CITY OF LONG BEACH

Finding Number: 2025-001 Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects Compliance Requirement(s): Eligibility Classification: Material Weakness Programs: HOME Investment Partnerships Program (HOME) ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023, 2024 Criteria or specific requirement (including statutory, regulatory, or other citation) 24 CFR92.252 Qualification as affordable housing: Rental housing (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion. (1) The affordability requirements: (i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership. (ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and (iii) Must be recorded in accordance with State recordation laws. (2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability. (3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. (4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b). (h) Tenant income. The income of each tenant must be determined initially in accordance with § 92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1) 24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations (1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h): (i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family. (ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request. (iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low- income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The City was unable to obtain documentation from the property manager to confirm that occupants of HOME-assisted units were qualified tenants for eighteen properties, which had a combined outstanding loan balance of $9.3 million as of fiscal year-end. These properties comprised a total of one hundred and fifty-four units, all associated with the same development group. The City could not secure the required records from the property manager to verify household income for each tenant. Consequently, compliance with income eligibility criteria, maximum rent thresholds, and minimum set-aside obligations for units designated for eligible individuals could not be determined.   Cause The City’s has been unable to obtain required documents from the developer/owner, including required documents to determine each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. Effect or potential effect The developer/owner’s withholding of required documents has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria. Questioned costs None Context The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.3 million. This represents 12% of the 154 HOME Loans and their related $79.5 million outstanding balances. On August 29th, 2025 the City of Long Beach initiated legal action against the developer/owner in Los Angeles County Superior Court. The action concerns Borrower's breach of loan agreements with the City regarding real property for which the City seeks foreclosure and is ongoing as of the issuance of this report. Identification as a repeat finding if applicable 2024-001 Recommendation We recommend the City continue its attempts to obtain the necessary documents from the development group and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements. Views of responsible officials and planned corrective actions The City has exercised its rights to enforce compliance with the terms of its contractual arrangement for this standalone developer/owner, which has resulted in the highest levels of legal action. Through its established monitoring and review procedures, City staff identified documents submitted by the developer that appeared to be inaccurate or falsified. This discovery prompted a multi-year investigation and subsequent litigation, undertaken in direct collaboration and response to instructions as directed by HUD. Throughout this period, the City’s investigative and litigation activities have not been historically viewed as compliance concerns, particularly given their necessity in preserving the integrity of the legal process.   At every stage, the City has acted consistently with HUD’s directives and the requirements of the applicable contractual framework. During the multi‑year investigation, HUD expressly instructed the City to continue normal program operations to avoid alerting the developer and to maintain the integrity of the ongoing inquiry. The City respectfully asserts that the audit finding is inconsistent with HUD’s guidance and the historical practices necessary to ensure effective enforcement. Since the initial identification of the finding, the City has taken all reasonable corrective actions within its authority to address the issue and mitigate associated risks. These actions include following established monitoring procedures to ensure compliance with HOME program requirements, making repeated documented requests for tenant eligibility records from the developer/owner, and escalating efforts through the City Attorney. This issue is isolated to one developer/owner and sampling for other developers/owners has not identified similar concerns. The City has been transparent about the ongoing litigation involving the standalone developer/owner responsible for maintaining the records and remains committed in resolving this matter and in pursuing additional actions available once the legal proceedings have been concluded. Furthermore, the City contends that the conditions described in 2 CFR 200.511(b)(3) apply and support dismissal of the finding, and therefore no further corrective action should be warranted. The City has not received any directives from the federal awarding agency requiring corrective measures beyond those already implemented. The continued reporting of the finding conflicts with necessary historical practice and reflects the unresolved status of litigation as directed by HUD, and not a failure by the City to take appropriate corrective action.

Program:HOME Investment Partnerships Program (HOME) Finding:2025-001 Contact Person:April Apodaca Administrative & Financial Services Bureau Manager Community Development Department Phone: (562) 570-6611 Email: April.Apodaca@longbeach.gov Planned Actions: The City has exercised its rights to enforce compliance with the terms of its contractual arrangement for this standalone developer/owner, which has resulted in the highest levels of legal action. Through its established monitoring and review procedures, City staff identified documents submitted by the developer that appeared to be inaccurate or falsified. This discovery prompted a multi-year investigation and subsequent litigation, undertaken in direct collaboration and response to instructions as directed by HUD. Throughout this period, the City’s investigative and litigation activities have not been historically viewed as compliance concerns, particularly given their necessity in preserving the integrity of the legal process. At every stage, the City has acted consistently with HUD’s directives and the requirements of the applicable contractual framework. During the multi‑year investigation, HUD expressly instructed the City to continue normal program operations to avoid alerting the developer and to maintain the integrity of the ongoing inquiry. The City respectfully asserts that the audit finding is inconsistent with HUD’s guidance and the historical practices necessary to ensure effective enforcement. Since the initial identification of the finding, the City has taken all reasonable corrective actions within its authority to address the issue and mitigate associated risks. These actions include following established monitoring procedures to ensure compliance with HOME program requirements, making repeated documented requests for tenant eligibility records from the developer/owner, and escalating efforts through the City Attorney. This issue is isolated to one developer/owner and sampling for other developers/owners has not identified similar concerns. The City has been transparent about the ongoing litigation involving the standalone developer/owner responsible for maintaining the records and remains committed in resolving this matter and in pursuing additional actions available once the legal proceedings have been concluded.

