City of ComptonLocal Government

Cause: Turnover of staff in the Housing Authority and delay in recruitment. Lack of internal control over the retention of program reports that form as the basis of the FASS-PH submissions. Effect or Potential Effect: The City may be subject to a permanent reduction or offset of administrative fees in an amount to be determined by HUD and demotion of the PHA’s SEMAP scoring one level. Questioned Cost: None. Context: The City obtained the notification from HUD dated on July 11, 2024 regarding a final notification of noncompliance related to financial reporting and PHA Plan requirements. The City submitted its audited financial statements for fiscal years 2021 and 2022 on June 25, 2024 and December 20, 2024, respectively. The auditor noted that the audited financial statements for fiscal year 2023 were submitted on June 10, 2025. The audited financial statements for fiscal year 2024 will be submitted in February 2026. Statistical Sampling Validity: Not applicable. Repeat of a Prior-Year Finding: 2018-007, 2019-005, 2020-001, 2021-002, 2023-004 Recommendation: We recommend the City establish policies and procedures that will ensure the submission of unaudited and audited financial information to HUD on a timely basis. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The City Controller’s Office drafted a Grants policy that is currently under review by City Management. Community development staff will ensure a succession plan is in place for any staff turnover and for report preparation compliance. The PHA Executive Director will work with the City Manager, City Controller’s Internal Auditor and Grants reporting team to ensure: 1. Timely reporting 2. There is viable Grants administration policy 3. There is an internal schedule and timeline in preparation for the submissions 4. There is Controller’s office and PHA staff dedicated to financial PHA reporting 5. That there’s an internal soft audit conducted by the aforementioned staff prior to HUD’s deadlines 6. Controller’s office staff is trained by Nan McKay on financial reporting for PHA’s (in process – Internal Auditor taking training in February 2026). 7. The Controller’s office will identify consultants to assist with timely audit submissions as deemed necessary by the City Manager, executive director and City Controller. Planned Implementation Date: July 2026 beginning of fiscal year with new funding and CHA/Controller’s officer reporting structure Responsible Person(s): City Manager, City Controller, PHA Executive Director, and Human Resources Director

Cause: The City’s internal control processes for reviewing and approving compensation changes were not followed promptly. There was a lack of procedures ensuring that salary adjustments were approved prior to the effective date. Effect or Potential Effect: Untimely approval of compensation changes increases the risk of inaccurate or unallowable personnel costs being charged to the federal award. This may result in questioned costs, noncompliance with federal regulations, and potential audit findings. Questioned Cost: None. Context: We selected five out of nine employees who worked on the program and in all cases, the PAF were authorized much later than the effective date of the compensation change. Statistical Sampling Validity: More than 50% of employees who work on the program were selected. Repeat of a Prior-Year Finding: 2022-005, 2023-005. Recommendation: The City should reinforce internal controls to ensure that all compensation changes are reviewed and approved promptly. This should include:  Establishing a timeline for the approval of compensation adjustments.  Implementing procedures that prevent compensation changes from being applied until formal approval is obtained.  Ensuring proper documentation of all approved salary changes is maintained. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation and has implemented hiring for temporary work assignments in order to facilitate update. Corrective Action Plan: The HR and payroll software will be updated by the City by December 2026. Planned Implementation Date: December 2026 Responsible Person(s): City Manager

Condition: We noted that the entity experienced significant turnover in key management positions responsible for overseeing compliance with federal awards during FY 2024. As a result, there was insufficient oversight of federal programs and internal controls. Critical duties related to compliance monitoring, reporting, and financial management were not performed adequately during the transition period, and there was a lack of continuity in management practices. Cause: The entity did not have adequate processes in place to ensure continuity of oversight and management responsibilities during periods of turnover. There were no succession plans or interim measures to ensure that compliance duties were properly transitioned and maintained. Effect or Potential Effect: The lack of oversight during the management turnover period increases the risk of non-compliance with federal award requirements. It can lead to gaps in monitoring, failure to meet reporting deadlines, inaccurate financial management, and the potential for disallowed costs or other negative consequences. Questioned Cost: None. Context: The deficiency was found during our testing of reporting and special tests and provisions. Statistical Sampling Validity: Not applicable. No sampling was performed. Repeat of a Prior-Year Finding: 2022-007, 2023-006. Recommendation: The entity should establish policies and procedures to ensure continuity of oversight and compliance monitoring during management transitions. This should include: 1. Developing a formal succession plan for key management positions responsible for overseeing federal programs. 2. Implementing interim oversight measures, such as assigning temporary leadership or redistributing compliance responsibilities during periods of transition. 3. Ensuring that new management receives timely training on compliance responsibilities and internal controls related to federal awards. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The recommendations are included in the new Grants policy. The City Manager shall review and submit to City Council for approval and adoption. Expected implementation by June 2026. Planned Implementation Date: June 2026 Responsible Person(s): City Manager

Cause: The condition was primarily due to inadequate internal controls over federal grant reporting, including insufficient monitoring of reporting deadlines, compounded by turnover in City personnel responsible for CSLFRF compliance. Effect or Potential Effect: Failure to submit required federal reports in accordance with program requirements constitutes noncompliance with CSLFRF reporting requirements and may result in increased federal oversight, required corrective actions, withholding of future funding, repayment of funds, or other enforcement actions by the granting agency. Questioned Cost: None. The reporting deficiencies did not directly result in questioned costs. Context: According to the Assistant City Manager, the City was unable to provide the required CSLFRF reporting documentation or evidence of submission for FY 2024 during the audit period. Management further indicated that CSLFRF reports for FY 2025 were subsequently submitted; however, such submissions were outside the scope of the audit period and did not provide evidence of compliance with FY 2024 reporting requirements. Statistical Sampling Validity: Not applicable. No statistical sampling was performed. Repeat of a Prior-Year Finding: 2022-004. Recommendation: The City should design and implement effective internal controls over federal grant reporting to ensure compliance with CSLFRF reporting requirements. Such controls should include clearly assigned reporting responsibilities, documented reporting timelines, procedures for timely submission through the Treasury reporting portal, and retention of supporting documentation evidencing report submission. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The new Grants policy will be reviewed and approved by the City Manager and implemented by June 2026. Community Development staff will ensure a succession plan is in place for any staff turnover and for report preparation compliance. Planned Implementation Date: June 2026 Responsible Person(s): City Manager

2023-004 – Lack of Reporting (MW, NC) Federal Program Title: Section 8 Housing Choice Vouchers Federal Catalog Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Category of Finding: Reporting Criteria: The Office of Management and Budget 2023 Compliance Supplement states that the following reports are required to be submitted to the U.S. Department of Housing and Urban Development (HUD). Financial Reports (OMB No. 2535-0107) – Financial Assessment Subsystem, FASS-PH. The Uniform Financial Reporting Standards (24 CFR section 5.801) require PHAs to submit timely GAAP-based unaudited and audited financial information electronically to HUD. Unaudited submissions are due no later than 60 days after the agency’s FYE and audited submissions are due nine months after the agency’s FYE. The FASS-PH system is one of HUD’s main monitoring and oversight systems for the HCVP. Condition: The FASS- PH unaudited and audited submissions for FY 2021, 2022, 2023 and 2024 are delinquent. Cause: Turnover of staff in the Housing Authority and delay in recruitment. Lack of internal control over the retention of program reports that form as the basis of the FASS-PH submissions. Effect or Potential Effect: The City may be subject to a permanent reduction or offset of administrative fees in an amount to be determined by HUD and demotion of the PHA’s SEMAP scoring one level. Questioned Cost: None. Context: The City obtained the notification from HUD dated on July 11, 2024. The City submitted the audited financial statements for FY 2021 and 2022 on June 25, 2024 and December 20, 2024, respectively. Statistical Sampling Validity: Not applicable. Repeat of a Prior-Year Finding: 2018-007, 2019-005, 2020-001, 2021-002 Recommendation: We recommend the City establish policies and procedures that will ensure the submission of unaudited and audited financial information to HUD on a timely basis. Status: In Progress Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The City Controller’s Office drafted a grants policy that is currently under review by City Management. Community development staff will ensure a succession plan is in place for any staff turnover and for report preparation compliance. Planned Implementation Date: September 2025 Responsible Person(s): City Manager, City Controller, and Community Development Director

2023-005 – Delayed Approval of Compensation Rates (SD) Federal Program Title: Section 8 Housing Choice Vouchers Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Category of Finding: Allowable Costs and Cost Principles Criteria: Per 2 CFR §200.430 of the Uniform Guidance, compensation for personnel services, including any adjustments, must be based on documented and approved procedures in accordance with the organization’s established policies. All changes to compensation must be approved and documented in a timely manner to ensure compliance with both federal and non-federal funding requirements. The City uses personnel action forms (PAF) to document changes to compensation. The PAF must be approved by authorized personnel in advance. Condition: During the review of personnel costs, it was observed that changes in the compensation rates for employees charged to the federally funded project were not approved in a timely manner. Documentation showed delays in the authorization of salary adjustments, with compensation changes becoming effective before formal approval by the City. Cause: The City’s internal control processes for reviewing and approving compensation changes were not followed promptly. There was a lack of procedures ensuring that salary adjustments were approved prior to the effective date. Effect or Potential Effect: Untimely approval of compensation changes increases the risk of inaccurate or unallowable personnel costs being charged to the federal award. This may result in questioned costs, noncompliance with federal regulations, and potential audit findings. Questioned Cost: None. Context: We selected four employees who worked on the program and in all cases, the PAF were authorized much later than the effective date of the compensation change. Statistical Sampling Validity: More than 50% of employees who work on the program were selected. Repeat of a Prior-Year Finding: 2022-005. Recommendation: The City should reinforce internal controls to ensure that all compensation changes are reviewed and approved promptly. This should include:  Establishing a timeline for the approval of compensation adjustments.  Implementing procedures that prevent compensation changes from being applied until formal approval is obtained.  Ensuring proper documentation of all approved salary changes is maintained. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation and has implemented hiring for temporary work assignments in order to facilitate update. Corrective Action Plan: The HR and payroll software will be updated by the City by December 2025. Planned Implementation Date: December 2025 Responsible Person(s): City Manager

