EIN: 946001435
UEI: MPQTKTQ7N4L4
Audited by: Chavan & Associates, LLP
Oversight agency: 20 [Department of Transportation]
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Data as of August 28, 2026
Management decision deadline — for entities that funded this organization
The FAC accepted this audit on February 27, 2026. Under 2 CFR 200.521(d), a pass-through entity that provided federal funds to this organization for this audit period must issue a management decision on these findings by August 27, 2026 (3 days ago).
What is a management decision? →FAC accepted this audit on March 13, 2025 — management decision was due September 13, 2025.
FAC accepted this audit on March 4, 2024 — management decision was due September 4, 2024.
FAC accepted this audit on March 29, 2023 — management decision was due September 29, 2023.
FAC accepted this audit on July 12, 2022 — management decision was due January 12, 2023.
During our audit, we noted that per the Coronavirus Relief Fund (Fund) program guidance in the Federal Register dated January 15, 2021, revenue replacement is not a permissible use of Fund payments. On April 21, 2020, the Town Council approved a waiver of rent and utilities for a set of nonprofit lessees. When preparing a listing of grant expenditures for reporting to the State, the Town chose to use their rent and utility waivers as a qualifying expenditure. Cause: The Town did not equivalate rental waivers and lost revenue replacement. The Town staff?s interpretation of lost revenue was understood to be unavoidable losses of revenue due to the pandemic. Questioned Costs: During our testing, we determined that $73,054 of federal expenditures were not allowable costs or allowable activities with total questioned costs of $94,998. Context and Effect: The Town was not in full compliance with neither the allowable costs and cost principles, nor the allowable activities compliance requirements of the program. Recommendation: We recommend the Town double-check for disallowed costs and activities when administering new grant programs. Management Response: The Town?s independent auditor has opined that the Town?s efforts to provide economic relief in the form of waivers of rent (rent forgiveness) to a number of non-profits and other entities should be considered as ?lost revenue? and therefore disallowable because lost revenue is precluded as an expenditure for the CARES act . Based on the Town?s understanding of the CARES act rent forgiveness support was classified as eligible under the Small business assistance category of expenditures. As such, the Town Council opted to assist these groups by forgiving their rent (a voluntary write-off of rents due to the Town) to support these entities during the height of the pandemic. If the Federal Government determines that this cost were to be disallowed, the Town has significant other qualifying expenditures in categories such as payroll for public safety that could be substituted for the small business rental assistance. In response to the questioned finding on waivers of rent, staff received approval from the State of California Department of Finance to re-allocate the questioned costs amount of $94,988 from business support (rent waivers) to public safety payroll. The department reviewed the Town?s submittal and on June 1, 2022 the Town received the department?s approval of the re-allocation as corrected in the State?s Corona Virus Fund Reporting worksheet.
Show full finding ▾Hide full finding ▴Finding: 2021-001 Awarding Agency Department of the Treasury Passed through State of California (State) Program Coronavirus Relief Fund AFN# 21.019 Criteria: Per 2 CFR section 225 App. A, Paragraph C.1.d, ?to be allowable under Federal awards, costs must meet the following general criteria: Conform to any limitations or exclusions set forth in these principles, Federal laws, terms and conditions of the Federal award, or other governing regulations as to types or amounts of cost items.? Condition: During our audit, we noted that per the Coronavirus Relief Fund (Fund) program guidance in the Federal Register dated January 15, 2021, revenue replacement is not a permissible use of Fund payments. On April 21, 2020, the Town Council approved a waiver of rent and utilities for a set of nonprofit lessees. When preparing a listing of grant expenditures for reporting to the State, the Town chose to use their rent and utility waivers as a qualifying expenditure. Cause: The Town did not equivalate rental waivers and lost revenue replacement. The Town staff?s interpretation of lost revenue was understood to be unavoidable losses of revenue due to the pandemic. Questioned Costs: During our testing, we determined that $73,054 of federal expenditures were not allowable costs or allowable activities with total questioned costs of $94,998. Context and Effect: The Town was not in full compliance with neither the allowable costs and cost principles, nor the allowable activities compliance requirements of the program. Recommendation: We recommend the Town double-check for disallowed costs and activities when administering new grant programs. Management Response: The Town?s independent auditor has opined that the Town?s efforts to provide economic relief in the form of waivers of rent (rent forgiveness) to a number of non-profits and other entities should be considered as ?lost revenue? and therefore disallowable because lost revenue is precluded as an expenditure for the CARES act . Based on the Town?s understanding of the CARES act rent forgiveness support was classified as eligible under the Small business assistance category of expenditures. As such, the Town Council opted to assist these groups by forgiving their rent (a voluntary write-off of rents due to the Town) to support these entities during the height of the pandemic. If the Federal Government determines that this cost were to be disallowed, the Town has significant other qualifying expenditures in categories such as payroll for public safety that could be substituted for the small business rental assistance. In response to the questioned finding on waivers of rent, staff received approval from the State of California Department of Finance to re-allocate the questioned costs amount of $94,988 from business support (rent waivers) to public safety payroll. The department reviewed the Town?s submittal and on June 1, 2022 the Town received the department?s approval of the re-allocation as corrected in the State?s Corona Virus Fund Reporting worksheet.
FINANCIAL STATEMENT FINDINGS - CURRENT YEAR Finding Reference Number: 2021- 001 General Fund Financial Position (Material Weakness) Name(s) of the contact person: Stephen Conway, Director of Finance Corrective Action Plan: Based on the Town?s understanding of the initial guidance released April 22, 2020 regarding CARES act eligible uses, rent forgiveness support was classified as eligible under the Small business assistance category of expenditures. As such, the Town Council opted to assist certain Town lessees by forgiving their rent (a voluntary write-off of rents due to the Town) to support these entities during the height of the pandemic. If the Federal government subsequently determines that this cost were to be disallowed, the Town has significant other qualifying expenditures in categories such as payroll for public safety that could be substituted for the small business rental assistance. In response to the questioned finding on waivers of rent, staff received approval from the State of California Department of Finance to re-allocate the questioned costs amount of $94,988 from business support (rent waivers) to public safety payroll. The department reviewed the Town?s submittal and on June 1, 2022 the Town received the department?s approval of the re-allocation as corrected in the State?s Corona Virus Fund Reporting worksheet. Anticipated Completion Date: Because of significant other CARES act qualifying expenditures that can be substituted for the questioned cost, effective immediately the Town of Los Gatos will refrain from claiming the Town Council approved expense write-offs of rental revenues due to the Town from lessees as an eligible use of Federal funds. This decision was made under the advice from the Town ?s independent auditor and staff?s review of the updated discussion of eligible expenditures and eligibility of lost revenues as was recently released in the January 15, 2021 Federal Register Department of the Treasury Corona Relief Fund for States, Tribal Governments, and Certain Eligible Local Governments.
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