2024-001

Finding Number: 2025-003 Finding Title: Internal Controls over Compliance of Reinspection’s to Enforce Housing Quality Standards Compliance Requirement(s): Special Tests – Housing Quality Standards Enforcement Classification: Material Weakness Programs: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year Federal Award Year: 2025 Criteria or specific requirement (including statutory, regulatory, or other citation Part 982—Section 8 Tenant-Based Assistance: Housing Choice Voucher Program 24 CFR 982.54(d)(21) Procedural guidelines and performance standards for conducting required HQS inspections, including: (d) The PHA Administrative Plan must cover all the PHA's local policies for administration of the program, including the PHA's policies on the following subjects (see 24 CFR 983.10 for a list of subjects specific to the project-based voucher (PBV) program that also must be included in the Administrative Plan of a PHA that operates a PBV program): (i) Any deficiency that the Public Housing Authority (PHA) has adopted as a life-threatening deficiency that is not a HUD-required life-threatening deficiency (ii) For PHAs that adopt the initial inspection non-life-threatening deficiency option: a. The PHA's policy on whether the provision will apply to all initial inspections or a portion of initial inspections. b. The PHA's policy on whether the provision will be applied to only some inspections and how the units will be selected. c. The PHA's policy on using withheld HAP funds to repay an owner once the unit is in compliance with HQS. (iii) For PHAs that adopt the alternative inspection provision: a. The PHA's policy on how it will apply the provision to initial and periodic inspections. b. The specific alternative inspection method used by the PHA. c. The specific properties or types of properties where the alternative inspection method will be employed. d. For initial inspections, the maximum amount of time the PHA will withhold HAP if the owner does not correct the HQS deficiencies within the cure period, and the period of time after which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract. (iv) The PHA's policy on charging a reinspection fee to owners.   24 CFR 982.54(d)(22) The PHA's policy on withholding HAP for units that do not meet HQS (see § 982.404(d)(1)) 24 CFR 982.406(e)(5) The PHA may commence housing assistance payments to the owner and make housing assistance payments retroactive to the effective date of the HAP contract only after the unit passes the PHA's HQS inspection. If the unit does not pass the HQS inspection, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected. If a deficiency is life- threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within no more than 30 calendar days (or any PHA- approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract. PHA Policy 8-Ii.F. Inspection Results And Reinspection’s For Units Under Hap Contract The City of Long Beach PHA Admin Plan requires that each deficiency is identified in the NPSIRE standards as either life-threatening, severe, moderate, or low. Further indicating that units under HAP contract, must correct for life-threatening deficiencies within 24 hours after notice has been provided and all others must be corrected within 30 days (or a PHA-approved extension) after notice has been provided. Life-threatening deficiencies require notifying both parties by telephone or email immediately while Severe or moderate deficiencies will be provided through a written notification within five business days of the inspection. Both will include specifying who is responsible for correcting the violation and the time frame within which the failure must be corrected. If low deficiencies are identified, these deficiencies will only be noted for informational purposes. The notice will inform the party which caused the deficiencies, whether owner or family, that if life-threatening conditions are not corrected within 24 hours, and non-life-threatening conditions are not corrected within the specified time frame (or any PHA-approved extension), the owner’s HAP will be abated in accordance with PHA policy (Section 8-II.G.) or the family’s assistance will be terminated in accordance with PHA policy (Chapter 12). 2 CFR 200 Subpart D – Post Federal Award Requirements 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The PHA lacked adequate internal controls to ensure the timely reinspection of all initial inspections required for housing quality standards enforcement. Of the 40 sampled cases, 3 re-inspections did not occur as mandated. Consequently, the re-inspections were not conducted within the timeframes established by PHA policy, which aligns with federal requirements. According to policy, a 30-day period for reinspection begins after notification of inspection results, which must be sent within five days of the initial inspection completion, totaling 35 days resulting in noncompliance with PHA policy 8-II.F and 24 CFR 982.406(e)(5). Testing identified that 2 out of 40 units were classified as Life-Threatening conditions under PHA policy, mandating correction within 24 hours. Despite this requirement, the reinspections conducted exceeded the stipulated 24-hour correction and verification period.   Additionally, 1 unit which failed inspections November 14, 2024 and November 15, 2024 were subject to attempts from the PHA to reinspect the unit. After 3 attempts in December 2024 and January 2025 the PHA did not issue the Notice of Intended Action Enforcement of Family Obligation timely in March 2025. The unit is still going through the informal hearing process. Cause The delayed reinspection’s and mistakenly closed inspection were due to constraints on resources and a change in the system utilized by HACLB to administer the program during the year. For the inspections classified as life-threatening, the categorization within the system was incorrect due to mistakes during the data entry process. Effect or potential effect The PHA did not perform necessary procedures to enforce owner and/or family obligations to correct deficiencies, which if unresolved, could lead to abated housing assistance payments and impact the quality of housing for tenants. Questioned costs None Context A sample of 40 required re-inspections related to housing quality standards enforcements over failed initial inspections were tested. These failed inspections, which require items to be corrected before being subjected to re-inspection by the PHA until eventually cleared. 1 re-inspection did not occur and remained open as of the time of this audit. This item related to a failed inspection which occurred in January 2025 is over 15 months past its required re-inspection date. The time period for this initial failed inspection occurred shortly after their implementation of enhanced reinspection scheduling process in December 2024, using its MRI housing software to automatically schedule re-inspections within the 30-day remediation period. The new system has lead to reduced instances of late or missed re-inspections in our testing when compared to the prior year. Identification as a repeat finding if applicable 2024-005 Recommendation In alignment with steps already take by HACLB to strengthen compliance and reduce instances of delayed re-inspections, we recommend HACLB continue refining their controls over the timeliness and completeness of its the housing quality standard enforcement scheduling and monitoring. Continuing with its previous corrective actions in this area, HACLB should enhance staff procedures over the monitoring of the system and related scheduling reports to ensure that every required re-inspection is scheduled and has taken place in compliance with program requirements. Views of responsible officials and planned corrective actions HACLB recognizes the importance of conducting timely re-inspections to ensure compliance with HUD National Standards for the Physical Inspections of Real Estate (NSPIRE) enforcement requirements, formerly known as Housing Quality Standards (HQS). HACLB has reviewed the circumstances surrounding the single delayed reinspection, although attempts were made to reinspect the unit, and has evaluated opportunities to strengthen internal controls over reinspection scheduling and monitoring.   Beginning in December 2024, HACLB implemented enhancements to its MRI housing management system to strengthen oversight of inspection enforcement activities by scheduling re-inspections in advance of the required 30-day correction period, reducing the risk of missed or delayed re-inspections. To further strengthen internal controls, HACLB centralized the process for non-compliance. Inspection staff will regularly review open enforcement cases and reports to identify and promptly address any overdue or pending re-inspections. HACLB will also continue providing staff guidance and training regarding re-inspection scheduling, case monitoring, and NSPIRE enforcement requirements. These measures are intended to improve accountability, strengthen monitoring controls, and reduce the risk of missed or delayed re-inspections. HACLB remains committed to continuous improvement and maintaining compliance with HUD requirements governing enforcement.

Program: Section 8 Housing Choice Vouchers (HCV) Finding: 2025-003 Finding Title: Internal Controls over Compliance of Reinspection’s to Enforce Housing Quality Standards Identification as a repeat finding if applicable: 2024-005 Contact Person: Michelle Mel-Duch, Housing Administrative and Financial Services Officer, Health & Human Services Department, (562) 570-5344, Michelle.Mel-Duch@longbeach.gov Planned Actions: Process Improvement for Reinspection Scheduling HACLB implemented an enhanced reinspection scheduling process designed to ensure that all reinspections are completed prior to the expiration of the required 30-day correction period. As part of this effort, HACLB configured its housing management software system (MRI) to generate and schedule reinspections upon identification of deficiencies. Compliance Monitoring HACLB utilizes MRI to identify and track cases where extensions have been requested or approved. The MRI functionality provides staff with visibility into extension requests while maintaining oversight of compliance requirements. Inspections staff reviews scheduling reports to monitor upcoming and overdue reinspections, verify completion of required inspections, and ensure timely follow-up on outstanding cases. Ongoing Monitoring and Quality Assurance To further strengthen compliance, inspections staff will conduct periodic reviews of payment hold reports to track approved extensions and to verify that all required reinspections have been scheduled. Any identified discrepancies will be promptly addressed through corrective action, staff coaching, and process improvements as necessary. Expected Completion Date: December 31, 2026