2023-006 – Lack of Oversight Due to Management Turnover (SD) Federal Program Title: Section 8 Housing Choice Vouchers Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Category of Finding: Reporting/Special Tests and Provisions Criteria: Under 2 CFR §200.303 of the Uniform Guidance, non-federal entities are required to establish and maintain effective internal control over compliance, including appropriate oversight of federal programs to ensure compliance with applicable laws, regulations, and the terms and conditions of the federal awards. Effective internal controls rely on strong management oversight to ensure that compliance responsibilities are met, even during periods of organizational change. Condition: We noted that the entity experienced significant turnover in key management positions responsible for overseeing compliance with federal awards during FY 2023. As a result, there was insufficient oversight of federal programs and internal controls. Critical duties related to compliance monitoring, reporting, and financial management were not performed adequately during the transition period, and there was a lack of continuity in management practices. Cause: The entity did not have adequate processes in place to ensure continuity of oversight and management responsibilities during periods of turnover. There were no succession plans or interim measures to ensure that compliance duties were properly transitioned and maintained. Effect or Potential Effect: The lack of oversight during the management turnover period increases the risk of non-compliance with federal award requirements. It can lead to gaps in monitoring, failure to meet reporting deadlines, inaccurate financial management, and the potential for disallowed costs or other negative consequences. Questioned Cost: None. Context: The deficiency was found during our testing of reporting and special tests and provisions. Statistical Sampling Validity: Not applicable. No sampling was performed. Repeat of a Prior-Year Finding: 2022-007. Recommendation: The entity should establish policies and procedures to ensure continuity of oversight and compliance monitoring during management transitions. This should include: 1. Developing a formal succession plan for key management positions responsible for overseeing federal programs. 2. Implementing interim oversight measures, such as assigning temporary leadership or redistributing compliance responsibilities during periods of transition. 3. Ensuring that new management receives timely training on compliance responsibilities and internal controls related to federal awards. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The recommendations are included in the new grants policy. The City Manager shall review and approve it for implementation by September 2025. Planned Implementation Date: September 2025 Responsible Person(s): City Manager

2022-004 – Lack of Reporting (SD, NC) Federal Program Title: Coronavirus State and Local Fiscal Recovery Funds Federal Catalog Number: 21.027 Federal Agency: U.S. Department of Treasury Category of Finding: Reporting Criteria: Pursuant to the Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement April 2022 Part 4 21.027 Coronavirus State and Local Fiscal Recovery Funds (page 4-21.027-7), the annual reporting requirement for Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) is through the submission of the initial Interim Report, quarterly Project and Expenditure Report, and the Recovery Plan Performance Report. The interim report is a one time report that provides an initial overview of status and use of funding. The Project and Expenditure Report details the financial data, projects funded, expenditures and contracts over $50,000. Condition: During our audit, the City was unable to provide evidence that any project and expenditure report for the period between July 2021 through June 2022 was submitted. Also, there was no evidence the interim report was submitted. The Recovery Plan Performance report is not a required report for the City due to their population size falling under the 250,000 requirement. Cause: Lack of appropriate control over reporting, mainly due to turn-over in City personnel. Effect or Potential Effect: Noncompliance may result in termination of the grants, reduction in future payments or funding amounts, repayment of federal funds already received and spent, imposed fines and penalties, reputational damage, special status for oversight and reviews, need for corrective action plan, and/or suspension or debarment. Questioned Cost: None. Context: According to the Assistant City Manager, reports for FY 2022 were neither drafted nor submitted, however they were prepared in FY 2023. Statistical Sampling Validity: Not applicable. No sampling was performed. Repeat of a Prior-Year Finding: No. Recommendation: The City should design and establish internal controls over reporting, which should include maintaining copies of reports submitted for audit. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The new grants policy will be reviewed and approved by the City Manager and implemented by March 2025. Planned Implementation Date: March 2025 Responsible Person(s): City Manager

2022-005 – Delayed Approval of Compensation Rates (SD) Federal Program Title: Section 8 Housing Choice Vouchers Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Category of Finding: Allowable Costs and Cost Principles Criteria: Per 2 CFR §200.430 of the Uniform Guidance, compensation for personnel services, including any adjustments, must be based on documented and approved procedures in accordance with the organization’s established policies. All changes to compensation must be approved and documented in a timely manner to ensure compliance with both federal and non-federal funding requirements. The City uses personnel action forms (PAF) to document changes to compensation. The PAF must be approved by authorized personnel in advance. Condition: During the review of personnel costs, it was observed that changes in the compensation rates for employees charged to the federally funded project were not approved in a timely manner. Documentation showed delays in the authorization of salary adjustments, with compensation changes becoming effective before formal approval by the City. Cause: The City’s internal control processes for reviewing and approving compensation changes were not followed promptly. There was a lack of procedures ensuring that salary adjustments were approved prior to the effective date. Effect or Potential Effect: Untimely approval of compensation changes increases the risk of inaccurate or unallowable personnel costs being charged to the federal award. This may result in questioned costs, non-compliance with federal regulations, and potential audit findings. Questioned Cost: None. Context: We selected five employees who worked on the program and in all cases, the PAF were authorized much later than the effective date of the compensation change. Statistical Sampling Validity: More than 50% of employees who work on the program were selected. Repeat of a Prior-Year Finding: No. Recommendation: The City should reinforce internal controls to ensure that all compensation changes are reviewed and approved promptly. This should include: • Establishing a timeline for the approval of compensation adjustments. • Implementing procedures that prevent compensation changes from being applied until formal approval is obtained. • Ensuring proper documentation of all approved salary changes is maintained. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The HR and payroll policies will be updated to incorporate the above recommendations. Planned Implementation Date: March 2025 Responsible Person(s): City Manager

2022-006 – Missing Contracts/Agreements with HUD (SD) Federal Program Title: Section 8 Housing Choice Vouchers Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Category of Finding: Special Tests and Provisions Criteria: Pursuant to Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement April 2022 Part 4 14.871, the Annual Contribution contract (ACC) establishes the amounts HUD will provide a housing authority for housing assistance payments (HAP) and administrative fees. In addition, CARES Act -HCV Program HAP Supplemental Funding and Administrative Fees were made available to the City in FY 2022. The amounts provided are identified in SF-424. The City should retain a copy of the ACC and the SF-424 for purposes of the audit. Condition: The City was unable to provide a copy of the ACC and SF-424. It appears that the current personnel at the Local Housing Authority were not aware of the existence of the ACC and SF-424 for FY 2022. Cause: The turnover of key personnel responsible for document retention and management, coupled with inadequate handover procedures, resulted in the failure to retain or properly transfer documents to new staff members. Effect or Potential Effect: We were unable to perform some of the procedures to ensure that the reported expenditures were in line with the approved funding. Questioned Cost: None. Context: It appears that the current personnel at the Local Housing Authority were not aware of the existence of the ACC and SF-424 for FY 2022. Statistical Sampling Validity: Not applicable. No sampling was performed. Repeat of a Prior-Year Finding: No. Recommendation: The City should establish a formalized procedure for documentation management that includes clear guidelines for document retention. Additionally, there should be a structured transition process when staff turnover occurs to ensure all key responsibilities and documents are properly handed over. This may include a centralized document repository and mandatory documentation of transitions between employees. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The new grants policy will be reviewed and approved by the City Manager and implemented by March 2025. Planned Implementation Date: March 2025 Responsible Person(s): City Manager

2022-007 – Lack of Oversight Due of Management Turnover (SD) Federal Program Title: Section 8 Housing Choice Vouchers Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Category of Finding: Reporting/Special Tests and Provisions Criteria: Under 2 CFR §200.303 of the Uniform Guidance, non-federal entities are required to establish and maintain effective internal control over compliance, including appropriate oversight of federal programs to ensure compliance with applicable laws, regulations, and the terms and conditions of the federal awards. Effective internal controls rely on strong management oversight to ensure that compliance responsibilities are met, even during periods of organizational change. Condition: During the audit, it was noted that the entity experienced significant turnover in key management positions responsible for overseeing compliance with federal awards. As a result, there was insufficient oversight of federal programs and internal controls. Critical duties related to compliance monitoring, reporting, and financial management were not performed adequately during the transition period, and there was a lack of continuity in management practices. Cause: The entity did not have adequate processes in place to ensure continuity of oversight and management responsibilities during periods of turnover. There were no succession plans or interim measures to ensure that compliance duties were properly transitioned and maintained. Effect or Potential Effect: The lack of oversight during the management turnover period increases the risk of non-compliance with federal award requirements. It can lead to gaps in monitoring, failure to meet reporting deadlines, inaccurate financial management, and the potential for disallowed costs or other negative consequences. Questioned Cost: None. Context: The deficiency was found during our testing of reporting and special tests and provisions. Statistical Sampling Validity: Not applicable. No sampling was performed. Repeat of a Prior-Year Finding: No. Recommendation: The entity should establish policies and procedures to ensure continuity of oversight and compliance monitoring during management transitions. This should include: 1. Developing a formal succession plan for key management positions responsible for overseeing federal programs. 2. Implementing interim oversight measures, such as assigning temporary leadership or redistributing compliance responsibilities during periods of transition. 3. Ensuring that new management receives timely training on compliance responsibilities and internal controls related to federal awards. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The recommendations are included in the new grants policy. The City Manager shall review and approve it for implementation by March 2025. Planned Implementation Date: March 2025 Responsible Person(s): City Manager

