and STRTPs subrecipient, and issuing management decision letters to ensure compliance.

Subrecipient Monitoring (Significant Deficiency in Internal Controls over Compliance and instance of noncompliance) Federal agency – U.S. Department of Health and Human Services Federal program title – Foster Care – Title IV-E Assistance listing number – 93.658 Criteria – 2 CFR Part 200 Uniform Administrative Requirements, Post Federal Award Requirements and Cost Principles for Federal Award (Uniform Guidance) requires the grantee to monitor the activities of subrecipients to ensure the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and terms and conditions of the subaward. Additionally, when the County passes money through to subrecipients, the County must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes certain information at the time of the subaward. Condition and context – During our testing in the prior fiscal year audit, we selected five subrecipients from a population of 24 subrecipients for testing and the County was unable to provide us with documentation of their risk assessment and the County did not obtain the single audit reports of the subrecipients as part of their monitoring procedures for all five. Management did obtain the California Department of Social Services management decision letters for two out of the five subrecipients tested. Given the finding was reported in May 2024, 11 months after the year ended June 30, 2023, management has not cleared the finding. Questioned costs – None Cause – The County does not have the proper training regarding compliance Uniform Guidance for subrecipients. Effect – The County was not in compliance with federal award subrecipient monitoring requirements. Continued noncompliance could result in sanctions by the federal awarding agency, including withholding future funding. Repeat finding – Yes, prior year 2022-003 Recommendation – The County should establish policies and procedures to ensure risk assessment is documented. The County should also obtain the single audit reports for their subrecipients and issue management decision letters as part of their monitoring. Views of responsible officials – The County (Human Services Agency) categorized five providers, all FFAs as subrecipients that received Title IV-E funding. These providers are clearly identified in the FY 2021/22 Schedule of Expenditures of Federal Awards (SEFA) as mandated by 2 CFR 200.332. The County (Human Services Agency) concurs that there is no documented process for completing and documenting a risk assessment, obtaining copies of the single audit reports for each FFA, group homes, and STRTPs subrecipient, and issuing management decision letters as part of a documented monitoring policy and procedure. The County (Human Services Agency) relies on CDSS to perform certain licensing and oversight functions as the single state agency for Title IV-E funds. The County (Human Services Agency) is responsible for and does review these audits and their findings; however, we concur that we did not sufficiently document our process or our follow-ups to ensure compliance.

Suspension & Debarment (Significant Deficiency in Internal Controls over Compliance and instance of noncompliance) Federal agency – U.S. Department of the Treasury Federal program title – COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ARPA) Assistance listing number – 21.027 Criteria – 2 CFR Part 200 Uniform Administrative Requirements, Post Federal Award Requirements and Cost Principles for Federal Award requires the grantee to perform suspension and debarment checks when procuring goods or services. Condition and context – During our testing in the prior fiscal year audit, for two procurements out of a population of seven tested for this program, the County did not perform the required suspension and debarment verification prior to entering into vendor agreements. Given the finding was reported in May 2024, 11 months after the year ended June 30, 2023, management has not cleared the finding. Questioned costs – None Cause – The County does not have procedures in place to ensure suspension and debarment checks are completed prior to entering into purchase or service agreements with vendors. Effect – The County was not in compliance with federal award suspension and debarment requirements. Continued noncompliance can result in sanctions by the federal awarding agency, including withholding future funding. Repeat finding – Yes, prior year 2022-004 Recommendation – The County should implement procedures to ensure the suspension and debarment check is completed prior to finalizing agreements with vendors. Views of responsible officials – Management agrees with this finding and recommendation. The County will implement a county-wide contract clause that will be added to covered transaction contracts to comply with 2 CFR 180, to ensure covered transactions receive verification that the person or entity is not excluded or disqualified. Review and approval of this suspension and debarment verification will be performed during the contract approval process, which will include this standardized clause. The County’s purchasing policy and procedures manual will be updated to include this standard suspension and debarment verification process to ensure this procedure is communicated county-wide and followed.

Subrecipient Monitoring (Significant Deficiency in Internal Controls over Compliance, Other Noncompliance) Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Foster Care – Title IV-E Assistance Listing Number: 93.658 Criteria: 2 CFR Part 200 Uniform Administrative Requirements, Post Federal Award Requirements and Cost Principles for Federal Award (Uniform Guidance) requires the grantee to monitor the activities of subrecipients to ensure the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and terms and conditions of the subaward. Additionally, when the County passes money through to subrecipients, the County must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes certain information at the time of the subaward. Condition: During our testing, we selected five subrecipients from a population of 24 subrecipients for testing and the County was unable to provide us with documentation of their risk assessment and the County did not obtain the single audit reports of the subrecipients as part of their monitoring procedures for all five. Management did obtain the California Department of Social Services management decision letters for two out of the five subrecipients tested. Questioned Costs: None Cause: The County does not have the proper training regarding compliance Uniform Guidance for subrecipients. Effect: The County was not in compliance with federal award subrecipient monitoring requirements. Continued noncompliance could result in sanctions by the federal awarding agency, including withholding future funding. Repeat Finding: Yes, prior year 2021-002 Recommendation: The County should establish policies and procedures to ensure risk assessment is documented. The County should also obtain the single audit reports for their subrecipients and issue management decision letters as part of their monitoring. Views of responsible officials – The County (Human Services Agency) categorized five providers, all FFAs as subrecipients that received Title IV-E funding. These providers are clearly identified in the FY 2021/22 Schedule of Expenditures of Federal Awards (SEFA) as mandated by 2 CFR 200.332. The County (Human Services Agency) concurs that there is no documented process for completing and documenting a risk assessment, obtaining copies of the single audit reports for each FFA, group homes, and STRTPs subrecipient, and issuing management decision letters as part of a documented monitoring policy and procedure. The County (Human Services Agency) relies on CDSS to perform certain licensing and oversight functions as the single state agency for Title IV-E funds. The County (Human Services Agency) is responsible for and does review these audits and their findings, however we concur that we did not sufficiently document our process or our follow-ups to ensure compliance.

Suspension & Debarment (Significant Deficiency in Internal Controls over Compliance, Other Noncompliance) Federal Agency: U.S. Department of the Treasury Federal Program Title: COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ARPA) Assistance Listing Number: 21.027 Criteria: 2 CFR Part 200 Uniform Administrative Requirements, Post Federal Award Requirements and Cost Principles for Federal Award requires the grantee to perform suspension and debarment checks when procuring goods or services. Condition: For two procurements out of a population of seven tested for this program, the County did not perform the required suspension and debarment verification prior to entering into vendor agreements. Questioned Costs: None Cause: The County does not have procedures in place to ensure suspension and debarment checks are completed prior to entering into purchase or service agreements with vendors. Effect: The County was not in compliance with federal award suspension and debarment requirements. Continued noncompliance can result in sanctions by the federal awarding agency, including withholding future funding. Repeat Finding: No Recommendation: The County should implement procedures to ensure the suspension and debarment check is completed prior to finalizing agreements with vendors. Views of responsible officials – Management agrees with this finding and recommendation. The County will implement a county-wide contract clause that will be added to covered transaction contracts to comply with 2 CFR 180, to ensure covered transactions receive verification that the person or entity is not excluded or disqualified. Review and approval of this suspension and debarment verification will be performed during the contract approval process, which will include this standardized clause. The County’s purchasing policy and procedures manual will be updated to include this standard suspension and debarment verification process to ensure this procedure is communicated county-wide and followed.

GSA_MIGRATION