2024-005

Finding Number: 2025-004 Finding Title: Internal Controls Over Participants Reexaminations Compliance Requirement(s): Eligibility, Special Tests – HAP Payment Classification: Significant Deficiency Programs: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year Federal Award Year: 2025 Criteria or specific requirement (including statutory, regulatory, or other citation 24 CFR 985.1 Purpose and applicability. PHA's quality control sample means an annual sample of files or records drawn in an unbiased manner and reviewed by an PHA supervisor (or by another qualified person other than the person who performed the original work) to determine if the work documented in the files or records conforms to program requirements. The minimum size of the PHA's quality control sample is as follows: Universe Minimum number of files or records to be sampled 50 or less 5. 51-600 5 plus 1 for each 50 (or part of 50) over 50. 601-2000 16 plus 1 for each 100 (or part of 100) over 600. Over 2000 30 plus 1 for each 200 (or part of 200) over 2000. Where the universe is: the number of admissions in the last year for each of the two quality control samples under the SEMAP indicator at § 985.3(a) Selection from the Waiting List; the number of families assisted for the SEMAP indicators at § 985.3(b) Reasonable Rent, and 985.3(c) Determination of Adjusted Income; the number of units under HAP contract during the last completed PHA fiscal year for the SEMAP indicator at § 985.3(e) HQS Quality Control Inspections; and the number of failed HQS inspections in the last year for the SEMAP indicator at § 985.3(f) HQS Enforcement.   § 985.3 Indicators, HUD verification methods and ratings (b) Reasonable rent. (1) This indicator shows whether the PHA has and implements a reasonable written method to determine and document for each unit leased that the rent to owner is reasonable based on current rents for comparable unassisted units: At the time of initial leasing; if there is any increase in the rent to owner; at the HAP contract anniversary if there is a 10 percent decrease in the published fair market rent (FMR) in effect 60 days before the HAP contract anniversary. The PHA's method must take into consideration the location, size, type, quality and age of the units, and the amenities, housing services, and maintenance and utilities provided by the owners in determining comparability and the reasonable rent. (24 CFR 982.4, 24 CFR 982.54(d)(15), 982.158(f)(7), 982.507, and 983.303) (2) HUD verification method: The IA annual audit report covering the PHA fiscal year entered on the SEMAP certification and on-site confirmatory review if performed. (3) Rating: (i) The PHA's SEMAP certification states that: (A) The PHA has a reasonable written method to determine reasonable rent which considers location, size, type, quality and age of the units and the amenities, housing services, and maintenance and utilities provided by the owners; and (B) Based on the PHA's quality control sample of tenant files, the PHA follows its written method to determine reasonable rent and has documented its determination that the rent to owner is reasonable in accordance with §§ 982.507 and 983.303 of this chapter, as applicable for at least 98 percent of units sampled at the time of initial leasing, if there is any increase in the rent to owner, and at the HAP contract anniversary if there is a 10 percent decrease in the published FMR in effect 60 days before the HAP contract anniversary. 20 points. (ii) The PHA's SEMAP certification includes the statements in paragraph (b)(3)(i) of this section, except that the PHA documents its determination of reasonable rent for only 80 to 97 percent of units sampled at initial leasing, if there is any increase in the rent to owner, and at the HAP contract anniversary if there is a 10 percent decrease in the published FMR in effect 60 days before the HAP contract anniversary. 15 points. (iii) The PHA's SEMAP certification does not support the statements in either paragraph (b)(3)(i) or (b)(3)(ii) of this section. 0 points. (c) Determination of adjusted income. (1) This indicator shows whether, at the time of admission and annual reexamination, the PHA verifies and correctly determines adjusted annual income for each assisted family and, where the family is responsible for utilities under the lease, the PHA uses the appropriate utility allowances for the unit leased in determining the gross rent. (24 CFR part 5, subpart F and 24 CFR 982.516) (2) HUD verification method: The IA annual audit report covering the PHA fiscal year entered on the SEMAP certification and on-site confirmatory review if performed. (3) Rating: (i) The PHA's SEMAP certification states that, based on the PHA's quality control sample of tenant files, for at least 90 percent of families: (A) The PHA obtains third party verification, as appropriate, of reported family annual income, the value of assets, expenses related to deductions from annual income, and other factors that affect the determination of adjusted income, and uses the verified information in determining adjusted income, and/or documents tenant files to show why third party verification was not available; (B) The PHA properly attributes and calculates allowances for any medical, child care, and/or disability assistance expenses; and (C) The PHA uses the appropriate utility allowances to determine gross rent for the unit leased. 20 points. (ii) The PHA's SEMAP certification includes the statements in paragraph (c)(3)(i) of this section, except that the PHA obtains and uses independent verification of income, properly attributes allowances, and uses the appropriate utility allowances for only 80 to 89 percent of families. 15 points. (iii) The PHA's SEMAP certification does not support the statements in either paragraph (c)(3)(i) or (c)(3)(ii) of this section. 0 points. CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition HACLB utilizes quality control samples from their SEMAP certification process over files documenting selections from the waiting list and income determinations to ensure compliance with requirements for HAP payments. HUD sets requirements for the minimum number of samples required for these indicators with instructions on the universe (population) to sample from and minimum samples based on that universe. HACLB utilized an incorrect universe for their sampling of the universe for determinations of adjusted income. As a result, quality control samples did not meet minimum requirements set by HUD for SEMAP. Cause HACLB calculated the minimum required quality control sample size for SEMAP Indicator 3 using the universe of rent reasonableness determinations, rather than the number of families assisted, which is the relevant population under SEMAP guidelines. Consequently, the sample-size calculation did not reflect the appropriate population. Effect or potential effect Insufficient controls over the reexamination process could lead to ineligible participants in the program, housing assistance payments that are either incorrect or to ineligible participants, and inaccurate reporting to HUD. Questioned costs None Context It was noted that HACLB calculated the minimum required quality control sample size for SEMAP Indicator 3 based on the universe of rent reasonableness determinations, rather than utilizing the number of families assisted as specified by SEMAP guidelines. As a result, the sample-size calculation did not accurately reflect the appropriate population. During the audit period, HACLB provided assistance to 7,309 families. According to SEMAP quality control sample size requirements, the minimum sample size for Indicator 3 should have been 57 files. However, HACLB used a universe of 2,665 rent reasonableness determinations and subsequently selected 34 files for review. Despite employing an incorrect population for the sample-size calculation, the files reviewed were ultimately drawn from the correct population of assisted families. Identification as a repeat finding if applicable 2024-007 Recommendation We recommend HACLB update policies and procedures to align the selection of quality control samples with federal requirements accordance with federal requirements. Views of responsible officials and planned corrective actions HACLB acknowledges the finding regarding the methodology used to calculate the SEMAP Indicator 3 sample size. To address this finding, HACLB reviewed HUD's SEMAP sampling requirements and will update its sample size worksheet to ensure future quality control sample sizes are calculated using the appropriate population in accordance with federal requirements. Staff responsible for SEMAP reporting and quality control reviews will receive additional guidance, training, and stay updated with regulations to ensure compliance.

Program: Section 8 Housing Choice Vouchers (HCV) Finding: 2025-004 Finding Title: Internal Controls Over Participants Reexaminations Identification as a repeat finding if applicable: 2024-007 Contact Person: Michelle Mel-Duch, Housing Administrative and Financial Services Officer, Health & Human Services Department, (562) 570-5344, Michelle.Mel-Duch@longbeach.gov Planned Actions: HACLB has updated its SEMAP Quality Control sample size worksheet to ensure the minimum required sample size is calculated using the total number of assisted families, in accordance with HUD SEMAP Indicator 3 requirements. The revised worksheet will be used for future quality control reviews to ensure compliance with federal requirements. In addition, HACLB has transitioned to the MRI housing management software platform, which provides enhanced reporting capabilities to generate accurate listings of assisted families, support the selection and tracking of quality control samples. To strengthen internal controls, HACLB will implement and document completion of reviews of reexamination files selected for SEMAP quality control. Expected Completion Date: December 31, 2026

2024-007

Finding Number: 2024-001 Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects Compliance Requirement(s): Eligibility Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) 24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion. (1) The affordability requirements: (i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership. (ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and (iii) Must be recorded in accordance with State recordation laws. (2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability. (3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. (4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b). (h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1). 24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations (1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h): (i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family. (ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request. (iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals. Cause The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information. Effect or potential effect The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria. Questioned costs None Context The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances. Identification as a repeat finding if applicable 2023-002 Recommendation We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements. Views of responsible officials and planned corrective actions The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway. The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.

Program: HOME Investment Partnerships Program (HOME) Finding: 2024-001 Contact Person: April Apodaca Administrative & Financial Services Bureau Manager Community Development Department Phone: (562) 570-6611 Email: April.Apodaca@longbeach.gov Planned Actions: The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway. The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns. Expected Completion Date: 12/31/2025

2023-002

Finding Number: 2024-002 Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections Compliance Requirement(s): Special Tests – Housing Quality Standards Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) § 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements: … (iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units. HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected? A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows: Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually. Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule. Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards. The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209. 2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented. Condition The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late. In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251. Cause The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year. Effect or potential effect Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process. Questioned costs None Context The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log. Identification as a repeat finding if applicable 2023-003 Recommendation We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections. Views of responsible officials and planned corrective actions Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections. The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays. The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.