2021-002- Missing Reports (MW, NC} Federal Program Title: Federal Catalog Number: Federal Agency: Pass-Through Entity: Federal Award Number and Year: Category of Finding: Section 8 Housing Choice Vouchers 14.871 U.S. Department of Housing and Urban Development Not applicable CA-071 - 2021 Reporting Criteria: The Office of Management and Budget 2021 Compliance Supplement states that the following reports are required to be submitted to the U.S. Department of Housing and Urban Development. HUD-52681-B, Voucher for Payment of Annual Contributions and Operating Statement (0MB No. 2577-0169). The PHA submits this form monthly to HUD electronically via the VMS. Congress has instructed HUD to use VMS data to determine renewal funding levels. HUD also uses VMS data for other funding, monitoring, and SEMAP-related decisions. HUD relies on the audit of the key line items below to determine the reasonableness of the data submitted for the purposes of calculating funding under the program. Financial Reports (0MB No. 2535-0107)-Financial Assessment Subsystem, FASS-PH. The Uniform Financial Reporting Standards (24 CFR section 5.801) require PHAs to submit timely GAAP-based unaudited and audited financial information electronically to HUD. The FASS-PH system is one of HU D's main monitoring and oversight systems for the HCVP. HUD-52648, SEMAP Certification - PHAs with jurisdiction in metropolitan Fair Market Rent areas have the option of submitting data to HUD with their annual SEMAP certifications on the percent of their tenantbased Section 8 families with children who live in and who have moved during the PHA fiscal year to low poverty census tracts in the PHA's principal operating area. Submission of this information with the SEMAP certification makes the PHA eligible for bonus points under SEMAP (24 CFR section 985.3(h)). HUD 60002, Section 3 Summary Report, Economic Opportunities for Low- and Very Low-Income Persons (0MB No. 2529-0043) - Each recipient that administers covered public and Indian housing assistance, regardless of the amount expended, and each recipient that administers covered housing and community development assistance in excess of $200,000 in a program year, must submit HUD 60002 information using the automated Section 3 Performance Evaluation and Registry System (SPEARS) (24 CFR sections 135.3(a)(1) and 135.90). HUD-50058, Family Report (0MB No. 2577-0083) - The PHA is required to submit this form electronically to HUD each time the PHA completes an admission, annual reexamination, interim reexamination, portability move-in, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA's jurisdiction under portability (24 CFR Part 908 and 24 CFR section 982.158). Condition: We were unable to obtain the following reports: HUD-52681-B, FASS-PH, and HUD-52648. Cause: Turnover of staff in the Housing Authority and delay in recruitment. Lack of internal control over the retention of program reports. Effect or Potential Effect: The City is facing sanctions from the Office of Inspector General (OIG) with a reduced Section 8 Management Assessment Program (SEMAP) rating from High Performer to Standard Performer. A reduced rating may result in HUD withholding additional grant funds or offset the Housing Choice Voucher (HCV) administrative fees. Questioned Cost: None. (MW) - Material Weakness (SD) - Significant Deficiency (NC) - Noncompliance -12- Context: The Housing Authority did not provide required reports. Statistical Sampling Validity: Not applicable. Repeat of a Prior-Year Finding: 2020-001, 2019-005, 2018-007 Recommendation: We recommend the City establish policies and procedures that will ensure the retention of program documents. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The City Controller's Office drafted a grants policy that is currently under review by City Management. Community development staff will ensure a succession plan is in place for any staff turnover and for report preparation compliance. Planned Implementation Date: December 31, 2024 Responsible Person(s): City Manager, Community Development Director, and City Controller

2021-003- Incorrect Payrates {SD) Federal Program Title: Federal Catalog Number: Federal Agency: Pass-Through Entity: Federal Award Number and Year: Category of Finding: Section 8 Housing Choice Vouchers 14.871 U.S. Department of Housing and Urban Development Not applicable CA-071 - 2021 Allowable Costs/Cost Principles Criteria: Title 2, Subtitle A, Chapter II, Part 200, General Provisions for Selected Items of Cost, Section 200.430, Compensation - Personal Services requires that costs of compensation are allowable to the extent that they satisfy specific requirements which in include that the total compensation of individual employees is determined and supported as provided in the Standards for Documentation of Personnel Expenses. The said standards require charges to Federal awards for salaries and wages must be based on records that must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: The City uses personnel action forms (PA 101) to document the approved payrates of City employees. During our audit, we noted that the payrates used to determine the amounts claimed for payroll costs associated with the program were lower than what was reflected in the PA 101 form. Cause: The City approved retroactive pay increases for employees and the pay increases were processed as lump sum adjustments. The payroll records prior to the approval of the retroactive pay were not adjusted to reflect the change. The program costs were not adjusted either. Effect or Potential Effect: The City missed the opportunity to claim higher payroll costs to the program. Questioned Cost: None. Context: Six instances of incorrect payrates were found out of 20 sample items. Since the costs claimed were lower than what they should have been, no questioned cost is reported. Statistical Sampling Validity: Samples are haphazardly selected. Repeat of a Prior-Year Finding: No Recommendation: We recommend the City improve procedures to ensure that payrate changes are approved timely and payroll costs charged to the grant are also adjusted whenever payrate changes are approved. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The general accounting policy will be updated for the accountant to check the payroll register to accrue retroactive pay changes to the correct period. Planned Implementation Date: June 30, 2024 Responsible Person(s): City Controller

2021-004- Distribution of Hours Worked (NC} Federal Program Title: Federal Catalog Number: Federal Agency: Pass-Through Entity: Federal Award Number and Year: Category of Finding: Section 8 Housing Choice Vouchers 14.871 U.S. Department of Housing and Urban Development Not applicable CA-071 - 2021 Allowable CosUCost Principles Criteria: Title 2, Subtitle A, Chapter II, Part 200, General Provisions for Selected Items of Cost, Section 200.430, Compensation - Personal Services requires that costs of compensation are allowable to the extent that they satisfy specific requirements which in include that the total compensation of individual employees is determined and supported as provided in the Standards for Documentation of Personnel Expenses. The said standards require charges to Federal awards for salaries and wages must be based on records that must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Federal award recipients should support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: If an employee works on more than one program or fund, the employee's salary or wages and benefits are distributed by the City to the respective programs or funds based on the number of hours worked. The basis for the distribution is the employee's timecard. During our audit, we noted one employee's timecard did not indicate the number of hours worked for Section 8 or another program/fund, however only 10% of his/her payroll cost was charged to Section 8. Cause: The City was unable to provide the timecard that showed the hours worked by the employee by program/fund. Effect or Potential Effect: Over or understatement of payroll cost charged to the program. Questioned Cost: None. Context: One exception out of 20 sample items. Statistical Sampling Validity: Samples are haphazardly selected. Repeat of a Prior-Year Finding: No Recommendation: We recommend that the City improve procedures to ensure that they retain all timecards that reflect the distribution of costs to programs/funds and make them available for the auditors. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The payroll policy will be updated to require that timecards be updated with supervisor signature if changes are made to change allocation to another fund. Planned Implementation Date: June 30, 2024 Responsible Person(s): City Controller

2021-005- Housing Quality Standards Inspection {NC) Federal Program Title: Federal Catalog Number: Federal Agency: Pass-Through Entity: Federal Award Number and Year: Category of Finding: Section 8 Housing Choice Vouchers 14.871 U.S. Department of Housing and Urban Development Not applicable CA-071 - 2021 Special Tests and Provisions Criteria: The public housing agency (PHA) must inspect the unit leased to a family at least annually to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality control re-inspections. Condition: In one instance, the City did not perform the required annual inspection. Cause: We were informed that the HUD system did not release the address for inspection so no inspection was performed. Effect or Potential Effect: The City's failure to comply with stated requirements exposes the City to sanctions from the federal agency, including loss of funding. Questioned Cost: None Context: The exception was noted in one out of 60 participants tested. The City has noted that they will investigate the issue. Statistical Sampling Validity: Samples are haphazardly selected. Repeat of a Prior-Year Finding: No Recommendation: We recommend the City to improve procedures to ensure that all annual inspections are performed. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: Policies will be enforced or monitored more closely by Housing Authority management to ensure all inspections and re-inspections are complete and documented. Planned Implementation Date: December 31, 2024 Responsible Person(s): Community Development Director

2021-006- Incorrect Payrates {SD, NC) Federal Program Title: Federal Catalog Number: Federal Agency: Pass-Through Entity: Federal Award Number and Year: Category of Finding: Coronavirus Relief Fund 21.019 U.S. Department of the Treasury CA Department of Finance N/A-2021 Allowable Costs/Cost Principles Criteria: Title 2, Subtitle A, Chapter II, Part 200, General Provisions for Selected Items of Cost, Section 200.430, Compensation - Personal Services requires that costs of compensation are allowable to the extent that they satisfy specific requirements which in include that the total compensation of individual employees is determined and supported as provided in the Standards for Documentation of Personnel Expenses. The said standards require charges to Federal awards for salaries and wages must be based on records that must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: The City used incorrect payrates when calculating payroll costs charged to the program. Cause: When the City calculated the Fire Department payroll and payroll costs related to Covid Leave, they used a report that reflected payrates that were higher than what the payroll register reported. Effect or Potential Effect: The City overstated the payroll costs charged to the program. Questioned Cost: $32,314 Context: The exception was found in 10 out of 28 employees selected. The questioned cost is the amount projected to the entire population. Statistical Sampling Validity: Samples are haphazardly selected. Repeat of a Prior-Year Finding: No Recommendation: We recommend the City enhance procedures to double check the payrates used when calculating charges to federal awards. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The City has other eligible costs that were not claimed for this grant that can be used to offset the questioned cost. Procedures are already in place to enhance payrate calculations in the future. Planned Implementation Date: Implemented as of April 2024 Responsible Person(s): City Controller

