City of FremontLocal Government

Section III Federal Awards Findings and Questioned Costs Reference Number: 2025-001 Federal Program Title: Community Development Block Grants / Entitlement Grants Federal Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Pass-Through Entity: N/A Federal Award Number and Year: B-24-MC-06-0011; 2024 Name of Department: Human Services Category of Finding: Reporting Type of finding: Instance of Noncompliance; Significant Deficiency in Internal Control over Compliance Criteria: In accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 170 – Reporting Subaward and Executive Compensation Information, Appendix A to Part 170 – Award Term, Section I(a), prime awardees awarded a Federal grant are required to file a Federal Funding Accountability and Transparency Act (FFATA) report by the end of the month following the month in which the prime awardee awards any sub-grant equal to or greater than $30,000. Condition: The City did not comply with the Federal Funding Accountability and Transparency Act (FFATA) reporting requirements. The City did not submit the required FFATA subaward report into the FSRS system within the required timeframe, which is no later than the end of the month following the month in which the subaward was made. The City submitted the report after the required deadline as outlined in the table below. Transactions Tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements 7 0 3 0 0 Dollar Amount of Tested Transactions Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements $1,382,685 $0 $1,047,859 $0 $0 Cause: The City had varying interpretations of the FFATA reporting timeline, which resulted in subaward reports being submitted outside the required reporting window. This occurred, in part, because stakeholders relied on differing interpretations of the timing requirements based on their understanding of the available guidance. Questioned Costs: Questioned costs were not identified. Context: Seven subawards requiring the submission of an subaward report were selected for testing from a total population of seven subrecipient awards. Three of the seven tested reports were not submitted in a timely manner. Effect: Because the required submission was not completed by the applicable due date, the City was not in compliance with the provisions of the FFATA reporting requirements. Recommendation: The Human Services Department which oversees this program should develop and document a standardized process to identify, track, and report all subaward agreements and modifications executed during the fiscal year that are subject to FFATA reporting requirements. Views of Responsible Officials and Planned Corrective Action: Management’s response is reported in the “Corrective Action Plan” section of this report.

Finding 2023-001 Wage Rate Requirements (Significant Deficiency in Internal Control Over Compliance) Program Identification: Awarding Agency: U.S. Department of Housing and Urban Development Program Name: Community Development Block Grants/Entitlement Grants Assistance Listing Number: 14.218 Award Number: B-20-MC-06-0011 Award Year: Fiscal Year Ended June 30, 2021 Criteria: Title 29 - Labor Part 5 – Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction (Also Labor Standards Provisions Applicable to Nonconstruction Contracts Subject to the Contract Work Hours and Safety Standards Act), Subpart A – Davis-Bacon and Related Acts Provisions and Procedures §5.5 Contract provisions and related matters. (a) The agency head shall cause or require the contracting officer to insert in full in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part from federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution (except where a different meaning is expressly indicated), and which is subject to the labor standards provisions of any of the acts listed in §5.1, the following clauses (or any modifications thereof to meet the particular needs of the agency, provided, that such modifications are first approved by the Department of Labor): (1) Minimum wages. (i) All laborers and mechanics employed or working upon the site of the work (or under the United States Housing Act of 1937 or under the Housing Act of 1949 in the construction or development of the project), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. (ii) (A) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the agency that is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the agency. The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on weekly transmittals. Instead the payrolls shall only need to include an individually identifying number for each employee (e.g., the last four digits of the employee’s social security number). Condition: During our audit of the City’s compliance with the Wage Rate Requirements for the CDBG Program, we selected a statistically valid sample of five certified payroll reports from a population of approximately 31 certified payrolls for the construction period November 9, 2022 through June 21, 2023. We noted that the City did not receive the required certified payroll prior to the City authorizing disbursement of funds to the prime contractors for 4 of the items selected. Cause of Condition: The City typically makes monthly payments to contractors. Although contractors are required to submit certified payrolls on a timely basis, the City did not carefully review and verify required documents were received before approval for payment. Effect: The City, who is responsible for overseeing compliance with the Wage Rate Requirements, did not consistently verify the laborers and mechanics employed by the contractors were paid prevailing wage rates before payment was released to the contractors. There is a risk that federal funds may be paid to contractors who do not comply with the Wage Rate Requirements, resulting in unallowable costs. Questioned Costs: Questioned costs are the payments made to the contractor during the period, which total $223,435. Recommendation: We recommend that the City evaluate the effectiveness of its current internal control policies and procedures. In addition, we recommend that the City establish internal control policies and procedures over withholding payment until the certified payrolls are received. Views of Responsible Officials and Corrective Action Plan: Management’s response is reported in “Corrective Action Plan” included on the next page of this report.