Program: HOME Investment Partnerships Program (HOME) Finding: 2024-002 Contact Person: April Apodaca Administrative & Financial Services Bureau Manager Community Development Department Phone: (562) 570-6611 Email: April.Apodaca@longbeach.gov Planned Actions: The City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections. The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays. The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns. Expected Completion Date: 12/31/2025

2023-003

Finding Number: 2024-003 Finding Title: Internal Controls and Compliance over the Timeliness of Housing Choice Voucher Participant Re-examination and Recertification Compliance Requirement(s): Eligibility Classification: Material Weakness Programs: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year Federal Award Year: 2024 Criteria or specific requirement (including statutory, regulatory, or other citation) The PHA must examine family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation. The Department of Housing and Urban Development (HUD) has provided a grace period of 2 months before they are reported as late. § 5.657 Section 8 project-based assistance programs: Reexamination of family income and composition. (a) Applicability. This section states requirements for reexamination of family income and composition in the Section 8 project-based assistance programs, except for the moderate rehabilitation and the project-based voucher programs. (b) Regular reexamination. The owner must conduct a reexamination and redetermination of family income and composition at least annually. (c) Interim reexaminations. (1) Generally. A family may request an interim reexamination of family income because of any changes since the last examination. The owner must conduct any interim reexamination within a reasonable time after the family request or when the owner becomes aware of an increase in family adjusted income under paragraph (c)(3) of this section. What qualifies as a “reasonable time” may vary based on the amount of time it takes to verify information, but such time generally should not exceed 30 days from the date a family reports changes in income to an owner. (2) Decreases in the family's annual adjusted income. The owner may decline to conduct an interim reexamination of family income if the owner estimates that the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD through notice), or such lower threshold established by the owner. (3) Increases in the family's annual adjusted income. The owner must conduct an interim reexamination of family income when the owner becomes aware that the family's adjusted income (as defined in § 5.611) has changed by an amount that the owner estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except. (i) The owner may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, unless the family has previously received an interim reduction under paragraph (c)(1) of this section during the certification period; and (ii) The owner may choose not to conduct an interim reexamination in the last three months of a certification period. (4) Policies on reporting changes in family income or composition. The owner must adopt policies consistent with this paragraph (c), prescribing when and under what conditions the family must report a change in family income or composition. (5) Effective date of rent changes. (i) If the family has reported a change in family income or composition in a timely manner according to the owner's policies, the owner must provide the family with 30 days advance notice of any rent increase, and such rent increase will be effective the first day of the month beginning after the end of that 30-day notice period. Rent decreases will be effective on the first day of the first month after the date of the actual change leading to the interim reexamination of family income. (ii) If the family has failed to report a change in family income or composition in a timely manner according to the owner's policies, owners must implement any resulting rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, rent decreases may be applied retroactively at the discretion of the owner, in accordance with the owner's conditions as established in written policy, and subject to paragraph (c)(5)(iii) of this section. (iii) A retroactive rent decrease may not be applied by the owner prior to the later of the first of the month following: (A) The date of the change leading to the interim reexamination of family income; or (B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination). Condition For 31 of 60 samples, the Authority did not re-examine eligible participants or redetermine family income on an annual basis (12 months). Of these 31, there were 12 samples completed within the 2-month grace period, before HUD considers the re-examination late for its purposes. The remaining 19 samples were not completed until after 14 months. Cause For the participants whose income was not re-examined during the fiscal year, it is due to the volume of participants within the HCV program in relation to the resources available to the Housing Authority of the City to administer the program. Effect or potential effect Delays in reviewing participant's eligibility status each 12-month period could lead to noncompliance with HUD regulations. Additionally, it could cause program resources to go to ineligible participants, which would result in unallowable cost to the program. Questioned costs None Context The Housing Authority of the City of Long Beach’s has 75 employees who are responsible for the administration of the programs over 7,800 participants, or over 100 Re-examinations per employee. Identification as a repeat finding if applicable 2023-007 Recommendation We recommend the City continue with its plan to address delays in the recertification processes through steps that are being taken to address resource constraints. Views of responsible officials and planned corrective actions The City of Long Beach Housing Authority (HACLB) acknowledges the audit finding and has implemented a comprehensive corrective action plan to address the timeliness of participant re-examinations and recertifications under the Housing Choice Vouchers Program (HCV). To improve program efficiency and compliance, HACLB has expanded staffing through the recruitment and training of new Housing Specialists and the hiring of key administrative officers, however the prolonged timeline for recruitment has resulted in operational challenges that impact overall efficiency, and there are still several supervisory positions that remain vacant after 10 months. HACLB also renewed a contract for support services to address the backlog of reexaminations and implemented a new housing software platform to enhance workflow management and productivity tracking. These combined efforts are expected to significantly reduce delays, enhance operational oversight, and support sustained compliance with HUD requirements. HACLB remains committed to continuously evaluating and improving its internal controls and procedures to ensure the timely completion of all HCV participant reexaminations and recertifications.

Program: Section 8 Housing Choice Voucher Finding: 2024-003 Contact Person: Michelle Mel-Duch Housing Administrative and Financial Services Officer Health & Human Services Department Phone: (562) 570-5344 Email: Michelle.Mel-Duch@longbeach.gov Planned Actions: 1. Staff Augmentation and Training: o In January 2025, HACLB submitted requisitions to the Human Resources Department to recruit additional Housing Specialists to improve the management of high volume HCV program participants, documentations, processes, and to meet various requirement deadlines. o As of May 3, 2025, four new Housing Specialists have been hired and are currently undergoing training. Four additional Housing Specialists are in the onboarding process with Human Resources Department. o Several supervisory positions remain unfilled due to the need to renew the hiring list. HACLB has submitted a request to initiate the renewal process in order to recruit from a new list. o In addition, HACLB has hired a Housing Administrative and Financial Services Officer and a Housing Operations Program Officer. These roles are critical in providing oversight of operational workflows, evaluating staff productivity, and developing strategies to optimize staffing levels and resource allocation. 2. Contracted Support Services: o To address a backlog of overdue reexaminations, HACLB renewed its contract with an external agency to provide dedicated assistance in processing pending cases. This contract became effective in May 2025 and has already begun to support the reexamination workload. 3. Technology Upgrade: o HACLB has transitioned to a new housing software platform tailored to improve the tracking and processing of annual recertifications. This system upgrade enhances productivity monitoring, facilitates efficient workflow management, and supports compliance with HUD timeliness standards. Expected Completion Date: September 30, 2026