2021-007- Missing Reports (SD, NC) Federal Program Title: Federal Catalog Number: Federal Agency: Pass-Through Entity: Federal Award Number and Year: Category of Finding: Community Development Block GranUEntitlement Grants 14.218 U.S. Department of Housing and Urban Development No applicable B-19-MC-06-0515 - 2019 Reporting Criteria: The Office of Management and Budget 2021 Compliance Supplement states that the following reports are required to be submitted to the U.S. Department of Housing and Urban Development. SF-425, Federal Financial Report - Applicable (cash status only) (this is the IDIS C04PR29 Cash on Hand Quarterly Report made available in IDIS on August 12, 2019, which allows grantees to generate this report by custom date ranges and export data to Excel and PDF) Integrated Disbursement and Information System (/DIS) (0MB No. 25060077) - Grantees may include reports generated by IDIS as part of their annual performance and evaluation report that must be submitted for the CDBG Entitlement program 90 days after the end of a grantee's program year. (1) C04PR03 - Activity Summary Report (2) C04PR26 - CDBG Financial Summary Report (3) C04PR26 - CDBG-CV Financial Summary Report (4) C04PR26 - CDBG Activity Summary by Selected Grant Section 3 of the Housing and Urban Development Act of 1968 - The purpose of Section 3 is to ensure that employment and other economic opportunities generated by certain HUD financial assistance shall, to the greatest extent feasible, and consistent with existing federal, state, and local laws and regulations, be directed to low-and very low-income persons, particularly those who are recipients of government assistance for housing, and to business concerns which provide economic opportunities to low-and very low-income persons. Section 3 projects are housing rehabilitation, housing construction, and other public construction projects assisted under HUD programs that provide housing and community development financial assistance when the total amount of assistance to the project exceeds a threshold of $200,000. Consolidated Annual Performance and Evaluation Report (CAPER) (24 CFR 91.520) -- A grantee's CAPER, submitted through the IDIS e-Con Planning Suite, is due 90 days after the close of a jurisdiction's program year. Condition: We were unable to obtain the following reports: SF-425, Section 3 report and CAPER. Cause: Turnover of staff and lack of internal control over the retention of program reports. Effect or Potential Effect: The City's failure to comply with stated reporting requirements exposes the City to sanctions from the federal agency, including loss of funding. Questioned Cost: None Context: The City did not provide the abovementioned reports. Statistical Sampling Validity: Not applicable. Repeat of a Prior-Year Finding: Yes, 2019-001, 2018-001 Recommendation: We recommend the City establish policies and procedures that will ensure the retention of program reports. City's Response: The City concurs with the recommendation. Corrective Action Plan: The City Controller drafted a grants policy which is currently under review by the City Manager, that includes succession planning in case of staff turnover and parameters for grant reporting compliance. Planned Implementation Date: December 31, 2024 Responsible Person(s): City Manager, Grants Manager

2021-008- Incorrect Payrate and Hours Worked (SD) Federal Program Title: Federal Catalog Number: Federal Agency: Pass-Through Entity: Federal Award Number and Year: Category of Finding: Community Development Block GranUEntitlement Grants 14.218 U.S. Department of Housing and Urban Development No applicable B-19-MC-06-0515 - 2019 Allowable CosUCost Principles Criteria: Title 2, Subtitle A, Chapter II, Part 200, General Provisions for Selected Items of Cost, Section 200.430, Compensation - Personal Services requires that costs of compensation are allowable to the extent that they satisfy specific requirements which in include that the total compensation of individual employees is determined and supported as provided in the Standards for Documentation of Personnel Expenses. The said standards require charges to Federal awards for salaries and wages must be based on records that must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our audit, we found one instance where the employee's timecard did not reflect the number of hours worked for CDBG and another instance where the employee's payrate did not agree to the payrate stated on the personnel action form (PA 101 ). Cause: For the exception related to timecard: The City was unable to provide the timecard that showed the hours worked by the employee by program/fund. For the exception related to payrate: The City approved retroactive pay increases for employees and the pay increases were processed as lump sum adjustments. The payroll records prior to the approval of the retroactive pay were not adjusted to reflect the change. The program costs were not adjusted either. Effect or Potential Effect: Over or understatement of costs charged to the program. Questioned Cost: None Context: One exception related to timecard and another exception related to payrate were found, out of 20 items selected. Statistical Sampling Validity: Samples are haphazardly selected. Repeat of a Prior-Year Finding: No Recommendation: We recommend the City improve procedures to ensure completeness and accuracy of payroll costs charged to federal programs. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The general accounting policy will be updated for the accountant to check the payroll register to accrue retroactive pay changes to the correct period. The payroll policy will also be updated to require that timecards be updated with supervisor signature if changes are made to change allocation to another fund. Planned Implementation Date: June 30, 2024 Responsible Person(s): City Controller

Federal Program Title: Section 8 Housing Choice Vouchers Federal Catalog Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: Not applicable Federal Award Number and Year: CA-071 ? 2019 Category of Finding: Reporting Criteria: TITLE 24- HOUSING AND URBAN DEVELOPMENT, PART 5- GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS, Subpart H- Uniform Financial Reporting Standards, Section 5.801- Uniform Financial Reporting Standards states: "(b) Entities (or individuals) to which this subpart is applicable must provide to HUD, on an annual basis, such financial information as required by HUD." TITLE 24- HOUSING AND URBAN DEVELOPMENT, PART 982- SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM, Subpart D - Annual Contributions Contract and PHA Administration of Program, Section 982.158- Program Accounts and Records states: "(a) The PHA must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements, in a manner that permits a speedy and effective audit. The records must be in the form required by HUD, including requirements governing computerized or electronic forms of record-keeping. The PHA must comply with the financial reporting requirements in 24 CFR part 5, subpart H." Based on the Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement August 2019, sections 4-14.871-10 through 4-14.871-14, public housing agencies (PHAs) are required to submit the following reports: 1. HUD-52681-B, Voucher for Payment of Annual Contributions and Operating Statement 2. Financial Reports- Financial Assessment Sub-system, FASS-PH 3. HUD-52648, SEMAP Certification -Addendum for Reporting Data for De-concentration Bonus Indicator 4. HUD-50058, Family Report Condition: The Housing Authority did not timely submit the required annual FASS-PH report for FY 2019- 2020 to HUD. Cause: Lack of internal control over the preparation and submission of the FASS-PH report. Lack of audited financial statements. Effect or Potential Effect: The City is facing sanctions from the Office of Inspector General (OIG) with a reduced Section Eight Management Assessment Program (SEMAP) rating from High Performer to Standard Performer. A reduced rating may result in HUD withholding additional grant funds or offset the Housing Choice Voucher (HCV) administrative fees. Questioned Cost: None Context: The Housing Authority did not submit the required annual FASS-PH Audited Submissions report to HUD since June 30, 2012. Statistical Sampling Validity: Not applicable. All required reports provided have been reviewed and tested. Repeat of a Prior-Year Finding: 2019-005, 2018-007, 2017-007, 2016-004, 2015-006, 2014-001 Recommendation: We recommend the City establish policies and procedures that will ensure accurate and timely submission of all required reports. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: Finance staff will be assigned to work with the Local Housing Authority in regards to submission of all financial reporting and reimbursement requests. Also, procedures will be established to ensure these are revisited and given attention to on a monthly basis. This will include training of a grant coordinator and training of various grant program personnel to establish policies and procedures for compliance with terms of the grant. The City will also establish and document policies and procedures designed to serve as a system of internal controls required by OMB?s Uniform Guidance (2 CFR 200). In the meantime, the City and the Compton Housing Authority have submitted the following unaudited reports: ? 6/30/13 FYE Unaudited Submission completed on 2/10/20 ? 6/30/14 FYE Unaudited Submission completed on 4/16/20 ? 6/30/15 FYE Unaudited Submission completed on 4/27/20 ? 6/30/16 FYE Unaudited Submission completed on 5/12/20 ? 6/30/17 FYE Unaudited Submission completed on 5/19/20 ? 6/30/18 FYE Unaudited Submission completed on 6/01/20 ? 6/30/19 FYE Unaudited Submission completed on 6/22/20 ? 6/30/20 FYE Unaudited Submission completed on 9/14/21 Due to the extraordinary circumstances outside the control of the City, the City and the CHA are unable to complete the Audited Submissions for fiscal years ended June 30, 2012 through 2018. The Audited Submission for fiscal year ended June 30, 2019 was submitted on April 30, 2021. The Audited Submission for fiscal year ended June 30, 2020 will be submitted in March 2022. Planned Implementation Date: June 30, 2022 Responsible Person(s): Michael Antwine, Assistant City Manager and Sharon Rahban, City Controller

Federal Program Title: Section 8 Housing Choice Vouchers Federal Catalog Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: Not applicable Federal Award Number and Year: CA-071 ? 2019 Category of Finding: Special Tests and Provisions ? Rolling Forward Equity Balances Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement August 2019, section 4-14.871-18 states: ?Public housing agencies (PHAs) are required to maintain complete and accurate accounts. In addition, the annual contributions contract (ACC) requires PHA to properly account for program activity. Proper accounting requires that (1) account balances are properly maintained, (2) records and accounting transactions support a proper roll-forward of equity, and (3) errors are corrected as detected. Several HUD OIG audits reports have noted that PHAs have not been accounting and reporting HAP and Administrative Fee equity accounts properly. This has resulted in several PHAs not being funded correctly and has resulted in OIG findings against HUD and PHAs. If audit testing, account analysis, or third-party (e.g., HUD) information, provides evidence that the current HAP and Administrative Fee equity is not correctly stated, the PHA is required to correct the account balance. Errors affecting these accounts could have begun starting with 2004 or 2005 financial statements (24 CFR section 982.158).? Condition: We were unable to obtain the housing assistance payments (HAP) equity account roll-forward for the year ended June 30, 2020. Cause: Lack of internal control over the monitoring HAP equity account. Effect or Potential Effect: The Housing Authority is not in compliance with grant requirements. Questioned Cost: Unknown. The questioned costs cannot be calculated, because the total additional funding received by the Housing Authority is unknown. Context: We were unable to obtain the HAP equity account balance at June 30, 2020. Statistical Sampling Validity: Not applicable. Sampling was not performed in relation to this finding. Repeat of a Prior-Year Finding: 2019-006, 2018-010, 2017-009, 2016-006, 2015-008, 2014-003 Recommendation: We recommend the Housing Authority establish and implement policies and procedures over calculation of the HAP equity account. City's Response: The City concurs with the recommendation. Corrective Action Plan: The Controller will work with the Local Housing Authority to ensure that the HAP equity balance is rolled forward on an annual basis. The City will also establish and document policies and procedures designed to serve as a system of internal controls required by OMB?s Uniform Guidance (2 CFR 200). In the meantime, the Housing Authority and City Controller?s Office will take steps to address the specific finding noted above to ensure accurate computation of the HAP equity account by updating and reconciling the fund balance/equity of the Section 8 fund between the HUD online portal and the general ledger on time for the fiscal 2021 audit. Planned Implementation Date: June 30, 2022 Responsible Person(s): Michael Antwine, Assistant City Manager and Sharon Rahban, City Controller