2023-005

Finding Number: 2024-004 Finding Title: Internal Controls and Compliance Over Federally Funded Equipment Compliance Requirement(s): Equipment and Real Property Management Classification: Significant Deficiency Programs: Port Security Grant Program ALN #: 97.056 Pass-through entity: N/A – Direct Award Federal Agency: Department of Homeland Security Federal Award Numbers: EMW-2021-PU-00463-S01 Federal Award Year: 2021 Criteria or specific requirement (including statutory, regulatory, or other citation § 200.313 Equipment. See also § 200.439. (a) Title. Title to equipment acquired under the Federal award will vest upon acquisition in the recipient or subrecipient subject to the conditions of this section. This title must be a conditional title unless a Federal statute specifically authorizes the Federal agency to vest title in the recipient or subrecipient without further responsibility to the Federal Government (and the Federal agency elects to do so). A conditional title means a clear title is withheld by the Federal agency until conditions and requirements specified in the terms and conditions of a Federal award have been fulfilled. Title for equipment vested in a recipient or subrecipient is subject to the following conditions: (1) Use the equipment for the authorized purposes of the project during the period of performance or until the property is no longer needed for the purposes of the project. (2) While the equipment is being used for the originally authorized purpose, the recipient or subrecipient must not dispose of or encumber its title or other interests without the approval of the Federal agency or pass-through entity. (3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section. (b) General. A State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. Indian Tribes must use, manage, and dispose of equipment acquired under a Federal award in accordance with tribal laws and procedures. If such laws and procedures do not exist, Indian Tribes must follow the guidance in this section. Other recipients and subrecipients, including subrecipients of a State or Indian Tribe, must follow paragraphs (c) through (e) of this section. (c) Use. (1) The recipient or subrecipient must use equipment for the project or program for which it was acquired and for as long as needed, whether or not the project or program continues to be supported by the Federal award. The recipient or subrecipient must not encumber the equipment without prior approval of the Federal agency or pass-through entity. The Federal agency may require the submission of the applicable common forms for reporting on equipment. When no longer needed for the original project or program, the equipment may be used in other activities in the following order of priority: (i) Activities under other Federal awards from the Federal agency that funded the original program or project; then (ii) Activities under Federal awards from other Federal agencies. These activities include consolidated equipment for information technology systems. (2) During the time that equipment is used on the project or program for which it was acquired, the recipient or subrecipient must also make the equipment available for use on other programs or projects supported by the Federal Government, provided that such use will not interfere with the purpose for which it was originally acquired. First preference for other use of the equipment must be given to other programs or projects supported by the Federal agency that financed the equipment. Second preference must be given to programs or projects under Federal awards from other Federal agencies. Use for non-federally funded projects is also permissible, provided such use will not interfere with the purpose for which it was originally acquired. The recipient or subrecipient should consider charging user fees as appropriate. (3) Notwithstanding the encouragement in § 200.307 to earn program income, the recipient or subrecipient must not use equipment acquired with the Federal award to provide services for a fee that is less than a private company would charge for similar services unless specifically authorized by Federal statute. This restriction is effective as long as the Federal Government retains an interest in the equipment. (4) When acquiring replacement equipment, the recipient or subrecipient may either trade-in or sell the equipment and use the proceeds to offset the cost of the replacement equipment. (d) Management requirements. Regardless of whether equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage equipment (including replacement equipment) utilizing procedures that meet the following requirements: (1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property. (2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years. (3) A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program. (4) Regular maintenance procedures must be in place to ensure the property is in proper working condition. (5) If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return. (e) Disposition. When equipment acquired under a Federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a Federal agency, the recipient or subrecipient must request disposition instructions from the Federal agency or pass-through entity if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal agency or pass-through entity disposition instructions: (1) Equipment with a current fair market value of $10,000 or less (per unit) may be retained, sold, or otherwise disposed of with no further responsibility to the Federal agency or pass-through entity. (2) Except as provided in § 200.312(b), or if the Federal agency or pass-through entity fails to provide requested disposition instructions within 120 days, items of equipment with a current fair market value in excess of $10,000 (per-unit) may be retained or sold by the recipient or subrecipient. However, the Federal agency is entitled to an amount calculated by multiplying the percentage of the Federal agency's contribution towards the original purchase by the current market value or proceeds from the sale. If the equipment is sold, the Federal agency or pass-through entity may permit the recipient or subrecipient to retain, from the Federal share, $1,000 of the proceeds to cover expenses associated with the selling and handling of the equipment. (3) The recipient or subrecipient may transfer title to the property to the Federal Government or to an eligible third party provided that the recipient or subrecipient must be entitled to compensation for its attributable percentage of the current fair market value of the property. (4) In cases where a recipient or subrecipient fails to take appropriate disposition actions, the Federal agency or pass-through entity may direct the recipient or subrecipient to take disposition actions. Condition As part of our audit procedures, we reviewed internal controls over inventory and asset management, including physical inspection and disposition tracking of equipment. For the Fire Department, we determined that no physical inventory of federally funded equipment had been conducted during the required biennial period, and no reconciliation of equipment records to actual assets had been performed. While informal tracking logs and asset purchase records existed, they were incomplete and lacked standardized documentation of asset tag numbers, inspection dates, asset condition, and verification signatures. Moreover, there was no evidence of centralized or departmental oversight to ensure routine physical inventory and compliance with Federal property standards. In addition, we identified the Harbor department failed to properly record the disposition of a federally funded asset. The asset was still marked as “in service” within the equipment listing provided to us during the audit; however the item had in fact been disposed of during the audit period. Cause The Fire Department’s grants team oversees the compliance with required federal equipment procedures, the grants team indicated capacity issues were the main contributor towards the lack of a reconciliation or inventorying of the equipment. The Harbor Departments property related to a vehicle which was disposed of after an accident. This occurred between the departments inventory processes leading to the listing not being updated by mistake. Effect or potential effect The Departments were out of compliance with federal requirements surrounding equipment management, maintenance, and disposal. Questioned costs None Context The Harbor Department special vehicle which had an estimated book value of $0 that was involved in a collision before being disposed of. There were $0 in proceeds received related to the disposal. Identification as a repeat finding if applicable N/A Recommendation We recommend the departments enhance internal controls to ensure its property records include all the requirements under the Uniform Guidance and properly identify all property and equipment purchased with federal funds. We recommend the Fire Department implement a plan to address staffing needs and formalize procedures regarding the reconciliation, tracking, and maintenance of federally funded equipment. We recommend the Harbor Department enhance their procedures on equipment disposals. Views of responsible officials and planned corrective actions The Fire Department will ensure that all grant funds are expended in compliance with grant guidelines, including the completion of a biennial Equipment Inventory and the submission of a certification letter verifying its accuracy to the grantor every other year. Effective June 16, 2025, the Fire Department will conduct an Equipment Inventory and submit a verification letter to the grantor confirming its completion on a biennial basis. The current Equipment Inventory will be completed by the Support Services Bureau by September 30, 2025. The Fire Department will ensure the accompanying verification letter is sent to the grantor along with the updated inventory list. This biennial requirement will be integrated into the Department’s annual calendar. Following the FY2025 inventory, the next cycle will occur in FY2027 and continue in every odd-numbered fiscal year thereafter. The Harbor Department will enhance its written procedures on equipment disposals and provide training to appropriate Finance, Security, and Maintenance Division staff in FY 2025 to ensure compliance and timeliness in following equipment disposal procedures.

Program: Port Security Grant Program Finding: 2024-004 Contact Person: Karen Rindone Assistant Fire Chief Long Beach Fire Department Phone: (562) 570-2544 Email: Karen.Rindone@longbeach.gov Planned Actions: The Fire Department will ensure that all grant funds are expended in compliance with grant guidelines, including the completion of a biennial Equipment Inventory and the submission of a certification letter verifying its accuracy to the grantor every other year. Effective June 16, 2025, the Fire Department will conduct an Equipment Inventory and submit a verification letter to the grantor confirming its completion on a biennial basis. The current Equipment Inventory will be completed by the Support Services Bureau by September 30, 2025. The Fire Department will ensure the accompanying verification letter is sent to the grantor along with the updated inventory list. This biennial requirement will be integrated into the Department’s annual calendar. Following the FY2025 inventory, the next cycle will occur in FY2027 and continue in every odd-numbered fiscal year thereafter. Expected Completion Date: 9/30/2025 Finding: 2024-004 Program: Port Security Grant Program Federal Award Number: EMW-2021-PU-00259 Contact Person: Don Kwok Assistant Director of Finance City of Long Beach Harbor Department Phone: (562) 283-7575 Email: Don.Kwok@polb.com Finding: The Harbor Department failed to properly record the disposition of a federally funded asset. The asset was still marked as “in service” within the equipment listing for FY2024. However, the item had in fact been disposed of during FY2024 after an accident. The asset had a $0 value prior to the accident which initiated the disposal. Corrective Action Plan: The Harbor Department will enhance its written procedures on equipment disposals and provide training to appropriate Finance, Security, and Maintenance Division staff in FY 2025 to ensure compliance and timeliness in following equipment disposal procedures.

Finding Number: 2024-005 Finding Title: Internal Controls over Compliance of Reinspection’s to Enforce Housing Quality Standards Compliance Requirement(s): Special Tests – Housing Quality Standards Enforcement Classification: Material Weakness Programs: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year Federal Award Year: 2024 Criteria or specific requirement (including statutory, regulatory, or other citation PART 982—SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM 24 CFR 982.54(d)(21) Procedural guidelines and performance standards for conducting required HQS inspections, including: (i) Any deficiency that the Public Housing Authority (PHA) has adopted as a life-threatening deficiency that is not a HUD-required life-threatening deficiency (ii) For PHAs that adopt the initial inspection non-life-threatening deficiency option: a. The PHA's policy on whether the provision will apply to all initial inspections or a portion of initial inspections. b. The PHA's policy on whether the provision will be applied to only some inspections and how the units will be selected. c. The PHA's policy on using withheld HAP funds to repay an owner once the unit is in compliance with HQS. (iii) For PHAs that adopt the alternative inspection provision: a. The PHA's policy on how it will apply the provision to initial and periodic inspections. b. he specific alternative inspection method used by the PHA. c. The specific properties or types of properties where the alternative inspection method will be employed. d. For initial inspections, the maximum amount of time the PHA will withhold HAP if the owner does not correct the HQS deficiencies within the cure period, and the period of time after which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract. (iv) The PHA's policy on charging a reinspection fee to owners. 24 CFR 982.54(d)(22) The PHA's policy on withholding HAP for units that do not meet HQS (see § 982.404(d)(1)) 24 CFR 982.406(e)(5) The PHA may commence housing assistance payments to the owner and make housing assistance payments retroactive to the effective date of the HAP contract only after the unit passes the PHA's HQS inspection. If the unit does not pass the HQS inspection, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected. If a deficiency is life-threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within no more than 30 calendar days (or any PHA-approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract. PHA POLICY 8-II.F. INSPECTION RESULTS AND REINSPECTIONS FOR UNITS UNDER HAP CONTRACT The city of Long Beach PHA Admin Plan requires that each deficiency is identified in the NPSIRE standards as either life-threatening, severe, moderate, or low. Further indicating that units under HAP contract, must correct for life-threatening deficiencies within 24 hours after notice has been provided and all others must be corrected within 30 days (or a PHA-approved extension) after notice has been provided. Life-threatening deficiencies require notifying both parties by telephone or email immediately while Severe or moderate deficiencies will be provided through a written notification within five business days of the inspection. Both will include specifying who is responsible for correcting the violation and the time frame within which the failure must be corrected. If low deficiencies are identified, these deficiencies will only be noted for informational purposes. The notice will inform the party which caused the deficiencies, whether owner or family, that if life-threatening conditions are not corrected within 24 hours, and non-life-threatening conditions are not corrected within the specified time frame (or any PHA-approved extension), the owner’s HAP will be abated in accordance with PHA policy (Section 8-II.G.) or the family’s assistance will be terminated in accordance with PHA policy (Chapter 12). 2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The PHA did not have sufficient internal controls in place to ensure timely reinspection of initial inspections for housing quality standard enforcement leading to eighteen re-inspections which were not completed within the required time frames set by PHA policy, created in accordance with federal requirements. The inspections selected were categorized as severe or moderate deficiencies, allowing for a 30 day period starting after providing notification of inspection results which must occur within 5 days of the inspection completion (or effectively 35 days), the eighteen samples mentioned were completed after this window causing the PHA to be noncompliant with PHA policy 8-II.F and 24 CFR 982.406(e)(5). Additionally, one tenant failed inspection in October 2023 before failing a subsequent reinspection in December 2023. No further action was taken by the PHA, and the case was closed without resolving the deficiencies that caused the inspections to fail leading to noncompliance with 24 CFR 982.406(e)(5) and PHA policy 8-II.F. Cause The delayed reinspection’s and mistakenly closed inspection were due to constraints on resources and a change in the system utilized by the authority to administer the program during the year. Effect or potential effect The PHA did not perform necessary procedures to enforce owner and/or family obligations to correct deficiencies, which if unresolved, could lead to housing assistance payments to either party which should have been abated. Questioned costs None Context Sixty inspections requiring reinspection were selected for testing, eighteen were found to be completed after the required reinspection date. Late reinspection’s ranged from 1 day late to over a year late. One of the failed re-inspections cases was closed by management prior to resolution of identified deficiencies. None of the 60 samples selected were categorized as “life threatening”. Identification as a repeat finding if applicable 2023-008 Recommendation We recommend the Authority enhance internal controls over the timeliness and completeness of its the housing quality standard enforcement procedures. Views of responsible officials and planned corrective actions The HACLB acknowledges the importance of timely reinspections to ensure compliance with Housing Quality Standards (HQS) and has taken concrete steps to strengthen its internal controls and enforcement mechanisms. To strengthen compliance and reduce delays, HACLB implemented an enhanced reinspection scheduling process in December 2024, using its MRI housing software to automatically schedule reinspections within the 30-day remediation period. The system also tracks extension requests and approvals, while staff regularly monitor system-generated reports to ensure timely follow-up and adherence to HUD standards. These improvements are designed to ensure that repairs are verified within the required timeframe, increase program compliance, and improve the overall quality of housing for HCV participants. HACLB is committed to ongoing monitoring and refinement of this process to ensure continuous improvement.

Program: Section 8 Housing Choice Voucher Finding: 2024-005 Contact Person: Michelle Mel-Duch Housing Administrative and Financial Services Officer Health & Human Services Department Phone: (562) 570-5344 Email: Michelle.Mel-Duch@longbeach.gov Planned Actions: 1. Process Improvement for Reinspection Scheduling: o Beginning December 2024, HACLB implemented an enhanced scheduling process to ensure all reinspections are conducted prior to the expiration of the required 30-day remediation period. o The agency has configured its housing software platform (MRI) to automatically schedule reinspections in advance of the 30-day deadline following the identification of deficiencies. This automated process minimizes the risk of delay or oversight. 2. Extension Tracking and Compliance Monitoring: o The MRI system is also configured to flag cases where an extension has been requested or approved, allowing for documented exceptions while maintaining compliance oversight. o Staff monitor reinspection dates regularly through system-generated reports to ensure adherence to HUD standards and to follow up on any outstanding cases. Expected Completion Date: December 31. 2025

2023-008

Finding Number: 2024-007 Finding Title: Internal Controls Over the Listing of Housing Quality Control Inspections Compliance Requirement(s): Special Tests – Housing Quality Control Inspections Classification: Significant Deficiency Programs: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year Federal Award Year: 2024 Criteria or specific requirement (including statutory, regulatory, or other citation 24 CFR 985.2 “PHA's quality control sample” PHA's quality control sample means an annual sample of files or records drawn in an unbiased manner and reviewed by an PHA supervisor (or by another qualified person other than the person who performed the original work) to determine if the work documented in the files or records conforms to program requirements. The minimum size of the PHA's quality control sample is as follows: Universe Minimum Minimum number of files or records to be sampled 50 or less 5 51-600 5 plus 1 for each 50 (or part of 50) over 50 601-2000 16 plus 1 for each 100 (or part of 100) over 600 Over 2000 30 plus 1 for each 200 (or part of 200) over 2000 A PHA supervisor or other qualified person must reinspect a sample of units under contract during the last PHA fiscal year. The guidelines included in Table 10-1 determine the required sample size. The universe referred to in table is the number of units under HAP contract at the end of the PHA’s previous fiscal year Condition The PHA was unable to provide a complete listing of Housing Quality Control, therefore we were unable to substantiate that the required number of quality control inspections were performed in compliance with program requirements. Cause PHA changed IT systems during the fiscal year under audit and it was caused by an IT system issue not being able to export the correct population for our testing Effect or potential effect The PHA could be out of compliance with requirements to perform a minimum number of housing quality control inspections. Questioned costs None Context The PHA provided a listing of 61 inspections which were classified as Quality Control Inspections. 7 were selected for testing, 2 of the selections were found not to be quality control inspections. Upon further inquiry it was identified that the listing was not accurate. Due to IT System changes occurring during the fiscal year under audit the PHA was unable to provide a corrected listing. The PHA had roughly 6700 units at the end of the prior fiscal year receiving housing assistance payments under the program, based on 24 CFR 985.2 the required number of quality control inspections the PHA were required to perform in the fiscal year under audit would be roughly 54 housing quality control inspections. Due to the inability to provide a complete listing we were unable to verify whether the PHA performed the required amount of quality control inspections. Identification as a repeat finding if applicable N/A Recommendation We recommend the PHA strengthen procedures to ensure the listing of housing quality control inspections is maintained accurately ensuring completeness. Views of responsible officials and planned corrective actions The legacy software system had limited functionality, which restricted our ability to generate the requested reports effectively. The HACLB recognizes the importance of maintaining accurate and timely records of Housing Quality Control inspections to ensure compliance with HUD regulations and to support program oversight. HACLB has implemented the MRI housing management software, which enhances functionality and reporting compared to the previous system, particularly benefiting the Inspections Team with advanced tools for organizing, scheduling, and tracking Quality Control inspections. The system’s reporting capabilities enable timely and detailed inspection listings, supporting compliance with HUD requirements for scheduling, documentation, and follow-up. The upgraded system has already begun to improve operational oversight and internal controls related to Housing Quality Control inspections. HACLB expects these enhancements to strengthen compliance efforts and promote better data accuracy and reporting transparency moving forward.