Criteria: Pursuant to the Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Section 8-7-3, IV. Due Date for Audit Reports, the copy of the data collection from should be filed `with the Federal Audit Clearinghouse (FAC) as the date 9 months after the end of the audit period?. The OMB extended the Single Audit submission deadline for fiscal year ended June 30, 2020 by six months. Condition: The City did not complete the audit and submit the Single Audit Reporting Package (the City's audited financial statements and single audit reports) for the fiscal years ended June 30, 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019 within nine months after the end of audit period. The City did not complete the audit and submit the Single Audit Reporting Package for the fiscal year ended June 30, 2020 within 15 months after the end of the audit period (the extended deadline). Cause: The City has been severely behind on its recording and reconciliations for financial transactions. The City?s Single Audit for 2013 was not completed until February of 2016. The City's predecessor auditor withdrew from the audit after issuance of the 2014 financial statements in November 2016 and did not issue a Single Audit report. Due to substantial employee turnover within the City at all levels, and incomplete records, the 2015, 2016, and 2017 audits have not been completed. The City has been working diligently to update its records since 2018, however it still continues to experience a lack of qualified personnel and substantial employee turnover in the City Controller?s Office. Effect or Potential Effect: Failure to submit the required Single Audit Reporting Package timely automatically results in the City not qualifying for low risk auditee status for the following year's single audit. In addition, failure to file the required Single Audit Reporting Package timely could result in the loss of federal funding. Questioned Cost: None Context: The physical single audit reports for fiscal years 2015, 2016, and 2017, were submitted to the U.S. Department of Housing and Urban Development (Attn: Mr. Miguel Fontanez, Director of Housing Voucher Financial Management Division) at the Office of Public and Indian Housing, Washington, DC 20410-5000 on March 27, 2019. The Single Audit Reporting Package for fiscal year 2019 was submitted on April 28, 2021. Statistical Sampling Validity: Not applicable. Sampling was not performed in relation to this finding. Repeat of a Prior-Year Finding: 2019-007, 2018-011, 2017-011, 2016-007, 2015-010, 2014-009 Recommendation: We recommend that the City bring its accounting records up to date and have financial statement and Single Audits prepared timely. We also recommend the City develop, document, and implement policies and procedures for timely submission of the Single Audit Reporting Package. Management Response and Corrective Action Plan City's Response: The City is in the process on catching up on the Single Audit packet submission for fiscal year 2020 and expects to be on time for fiscal year 2021 and going forward. Corrective Action Plan: City Manager and Controller are continuously working with auditors to ensure delinquent reports are submitted as soon as possible and that fiscal year 2021 can be submitted in a timely manner. Planned Implementation Date: June 30, 2022 Responsible Person(s): City Manager and Sharon Rahban, City Controller

Criteria: Pursuant to the Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, the City has responsibility to: ? Identify, in its accounts, all federal awards received and expended and the federal programs under which they were received. Federal program and award identification shall include, as applicable, the CFDA title and number, award number and year, name of the federal agency, and name of the pass-through entity. ? Prepare appropriate financial statements, including the schedule of expenditures of federal awards. Condition: The City did not report the correct CFDA number and program identification number for one program. The same program was incorrectly reported as part of a cluster, and the amount of program expenditures was misstated. The total program expenditures for another program was also misstated. Cause: Lack of internal controls and adequate staff training and competence on the integration of financial statement records to single audit reporting requirements on the SEFA. Effect or Potential Effect: Failure to report expenditures by proper CFDA number and program identification number exposes the City to be flagged by the awarding federal agency for grant sanctions and the rectification of its reported records to the Federal Clearing House. Questioned Cost: None Context: CDBG Section 108 (CFDA 14.248) was incorrectly included under the CDBG - Entitlement Grant Cluster. The CFDA number and identification number for the same grant were not provided. The total program expenditures were understated by approximately $39,000. The total program expenditures for CDBG (CFDA 14.218) did not include the amounts provided to subrecipients, resulting in an understatement of approximately $93,000. Statistical Sampling Validity: Not applicable. Sampling was not performed in relation to this finding. Repeat of a Prior-Year Finding: No. Recommendation: We recommend that the City provide education and training to the staff member who prepares the SEFA to ensure that the SEFA is complete and accurate. Management Response and Corrective Action Plan City?s Response: The City concurs with the recommendation. Corrective Action Plan: The City will update the SEFAs in the future to ensure the breakdown of specific programs is correct. The report will be reviewed by supervisors prior to submission to auditors.The City will also establish and document policies and procedures in the grants policy to implement this process and will include assignment of authority and responsibility, reconciliation, and review of the SEFA. In the meantime, the City Controller?s Office has taken steps to address the specific finding noted above by organizing a formal training over SEFA preparation and reporting by September 2021. Planned Implementation Date: June 30, 2022 Responsible Person(s): Sharon Rahban, City Controller

2019-001 - Reporting (MW,NC) Federal Program Title: Community Development Block Grants/Entitlement Grants Federal Catalog Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: Not applicable Federal Award Number and Year: B-18-MC-06-0515 ? 2019 Category of Finding: Reporting Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement August 2019, sections 3.2-L-1 and 4-14.218-10 states: "Recipients must use the standard financial reporting forms or such other forms as may be authorized by OMB (approval is indicated by an OMB paperwork control number on the form) when reporting to the Federal awarding agency. Each recipient must report program outlays and program income on a cash or accrual basis, as prescribed by the Federal awarding agency." For CDBG, the City is required to submit the following reports: ? SF-425 - Federal Financial Report ? C04PR03 - Activity Summary Report ? C04PR26 - CDBG Financial Summary ? HUD 60002, Section 3 Summary Report, Economic Opportunities for Low- and Very Low-Income Persons, (OMB No. 2529-0043) U.S. Department of Housing and Urban Development (HUD) guidance titled, "Using IDIS to Prepare the Consolidated Plan, Annual Action Plan, and CAPER/PER," states: "Within 90 days after the end of its program year, a grantee must submit a Consolidated Annual Performance and Evaluation Report (CAPER). The primary purpose of the CAPER is to report on accomplishments of funded activities within the program year and to evaluate the grantee?s progress in meeting one-year goals described in the Annual Action Plan and long-term goals described in the Consolidated Plan." Condition: The City was unable to provide the required complete set of the SF-425 Federal Financial Reports. Only the reports for the third and fourth quarter of the fiscal year were prepared and submitted to HUD in July and September 2019, respectively. Although the third and fourth quarter SF-425 reports were submitted timely, we were unable to perform testing on the reports for the first and second quarter for report information accuracy. In addition, the Annual Action Plan and CAPER do not appear to have been submitted to HUD to be accessed publicly. Cause: Lack of internal control over the preparation, review, and submission of the financial reports. Effect or Potential Effect: The City's failure to comply with stated rules and regulations over the required reports increases the risk that inaccurate or incomplete information will be reported. Questioned Cost: No costs identified Context: In July 2019, the City resumed submitting the SF-425 Federal Financial Report and had prepared and submitted the third and fourth quarter reports of the fiscal year. The SF-425 Federal Financial Reports for the first and second quarters were not available for review. The City was able to provide the C04PR03 and C04PR26 reports. We obtained the Annual Action Plan and CAPER from the City for the year, however these reports do not appear when a search is made at hudexchange.info, the online platform for HUD program information. Statistical Sampling Validity: Not applicable. All required reports provided have been reviewed and tested. Repeat of a Prior-Year Finding: 2018-001, 2017-001, 2016-002, 2015-003, 2014-005 Recommendation: The City should strengthen its process over the preparation of its reports to ensure the reports are based on the applicable accounting and performance records. They should ensure that these reports are not only prepared, but also reviewed for accuracy and completeness prior to submission. The City should have a process to ensure that all required reports are prepared, reviewed, and submitted on a timely basis. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Grants Division should prepare a schedule of all financial reports and be alert with which department initiated the grants. Also, Grants Division should also follow up if assistance is needed from the Controller?s Office in preparing the reports. For financial reports, City Controller Accountant II should review reports with the respective departments that have initiated the grants and the Grants Division. Final review and approval should be performed by the City Controller or Deputy City Controller. Corrective Action Plan: Finance staff will be assigned to work with the Grants Division in regards to submission of all financial reporting and reimbursement requests. Also, procedures will be established and included in the grants policy to ensure these are revisited and given attention. This will include training of a grant coordinator and training of various grant program personnel to establish policies and procedures for compliance with terms of the grant. These procedures will also include review of reports and maintaining required documentation to show proof of performance reporting. In the meantime, the Grants Division and City Controller?s Office will take steps to address the finding noted above. Planned Implementation Date: June 30, 2021 Responsible Person(s): Aubrey Relf, City Grants Compliance Manager and Sharon Rahban, City Controller