Program: Section 8 Housing Choice Voucher Finding: 2024-007 Contact Person: Michelle Mel-Duch Housing Administrative and Financial Services Officer Health & Human Services Department Phone: (562) 570-5344 Email: Michelle.Mel-Duch@longbeach.gov Planned Actions: 1. Implementation of New Software System: o HACLB has transitioned to the new MRI housing management software platform, which offers fully sufficient functionality and reporting capabilities compared to the prior system. o The new MRI system provides the Inspections Team with advanced tools to organize, schedule, and track Quality Control inspections efficiently and accurately. 2. Improved Reporting and Compliance: o The MRI system’s reporting functions allow HACLB to generate detailed and timely listings of all Housing Quality Control inspections. o This improvement supports HACLB’s ability to meet HUD requirements for inspection scheduling, documentation, and follow-up activities. Expected Completion Date: December 31, 2025

Finding Number: 2023-002 Program: HOME Investment Partnerships Program (HOME) ALN #: 14.239 Pass-through entity: NA – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M14-MC060518, M15-MC060518, M16-MC060518, M17-MC060518, M18-MC060518, M19-MC060518, M21-MC060518, and M22-MC060518 Federal Award Year: 11/18/2015–09/01/2023, 01/19/2017–09/01/2024, 09/22/2017–09/01/2025, 09/12/2018- 09/01/2026, 09/04/2019–09/01/2027, 08/19/2021–09/01/2029, and 11/09/2022–09/01/2030 Compliance Requirement: Eligibility Criteria 24 CFR92.252 Qualification as affordable housing: Rental housing. (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion. (1) The affordability requirements: (i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership; (ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and (iii) Must be recorded in accordance with State recordation laws. (2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure in order to preserve affordability. (3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. (4) The termination of the restrictions on the project does not terminate the participating jurisdiction’s repayment obligation under § 92.503(b). Rental housing activity (Minimum period of affordability - In years) Rehabilitation or acquisition of existing housing per unit amount of HOME funds: Under $15,000 (5) 15,000 to $14,000 (10) Over $40,000 or rehabilitation involving refinancing (15) New construction or acquisition of newly constructed housing (20) (h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant’s annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant’s annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to §92.203(a)(1). 24 CFR 92.203 Income determinations- (b) Required Documentation for Annual Income Calculations (1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with § 92.252(h): (i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family. (ii) Obtain from the family a written statement of the amount of the family’s annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request. (iii) Obtain a written statement from the administrator of a government program under which the family receives benefits and which examines each year the annual income of the family. The statement must indicate the tenant’s family size and state the amount of the family’s annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant’s annual income does not exceed this limit. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Conditions Found The City was unable to collect documents from the property manager at the inspection site to ensure that individuals who occupied HOME - assisted units were eligible tenants. For 4 of 60 sample selections, which all related to the same development group, but different properties, the City did not complete the required eligibility procedures. Therefore, the City did not determine each family’s income to determine eligibility, did not ensure the family was low income or very low income, and that the rent did not exceed 30% of adjusted income of a family whose income equals 65% of the median income for the area. Additionally, for the same development group, the City was unable to determine if, for projects with five or more units, 20% of HOME units were occupied by very-low income families. Per discussion with the City, they were unable to collect eligibility documents related to any of the loans related to this developer. Per review of the City’s HOME loan rollforward, 21 out of 279 loans relate to this developer, which represent 6% of the total loan population. Additionally, the 21 loans represent $13.4M of $87.5M of total loans disbursed, or approximately 15% of the total population. Cause Per inquiry with the Housing Development Officer, for the four exceptions related to the same development group, there were multiple attempts between July 6, 2023 and January 26, 2024 to contact the property manager and retrieve income verification documentation for individuals occupying HOME assisted units. It was later determined that the project manager for the developer was no longer with the company. The City then provided a six-week extension to the development agency on January 26, 2024, in a last attempt for them to provide the documentation. No documents or further communication was made with the City. The City was ultimately unable to obtain the documents needed to determine eligibility. Effect Participants who do not meet income requirements could potentially cause the City to not be in compliance with HUD requirements. Questioned Costs Not applicable Repeat finding 2022-001 Statistical sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the City continue working with the developer to ensure eligibility documents are gathered and within a timely manner. Views of Responsible Officials The Community Development Department continues to complete eligibility procedures and is diligently working to collect the required documents. As noted by KPMG, 4 out of 60 sample selections were all related to properties held by the same development group. It is inaccurate to state that the City has ceased attempts to obtain corrective action from the developer. Since granting the developer a six-week extension on January 26, 2024, the Community Development Department has continued to communicate with the developer to obtain the missing documentation. During a Teams call with a representative from KPMG on July 18, 2024, the City provided the auditor with evidence of continued correspondence with the developer, in the form of emails dated March 18, 2024, March 20, 2024, and, most recently, July 1, 2024. Issues with tenant income eligibility and other related matters with this particular developer have persisted for several years and are well known to the Community Development Department, the grantor, other relevant City departments, and external agencies related to the grantor.

Program: HOME Investment Partnerships Program (HOME) Finding: 2023-002 Contact Person: April Apodaca Administrative & Financial Services Bureau Manager Community Development Department Phone: (562) 570-6611 Email: April.Apodaca@longbeach.gov Planned Actions: Since granting the developer a six-week extension on January 26, 2024, the Community Development Department has continued to communicate with the developer to obtain the missing documentation. During a Teams call with a representative from KPMG on July 18, 2024, the City provided the auditor with evidence of continued correspondence with the developer, in the form of emails dated March 18, 2024, March 20, 2024, and, most recently, July 1, 2024. Expected Completion Date: 12/31/2024