2019-002 ? Program Income ? Identification, Determination, Assessment, and Recording (MW, NC) Federal Program Title: Community Development Block Grants/Entitlement Grants Federal Catalog Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: Not applicable Federal Award Number and Year: B-18-MC-06-0515 ? 2019 Category of Finding: Program Income ? Identification, Determination, Assessment, and Recording Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement August 2019, section 4-14.218-9 states: "The grantee must accurately account for any program income generated from the use of CDBG funds and must treat such income as additional CDBG funds which are subject to all program rules. "Making loans and collecting the payments on those loans can be a significant source of program income for grantees. The use of program income derived from loan payments is subject to program requirements. This carries with it the responsibility for grantees to have a loan origination and servicing system in effect which assures that loans are properly authorized, receivables are properly established, earned income is properly recorded and used, and write-offs of uncollectible amounts are properly authorized (24 CFR sections 570.500 and 570.504)." Condition: The city does not have adequate internal controls to identify and record CDBG program income on a regular and timely basis. Known program income received in the current year from monthly loan repayments totaling $71,983 did not get reported as such. Cause: Lack of internal controls and adequate staff training on program income identification, determination, assessment, and recording. Effect or Potential Effect: The Grants Division is not in compliance with grant requirements, where drawdowns are being applied against the grant award instead of the required reported program income first. The lack of internal controls may also result in misstatements due to errors or fraud, which could ultimately result in misuse of federal funds. Questioned Cost: None Context: There has been no accurate and timely process for the city to record program income. Per the IDIS PR09 report, program income was reported on an annual basis for program years 1997 through 2005. No program income was reported for program years 2008 through 2015. During program year 2016, the grant consultant identified and reported program income received in program years 2011 through 2015. However, not all program year 2016 program income was reported. During program year 2017, no program income was reported. During program year 2018, i.e. FYE 2019, one program income transaction had been identified and reported, however this is unrelated from the identified known monthly loan repayment referenced above. Statistical Sampling Validity: Not applicable. All known program income had been reviewed and tested. Repeat of a Prior-Year Finding: 2018-002, 2017-002 Recommendation: We recommend that the City strengthen their procedures in relation to identifying, determining, assessing, and recording program income. The City should have procedures in place to accurately identify program income as they are received and are appropriately recorded in the CDBG fund as such and into IDIS. The City should ensure that program income received should be applied first. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The City will establish and document policies and procedures designed to serve as the system of internal controls required by OMB?s Uniform Guidance (2 CFR 200). In the meantime, the Grants Division and City Controller?s Office will take steps to address the finding noted above by providing adequate training to staff. In addition, the City Controller proposes to implement the accounts receivable module of the City accounting software, OneSolution, to assist with the tracking and recording of program income. The budget enhancement for that will be included for fiscal year 2022. Planned Implementation Date: June 30, 2022 Responsible Person(s): Aubrey Relf, City Grants Compliance Manager and Sharon Rahban, City Controller

2019-003 ? Program Income ? CDBG Loan Listing (MW, NC) Federal Program Title: Community Development Block Grants/Entitlement Grants Federal Catalog Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: Not applicable Federal Award Number and Year: B-18-MC-06-0515 ? 2019 Category of Finding: Program Income ? Loan Listing Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement August 2019, section 4-14.218-9 states: "The grantee must accurately account for any program income generated from the use of CDBG funds and must treat such income as additional CDBG funds which are subject to all program rules. "Making loans and collecting the payments on those loans can be a significant source of program income for grantees. The use of program income derived from loan payments is subject to program requirements. This carries with it the responsibility for grantees to have a loan origination and servicing system in effect which assures that loans are properly authorized, receivables are properly established, earned income is properly recorded and used, and write-offs of uncollectible amounts are properly authorized (24 CFR sections 570.500 and 570.504)." Condition: The City does not have a complete listing of loans and loan balances subject to repayment. The City therefore does not have a working schedule that captures a complete listing of expected receipts that will prompt the recording of program income. In addition, the loan receivable listing does not agree with the general ledger balance. Cause: Lack of internal controls, implementation, and adequate staff training on the maintenance of a complete listing and schedule of issued loans and running loan balances related to CDBG. Effect or Potential Effect: The Grants Division is not in compliance with grant requirements and grant income has not been properly reported. In addition, there?s a possibility that loan payments received may not be credited to the correct debtor?s account or that write-offs are made without proper approval. Questioned Cost: None Context: The City appears to have a partial listing of outstanding loans and loan repayment schedules, however, the repayment schedules have not been updated on a regular and timely basis, loan balances are not reconciled to the general ledger, and loan repayments are not being reconciled to reported program income. The completeness of program income cannot be assured as long as the city does not have a complete tracking of CDBG Section 108 loans and HOME loans outstanding. The loans receivable general ledger balance does not appear to be updated when payments are received. The recorded balance at June 30, 2019 remained the same from June 30, 2018. Statistical Sampling Validity: Not applicable. All related outstanding loans and loan repayment schedules provided by the City had been reviewed and tested. Repeat of a Prior-Year Finding: 2018-003, 2017-003 Recommendation: We recommend the City maintain a complete listing of outstanding loans and prepare and regularly use a master CDBG-related loan repayment schedule detailing all loans issued to monitor and capture loan repayments that would prompt the recording of program income as repayments are received. In addition, loans receivable should be reconciled to the general ledger on a regular periodic basis. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The City will establish and document policies and procedures designed to serve as the system of internal controls required by OMB?s Uniform Guidance (2 CFR 200). In the meantime, the Grants Division and City Controller?s Office will take steps to address the specific finding noted above by updating and reconciling the loan receivable schedule to the general ledger on time for the fiscal year 2020 audit. In addition, the City Controller proposes to implement the accounts receivable module of OneSolution to assist with the tracking and recording of program income. The budget enhancement for that will be included for fiscal year 2022. Planned Implementation Date: June 30, 2022 Responsible Person(s): Aubrey Relf, City Grants Compliance Manager and Sharon Rahban, City Controller

2019-004 ? Equipment and Real Property Management ? Maintenance of Property Records (MW, NC) Federal Program Title: Community Development Block Grants/Entitlement Grants Federal Catalog Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: Not applicable Federal Award Number and Year: B-18-MC-06-0515 ? 2019 Category of Finding: Equipment and Real Property Management Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement August 2019, section 3.2-F-1 states: ?Non-Federal entities other than States must follow 2 CFR sections 200.313(c) through (e) which require that: Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property (2 CFR section 200.313(d)(1)). A physical inventory of the property must be taken and the results reconciled with the property records at least once every 2 years (2 CFR section 200.313(d)(2)). A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated (2 CFR section 200.313(d)(3)). Adequate maintenance procedures must be developed to keep the property in good condition (2 CFR section 200.313(d)(4)).? Condition: The City does not maintain property records of all equipment and real property acquired or improved through Federal funds. We were therefore unable to test items from these records to ascertain that physical inspections of equipment are conducted, equipment is appropriately safeguarded, property records are maintained, and dispositions were properly done per Federal awarding agency disposition instructions. In connection to real properties financed through the City?s CDBG program, we were unable to gain a complete inventory listing of such properties. Cause: Lack of internal controls over recording and maintaining of capital assets. Effect or Potential Effect: The City is exposed to possible grantor sanctions and inaccuracies in the maintenance of its capital assets. Capital assets could also be lost, stolen, or disposed of without being detected. Questioned Cost: $390,990 Context: Two light rescue paramedic squad vehicles in the amount of $390,990 were purchased in relation to the Public Facilities Improvements Project as noted in the IDIS CDBG Activity Summary Report. Although the purchase is eligible and properly supported, no evidence of a detailed listing for property records in relation to equipment purchased with federal funds is maintained. Statistical Sampling Validity: Non-statistical sampling was used. Repeat of a Prior-Year Finding: 2018-006, 2015-002, 2014-007 Recommendation: We recommend the City maintains complete property records, which include a description, serial number or other identification number, source, title holder, acquisition date, cost, percentage of federal participation in the cost, location, use and condition, and any ultimate disposition data including the date of disposal and sale price of the property. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The Controller?s office will work with the Grants Division to develop policies and procedures of internal controls as required by OMB?s Uniform Guidance (2 CFR 200) to ensure compliance with all grant requirements, including beginning a list of property and equipment, and taking steps to perform an inventory of property records. In the meantime, the Grants Division and City Controller?s Office will take steps to address the specific finding noted above. In addition, the City Controller proposes to implement the capital assets module of OneSolution to assist with the tracking and recording of City-wide capital assets. The budget enhancement for that will be included for fiscal year 2022. Planned Implementation Date: June 30, 2022 Responsible Person(s): Aubrey Relf, City Grants Compliance Manager and Sharon Rahban, City Controller

2019-005 ? Reporting (MW, NC) Federal Program Title: Section 8 Housing Choice Vouchers Federal Catalog Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: Not applicable Federal Award Number and Year: CA-071 ? 2019 Category of Finding: Reporting Criteria: TITLE 24- HOUSING AND URBAN DEVELOPMENT, PART 5- GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS, Subpart H- Uniform Financial Reporting Standards, Section 5.801- Uniform Financial Reporting Standards states: "(b) Entities (or individuals) to which this subpart is applicable must provide to HUD, on an annual basis, such financial information as required by HUD." TITLE 24- HOUSING AND URBAN DEVELOPMENT, PART 982- SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM, Subpart D - Annual Contributions Contract and PHA Administration of Program, Section 982.158- Program Accounts and Records states: "(a) The PHA must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements, in a manner that permits a speedy and effective audit. The records must be in the form required by HUD, including requirements governing computerized or electronic forms of record-keeping. The PHA must comply with the financial reporting requirements in 24 CFR part 5, subpart H." Based on the Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement August 2019, sections 4-14.871-10 through 4-14.871-14, public housing agencies (PHAs) are required to submit the following reports: 1. HUD-52681-B, Voucher for Payment of Annual Contributions and Operating Statement 2. Financial Reports- Financial Assessment Sub-system, FASS-PH 3. HUD-52648, SEMAP Certification -Addendum for Reporting Data for De-concentration Bonus Indicator 4. HUD-50058, Family Report Condition: The Housing Authority did not timely submit the required annual FASS-PH report for FY 2018-2019 to HUD. Cause: Lack of internal control over the preparation and submission of the FASS-PH report. Effect or Potential Effect: The City is facing sanctions from the Office of Inspector General (OIG) with a reduced Section Eight Management Assessment Program (SEMAP) rating from High Performer to Standard Performer. A reduced rating may result in HUD withholding additional grant funds or offset the Housing Choice Voucher (HCV) administrative fees. Questioned Cost: None Context: The Housing Authority did not submit the required annual FASS-PH Audited Submissions report to HUD since June 30, 2012. Statistical Sampling Validity: Not applicable. All required reports provided have been reviewed and tested. Repeat of a Prior-Year Finding: 2018-007, 2017-007, 2016-004, 2015-006, 2014-001 Recommendation: We recommend the City establish policies and procedures that will ensure accurate and timely submission of all required reports. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: Finance staff will be assigned to work with the Local Housing Authority in regards to submission of all financial reporting and reimbursement requests. Also, procedures will be established to ensure these are revisited and given attention to on a monthly basis. This will include training of a grant coordinator and training of various grant program personnel to establish policies and procedures for compliance with terms of the grant. The City will also establish and document policies and procedures designed to serve as a system of internal controls required by OMB?s Uniform Guidance (2 CFR 200). In the meantime, the City and the Compton Housing Authority have submitted the following unaudited reports: ? 6/30/13 FYE Unaudited Submission completed on 2/10/20 ? 6/30/14 FYE Unaudited Submission completed on 4/16/20 ? 6/30/15 FYE Unaudited Submission completed on 4/27/20 ? 6/30/16 FYE Unaudited Submission completed on 5/12/20 ? 6/30/17 FYE Unaudited Submission completed on 5/19/20 ? 6/30/18 FYE Unaudited Submission completed on 6/01/20 ? 6/30/19 FYE Unaudited Submission completed on 6/22/20 Due to the extraordinary circumstances outside the control of the City, the City and the CHA are unable to complete the Audited Submissions for fiscal years ended June 30, 2012 through 2018. Planned Implementation Date: June 30, 2021 Responsible Person(s): Michael Antwine, Assistant City Manager and Sharon Rahban, City Controller

2019-006 ? Special Tests and Provisions ? Rolling Forward Equity Balances (MW, NC) Federal Program Title: Section 8 Housing Choice Vouchers Federal Catalog Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: Not applicable Federal Award Number and Year: CA-071 ? 2019 Category of Finding: Special Tests and Provisions ? Rolling Forward Equity Balances Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement August 2019, section 4-14.871-18 states: ?Public housing agencies (PHAs) are required to maintain complete and accurate accounts. In addition, the annual contributions contract (ACC) requires PHA to properly account for program activity. Proper accounting requires that (1) account balances are properly maintained, (2) records and accounting transactions support a proper roll-forward of equity, and (3) errors are corrected as detected. Several HUD OIG audits reports have noted that PHAs have not been accounting and reporting HAP and Administrative Fee equity accounts properly. This has resulted in several PHAs not being funded correctly and has resulted in OIG findings against HUD and PHAs. If audit testing, account analysis, or third-party (e.g., HUD) information, provides evidence that the current HAP and Administrative Fee equity is not correctly stated, the PHA is required to correct the account balance. Errors affecting these accounts could have begun starting with 2004 or 2005 financial statements (24 CFR section 982.158).? Condition: We were unable to obtain the housing assistance payments (HAP) equity account roll-forward for the year ended June 30, 2019. Cause: Lack of internal control over the monitoring HAP equity account. Effect or Potential Effect: The Housing Authority is not in compliance with grant requirements. Questioned Cost: Unknown. The questioned costs cannot be calculated, because the total additional funding received by the Housing Authority is unknown. Context: We were unable to obtain the HAP equity account balance at June 30, 2019. Statistical Sampling Validity: Not applicable. Sampling was not performed in relation to this finding. Repeat of a Prior-Year Finding: 2018-010, 2017-009, 2016-006, 2015-008, 2014-003 Recommendation: We recommend the Housing Authority establish and implement policies and procedures over calculation of the HAP equity account. Management Response and Corrective Action Plan City's Response: The City concurs with the recommendation. Corrective Action Plan: The Controller will work with the Local Housing Authority to ensure that the HAP equity balance is rolled forward on an annual basis. The City will also establish and document policies and procedures designed to serve as a system of internal controls required by OMB?s Uniform Guidance (2 CFR 200). In the meantime, the Housing Authority and City Controller?s Office will take steps to address the specific finding noted above to ensure accurate computation of the HAP equity account by updating and reconciling the fund balance/equity of the Section 8 fund between the HUD online portal and the general ledger on time for the fiscal 2020 audit. Planned Implementation Date: June 30, 2021 Responsible Person(s): Michael Antwine, Assistant City Manager and Sharon Rahban, City Controller

Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI sections 3.2-L-1 and 4-14.218-10 states: "Recipients must use the standard financial reporting forms or such other forms as may be authorized by OMB (approval is indicated by an OMB paperwork control number on the form) when reporting to the Federal awarding agency. Each recipient must report program outlays and program income on a cash or accrual basis, as prescribed by the Federal awarding agency." For CDBG, the City is required to submit the following reports. * SF-425 - Federal Financial Report * C04PR03 - Activity Summary Report * C04PR26 - CDBG Financial Summary * HUD 60002, Section 3 Summary Report, Economic Opportunities for Low- and Very Low- Income Persons, (OMB No. 2529-0043) U.S. Department of Housing and Urban Development (HUD) guidance titled, "Using IDIS to Prepare the Consolidated Plan, Annual Action Plan, and CAPER/PER," states: "Within 90 days after the end of its program year, a grantee must submit a Consolidated Annual Performance and Evaluation Report (CAPER). The primary purpose of the CAPER is to report on progress in meeting one-year goals described in the Annual Action Plan and long-term goals described in the Consolidated Plan." Condition: The City was unable to provide the required SF-425 Federal Financial Report. We were therefore unable to perform testing on report information accuracy. Cause: Lack of internal control over the preparation, review, and submission of the financial reports. Effect or Potential Effect: The City's failure to comply with stated rules and regulations over the required reports increases the risk that inaccurate or incomplete information will be reported. Questioned Cost: No costs identified Context: The SF-425 Federal Financial Report was not available for review. Auditor therefore cannot perform reporting testing on the SF-425 report. Upon search made in hudexchange.info, the online platform for HUD program information, no CAPER appears to have been submitted for the 2016 program year (FY 2016-2017). The CAPER was completed and timely submitted for the 2017 program year (FY 2017-2018). The City was able to provide the C04PR03 and C04PR26 reports. Repeat of a Prior-Year Finding: 2017-001, 2016-002, 2015-003, 2014-005

Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI section 4-14.218- 9 states: "The grantee must accurately account for any program income generated from the use of CDBG funds and must treat such income as additional CDBG funds which are subject to all program rules. "Making loans and collecting the payments on those loans can be a significant source of program income for grantees. The use of program income derived from loan payments is subject to program requirements. This carries with it the responsibility for grantees to have a loan origination and servicing system in effect which assures that loans are properly authorized, receivables are properly established, earned income is properly recorded and used, and write-offs of uncollectible amounts are properly authorized (24 CFR sections 570.500 and 570.504)." Condition: The City does not have adequate internal controls to identify and record CDBG program income on a regular and timely basis. Program income is not being used to pay for allowable costs prior to drawing down additional funds. Known program income received in the current year from ten monthly loan repayments totaling $61,844 did not get reported as such. In addition, it is not clear whether or not two months of loan payments totaling $12,369 were received and not reported. Cause: Lack of internal controls and adequate staff training on program income identification, determination, assessment, and recording. Effect or Potential Effect: The Grants Division is not in compliance with grant requirements, where drawdowns are being applied against the grant award instead of the required reported program income first. The lack of internal controls may also result in misstatements due to errors or fraud, which could ultimately result in misuse of federal funds. Questioned Cost: $61,844 Context: There has been no accurate and timely process for the City to record program income. Per the IDIS PR09 report, program income was reported on an annual basis for program years 1997 through 2005. No program income was reported for program years 2008 through 2015. During program year 2016, the grant consultant identified and reported program income received in program years 2011 through 2015. However, not all program year 2016 program income was reported and no 2017 program income was reported. Repeat of a Prior-Year Finding: 2017-002

Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI section 4-14.218- 9 states: "The grantee must accurately account for any program income generated from the use of CDBG funds and must treat such income as additional CDBG funds which are subject to all program rules. "Making loans and collecting the payments on those loans can be a significant source of program income for grantees. The use of program income derived from loan payments is subject to program requirements. This carries with it the responsibility for grantees to have a loan origination and servicing system in effect which assures that loans are properly authorized, receivables are properly established, earned income is properly recorded and used, and write-offs of uncollectible amounts are properly authorized (24 CFR sections 570.500 and 570.504)." Condition: The City does not have a complete listing of loans and loan balances subject to repayment. The City therefore does not have a working schedule that captures a complete listing of expected receipts that will prompt the recording of program income. In addition, the loan receivable listing does not agree with the general ledger balance. Cause: Lack of internal controls, implementation, and adequate staff training on the maintenance of a complete listing and schedule of issued loans and running loan balances related to CDBG. Effect or Potential Effect: The Grants Division is not in compliance with grant requirements and grant income has not been properly reported. In addition, there's a possibility that loan payments received may not be credited to the correct debtor's account or that write-offs are made without proper approval. Questioned Cost: None Context: The City appears to have a partial listing of outstanding loans and loan repayment schedules, however, the repayment schedules have not been updated on a regular and timely basis, loan balances are not reconciled to the general ledger, and loan repayments are not being reconciled to reported program income. The completeness of program income cannot be assured as long as the City does not have a complete tracking of CDBG Section 108 loans and HOME loans outstanding. The loans receivable general ledger balance does not appear to be updated when payments are received. The recorded balance at June 30, 2018 is the same as June 30, 2017 and 2016. Our review indicated that no CDBG program income was reported from FYE 2009 through FYE 2016. In FYE 2017, program income for FYE 2012 through FYE 2016 was reported as program income along with some, but not all of the FYE 2017 program income. No CDBG program income was reported in FYE 2018. Repeat of a Prior-Year Finding: 2017-003

Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement 2017, Part 6 Internal Control section 6-M-1 states: "The A-102 Common Rule, 0MB Circular A-110 and 2 CFR section 200.303 require that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award." Condition: The City did not properly approve payroll timesheets for both CDBG and Section 8 program administration expenditures. Cause: Lack of internal controls and adequate staff training over the proper approval process of electronic timesheets. Effect or Potential Effect: The City could be charging an inaccurate or unallowable amount of payroll expenditures to its Federal grants programs, which is a noncompliance for allowable costs. Questioned Cost: Unknown Context: We selected a sample of two employees for four pay periods each for CDBG and Section 8 to test payroll internal controls and compliance. Our review identified 8 out of the 13 timesheets had no indication of supervisory review and approval, and no further support can be provided to ascertain that the timesheet is accurate and valid for direct program administration to request for Federal award reimbursement. Repeat of a Prior-Year Finding: No

Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement 2017, sections 3.2-B-12 and 3.2-B-14, respectively, state: "The individual State/local government/Indian tribe departments or agencies (also known as "operating agencies") are responsible for the performance or administration of Federal awards. In order to receive cost reimbursement under Federal awards, the department or agency usually submits claims asserting that allowable and eligible costs (direct and indirect) have been incurred in accordance with 2 CFR part 200, subpart E." "Costs did not consist of improper payments, including (1) payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements" and "costs were adequately documented." Condition: The City does not maintain adequate supporting documentation for its IDIS drawdown requests to explain and support program reimbursement requests. The City does not have a system in place for the ongoing tracking of drawdowns in line with a regular review and reconciliation of the general ledger. We noted a difference of $84,286 between City recorded expenditures per the general ledger and the total drawdowns for the current program year in IDIS. Upon further review, we noted a difference of $33,086 between the IDIS drawdowns and the total award expenditures per the general ledger that could not be reconciled. In addition, the City was not able to provide adequate documentation for administrative costs of $37,727. Cause: Lack of internal controls over the logging of drawdown records prior to processing the vouchers for reimbursement in IDIS. Effect or Potential Effect: The oversight of the drawn voucher in IDIS for Federal grant reimbursement exposes the City to underlying implications that such transactions may get through without appropriate review and authorization. This may lead to the posting of unallowed transactions that would be noncompliant to the program requirements. Questioned Cost: CDBG Administration drawdown of $70,813. Context: Upon the review of the current year IDIS drawdowns to the actual award expenditures per the general ledger, an irreconcilable difference of $33,086 was noted related to administrative costs. Further review led to a voucher submitted to IDIS for administrative costs that did not get recorded in the City's internal running log of drawdowns and did not have supporting documentation. A form of support was provided not in a timely manner, i.e. a month after initial request, indicating a lack of internal controls over the maintenance and reconciliation of actual IDIS drawdowns and the running drawdown log. Repeat of a Prior-Year Finding: No

Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement 2017, section 3.2-F-1 states: "Non-Federal entities other than States must follow 2 CFR sections 200.313(c) through (e) which require that: Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property (2 CFR section 200.313(d)(1)). A physical inventory of the property must be taken and the results reconciled with the property records at least once every 2 years (2 CFR section 200.313(d)(2)). A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated (2 CFR section 200.313(d)(3)). Adequate maintenance procedures must be developed to keep the property in good condition (2 CFR section 200.313(d)(4))." Condition: The City does not maintain property records of all equipment and real property acquired or improved through Federal funds. The City has not performed a physical inventory of property acquired with federal funds within the past two years. We were therefore unable to test items from these records to ascertain that physical inspections of equipment were conducted, equipment is appropriately safeguarded, property records are maintained, and dispositions were properly handled per Federal awarding agency disposition instructions. Cause: Lack of internal controls over recording and maintaining of capital assets. Effect or Potential Effect: The City is exposed to possible grantor sanctions and inaccuracies in the maintenance of its capital assets. Questioned Cost: None Context: The City was not able to provide evidence of a detailed listing for property records in relation to equipment purchased with Federal funds. A fire engine was indicated to have been purchased in the current year in relation to the Public Facilities Improvements Project as noted in the IDIS CDBG Activity Summary Report. Equipment acquisitions were also reported in prior years. Repeat of a Prior-Year Finding: 2015-002, 2014-007, 2013-007

Criteria: TITLE 24- HOUSING AND URBAN DEVELOPMENT, PART 5- GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS, Subpart H- Uniform Financial Reporting Standards, Section 5.801- Uniform Financial Reporting Standards states: "(b) Entities (or individuals) to which this subpart is applicable must provide to HUD, on an annual basis, such financial information as required by HUD." TITLE 24- HOUSING AND URBAN DEVELOPMENT, PART 982- SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM, Subpart D - Annual Contributions Contract and PHA Administration of Program, Section 982.158- Program Accounts and Records states: "(a) The PHA must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements, in a manner that permits a speedy and effective audit. The records must be in the form required by HUD, including requirements governing computerized or electronic forms of record-keeping. The PHA must comply with the financial reporting requirements in 24 CFR part 5, subpart H." Based on the above compliance requirements and review of the grant requirements, public housing agencies (PHAs) are required to submit the following reports: 1. HUD-52681-B, Voucher for Payment of Annual Contributions and Operating Statement 2. Financial Reports- Financial Assessment Sub-system, FASS-PH 3. HUD-52648, SEMAP Certification -Addendum for Reporting Data for De-concentration Bonus Indicator 4. HUD 60002, Section 3 Summary Report, Economic Opportunities for Low- and Very Low- Income Persons 5. HUD-50058, Family Report Condition: The Housing Authority did not submit the required annual FASS-PH and 60002 Section 3 Summary reports for FY 2017-2018 to HUD. In addition, an audited FASS-PH has not been submitted to HUD since FYE 2010 and an unaudited FASS-PH has not been submitted to HUD since FYE 2012. Cause: Lack of internal control over the preparation and submission of the FASS-PH and 60002 Section 3 reports. The City has not had financial audits completed for fiscal years after June 30, 2014. Effect or Potential Effect: Failure to comply with the reporting requirements may result in grantor sanctions, including potential loss of funding. Questioned Cost: None Context: The Housing Authority did not submit the required annual FASS-PH and 60002 Section 3 reports to HUD. The City has not filed the FASS-PH report since June 30, 2010. Repeat of a Prior-Year Finding: 2017-007, 2016-004, 2015-006, 2014-001, 2013-011

Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI section 4-14.871- 18 states: "The annual contributions contract (ACC) establishes the amounts HUD will provide a public housing agency (PHA) for housing assistance payments (HAP) and administrative fees. HAP may not be used to cover administrative expenses nor may HAP (including restricted net position [RNP]) be loaned, advanced, or transferred to other component units or other programs such as Public and Indian Housing (CFDA 14.850) (24 CFR sections 982.151 and 982.152)." Condition: We were unable to perform compliance testing due to unavailability of the requested FASSPH report. We therefore were unable to determine whether transfers and advances of HCVP funds were properly conducted and whether the Housing Choice Voucher Program's HAP and administrative fee funding were used appropriately. Cause: Lack of internal control over the preparation and submission of the FASS-PH report. Effect or Potential Effect: Use of funds for unallowed costs. The Housing Authority is not in compliance with grant requirements. Questioned Costs: $108,104. $77,542 for professional services and $30,562 in HAP administrative fees over reimbursed to the City. These amounts are based on the OIG audit report dated July 11, 2019. Context: The Housing Authority did not submit the required annual FASS-PH report to HUD, and we therefore were unable to perform the required procedures for the operating transfers and administrative fees compliance component of special tests and provisions of the program. Repeat of a Prior-Year Finding: 2017-010

Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI sections 4-14.871- 16 and 4-14.871-17 states: "The PHA must inspect the unit leased to a family at least annually to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality control re-inspections. The PHA must prepare a unit inspection report (24 CFR sections 982.158(d) and 982.405(b)). "For units under HAP contract that fail to meet HQS, the PHA must require the owner to correct any life threatening HQS deficiencies within 24 hours after the inspections and all other HQS deficiencies within 30 calendar days or within a specified PHA-approved extension. If the owner does not correct the cited HQS deficiencies within the specified correction period, the PHA must stop (abate) HAPs beginning no later than the first of the month following the specified correction period or must terminate the HAP contract. The owner is not responsible for a breach of HQS as or for tenant damage. For family-caused defects, if the family does not correct the cited HQS deficiencies within the specified correction period, the PHA must take prompt and vigorous action to enforce the family obligations (24 CFR sections 982.158(d) and 982.404)." Condition: Our review identified six (6) re-inspections out of the total sixteen (16) that were performed were completed after the required 30-day time period. Our review also identified one required inspection for the year that had not been conducted. Cause: The HQS re-inspections were not performed in a timely manner due to delays on the abated status on the property or more focus on other urgent inspections. The high volume of requested inspections and the shortage of staff during the audit examination period were also factors. Effect or Potential Effect: Failure to perform re-inspections for HQS deficiencies that were recorded during the annual inspection may result in grantor sanctions, potentially leading to a loss grant funding. Questioned Cost: None Context: Of the sixty (60) participant files reviewed, fifteen (15) required re-inspection. Of those 15, the City failed to perform re-inspections for six (6) participants within the 30-day time period. Repeat of a Prior-Year Finding: 2017-008, 2016-005, 2015-007, 2014-002, 2013-012

Criteria: Title 24- Housing and Urban Development, Part 982- Section 8 Tenant-Based Assistance: Housing Choice Voucher Program, Subpart D - Annual Contributions Contract and PHA Administration of Program, Section 982.158- Program Accounts and Records states: "(a) The PHA must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements, in a manner that permits a speedy and effective audit. The records must be in the form required by HUD, including requirements governing computerized or electronic forms of record-keeping. The PHA must comply with the financial reporting requirements in 24 CFR part 5, subpart H." Condition: The Housing Authority is required to properly account for program activity. We were unable to obtain the housing assistance payments (HAP) equity account roll-forward for the year ended June 30, 2018. Cause: Lack of internal control over the monitoring HAP equity account. Effect or Potential Effect: The Housing Authority is not in compliance with grant requirements. Questioned Cost: Unknown. The questioned costs cannot be calculated, because the total additional funding received by the Housing Authority is unknown. Context: We were unable to obtain the HAP equity account balance at June 30, 2018. Repeat of a Prior-Year Finding: 2017-009, 2016-006, 2015-008, 2014-003, 2013-013