2022-001

Finding Number: 2023-003 Program: HOME Investment Partnerships Program (HOME) ALN #: 14.239 Pass-through entity: NA – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M14-MC060518, M15-MC060518, M16-MC060518, M17-MC060518, M18-MC060518, M19-MC060518, M21-MC060518, and M22-MC060518 Federal Award Year: 11/18/2015–09/01/2023, 01/19/2017–09/01/2024, 09/22/2017–09/01/2025, 09/12/2018–09/01/2026, 09/04/2019–09/01/2027, 08/19/2021–09/01/2029, and 11/09/2022–09/01/2030 Compliance Requirement: Special Tests- Housing Quality Standards Criteria During the period of affordability (i.e., the period for which the nonfederal entity must maintain subsidized housing) for HOME-assisted rental housing, the participating jurisdiction must perform on-site inspections to determine compliance with property standards and verify the information submitted by the owners no less than (a) every three years for projects containing 1 to 4 units, (b) every two years for projects containing 5 to 25 units, and (c) every year for projects containing 26 or more units. The participating jurisdiction must perform on-site inspections of rental housing occupied by tenants receiving HOME/HOME-ARP-assisted tenant-based rental assistance to determine compliance with housing quality standards (24 CFR sections 92.209(i), 92.251(f), and 92.504(d)). Additionally, per 24 CFR 92.504(d)(1)(D), inspections must be based on a statistically valid sample of units appropriate for the size of the HOME-assisted project, as set forth by HUD through a document published in the Federal Register. For projects with one to four HOME-assisted units, a participating jurisdiction must inspect all of the HOME-assisted units and all inspectable areas for each building with HOME-assisted units. However, per the HUD 2013 final rule, not less than 20% of the units can be inspected. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented. Conditions Found The City failed to complete inspections on the required number of HOME-assisted units and within the time period required. During our testwork we noted that 4 of the 11 property selections had less than 20% of the units inspected. Additionally, we noted that 5 of the 11 inspections did not occur within the required one-, two-, or three-year time period since the previous inspection date. The City maintains a log that indicates the property, address, minimum number of inspections required, number of units, the responsible monitor, and if the inspection passed or failed. However, the log is unable to detect that at least 20% of HOME-assisted units per project are selected for inspection. The log calculates a minimum of 15% of HOME units inspected per property/project. Additionally, per HUD regulations, the City must make a statistical sample of HOME-assisted units within a project. The log is not indicative of a statistical sample. Lastly, the log does not track all HOME projects, thus, the City is not able to demonstrate its compliance with the frequency of inspection of all sites. Cause Due to staffing constraints and the number of required inspections, the City was not able to inspect at least 20% of the units within all projects and within the required time. Further, the City’s log is not designed to include all the required elements for frequency and number of inspections. Effect Not inspecting the proper number of units and within the correct time period could cause the City to be non-compliant with HUD requirements. Questioned Costs Not applicable Repeat finding A similar finding was not reported in the prior year. Statistical sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the City update the internal tracker to ensure that 20% of HOME units are inspected, inspections are based on a statistical sample, and that all inspections occur within the required time. Additionally, the City should track all projects to ensure they are in compliance with all HOME-assisted projects. Views of Responsible Officials The Community Development Department has faced challenges in meeting its inspection goals, primarily due to resource limitations, staff redeployment and the impact of COVID-19. It is taking steps to address these issues by forming an in-house inspection team and adopting elements from HUD’s yet-to-be-released NSPIRE system. For example, three full-time positions have been filled as of May 2024 to assist with the Housing Quality Standards (HQS) efforts. While HUD guidelines have stated an acceptable rate of 15-20% in their own HQS guidelines, the City set its goal at 20%. Therefore, it is important to note that this finding is not indicative of a failure to meet the regulatory standard, but rather to meet an internal one. Furthermore, the testing shows that the standard was met when the universe of projects and inspections is examined. The Community Development Department aimed to complete 20% of inspections and achieved a completion rate of 19.65% during the fiscal year under audit. The City maintains that the intent of the regulation was met through this standard and this finding has been issued, because the inspections were uneven across individual projects. This can be attributed to resource limitations, reliance on the Housing Authority’s inspection system, and COVID-19 delays, which led to significant backlogs from prior years when access was limited. The Community Development Department is now taking more systematic, proactive measures to improve the inspection process, particularly through filled vacancies, in-house inspections conducted by department staff, and an active log indicating inspection targets. As a result, during the current fiscal year, there has been a smoother, more data-driven, systematic approach to meeting HQS requirements, as evidenced by the substantial decrease in backlog. The Department is on track to ensure that every project will meet an inspection target that meets the NSPIRE standards (as currently drafted). Response to Views of Responsible Officials As noted in the criteria section above, 24 CFR 92.504(d)(1)(D) states, inspections must be based on a statistically valid sample of units appropriate for the size of the HOME-assisted project, as set forth by HUD through a document published in the Federal Register. For projects with one to four HOME-assisted units, a participating jurisdiction must inspect all of the HOME-assisted units and all inspectable areas for each building with HOME-assisted units. However, per the HUD 2013 final rule, not less than 20% of the units can be inspected. Therefore, 20% of units are required to be inspected at each property. The 20% is not calculated based on total number of loans or HOME assisted units at the City, as indicated in Management’s response. Additionally, the City was unable to demonstrate that inspections were based on a statistically valid sample.

Program: HOME Investment Partnerships Program (HOME) Finding: 2023-003 Contact Person: April Apodaca Administrative & Financial Services Bureau Manager Community Development Department Phone: (562) 570-6611 Email: April.Apodaca@longbeach.gov Planned Actions: The Community Development Department has faced challenges in meeting its inspection goals, primarily due to resource limitations, staff redeployment and the impact of COVID-19. It is taking steps to address these issues by forming an in-house inspection team and adopting elements from HUD’s yet-to-be-released NSPIRE system. For example, three full-time positions have been filled as of May 2024 to assist with the Housing Quality Standards (HQS) efforts. The Community Development Department is now taking more systematic, proactive measures to improve the inspection process, particularly through filled vacancies, in-house inspections conducted by department staff, and an active log indicating inspection targets. As a result, during the current fiscal year, there has been a smoother, more data-driven, systematic approach to meeting HQS requirements, as evidenced by the substantial decrease in backlog. The Department is on track to ensure that every project will meet an inspection target that meets the NSPIRE standards (as currently drafted). The Community Development Department will continue to monitor HUD’s proposed NSPIRE standards and will rely on in-house inspections and continued alignment with those until they are finalized. HUD has indicated that the standards will not be finalized until 10/1/2025. Expected Completion Date: 9/30/2024

Finding Number: 2023-004 Program: HOME Investment Partnerships Program (HOME) ALN #: 14.239 Pass-through entity: NA – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M14-MC060518, M15-MC060518, M16-MC060518, M17-MC060518, M18-MC060518, M19-MC060518, M21-MC060518, and M22-MC060518 Federal Award Year: 11/18/2015–09/01/2023, 01/19/2017–09/01/2024, 09/22/2017–09/01/2025, 09/12/2018–09/01/2026, 09/04/2019–09/01/2027, 08/19/2021–09/01/2029, and 11/09/2022–09/01/2030 Compliance Requirement: Special Tests- Housing Quality Standards Criteria During the period of affordability (i.e., the period for which the nonfederal entity must maintain subsidized housing) for HOME-assisted rental housing, the participating jurisdiction must perform on-site inspections to determine compliance with property standards and verify the information submitted by the owners no less than (a) every three years for projects containing one to four units, (b) every two years for projects containing five to 25 units, and (c) every year for projects containing 26 or more units. The participating jurisdiction must perform on-site inspections of rental housing occupied by tenants receiving HOME/HOME-ARP-assisted tenant-based rental assistance to determine compliance with housing quality standards (24 CFR sections 92.209(i), 92.251(f), and 92.504(d)). As stated in 24 CFR 92.251(f) part 4, the participating jurisdiction must have procedures for ensuring that timely corrective and remedial actions are taken by the project owner to address identified deficiencies. It is further outlined in HUD’s 2013 final rule that, if any deficiencies are identified for any inspectable items (as established in the PJ’s inspection procedures), a follow-up on-site inspection is required within 12 months. For non-hazardous deficiencies, the PJ can either conduct an on-site inspection or accept third party documentation (such as a paid invoice for work completed). Health and safety deficiencies identified during inspections must be corrected immediately. The PJ must adopt a more frequent inspection schedule for these properties. The City’s procedures outline a 30 day requirement for deficiencies to be completed. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented. Conditions Found During our testwork we noted that repairs/deficiencies that were identified during the initial on-site inspection were not completed timely, as set forth in the City’s policies and procedures. For 3 of 11 sample selections, we noted that repairs were documented and completed after the 30-day window. Additionally, the City does not have a control to ensure deficiencies noted during the initial inspection are remediated within 30 days. Cause Due to staffing constraints and the number of required repairs, the City was not able to ensure repairs were completed within 30 days. Effect Not performing procedures to ensure that deficiencies were remediated, will cause the City to be out of compliance with HUD requirements. Questioned Costs Not applicable Repeat finding A similar finding was not reported in the prior year. Statistical sample The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the City implement a control to ensure that deficiencies are remediated within 30 days. Views of Responsible Officials This issue is related to Finding 2023-003, and should be considered in the context of that response. Housing Quality Inspection times were impacted in 2023 due to staff shortages and the need to address a significant backlog that occurred as a result of the COVID-19 pandemic. Despite these challenges, the City remained committed to ensuring the health and safety of affordable housing by maintaining an overall inspection rate of 19.65% in Fiscal Year 2023. Furthermore, the Community Development Department is taking comprehensive measures to address the needed maintenance completion timeframe following the required inspection, and the goal is to ensure repairs are completed within thirty days. For context, it’s important to note that KPMG mentioned three repair delays. Although 3 of the 11 samples were outside the City’s stated goal of a thirty-day repair turnover, none faced material delays. One of them was delayed by two days (32 days to complete), while the other two repairs were completed within 34 and 46 days, respectively. This condition has been addressed by implementation of the corrections itemized in Finding 2023-003.

Program: HOME Investment Partnerships Program (HOME) Finding: 2023-004 Contact Person: April Apodaca Administrative & Financial Services Bureau Manager Community Development Department Phone: (562) 570-6611 Email: April.Apodaca@longbeach.gov Planned Actions: This issue is related to Finding 2023-003, and should be considered in the context of that response. Housing Quality Inspection times were impacted in 2023 due to staff shortages and the need to address a significant backlog that occurred as a result of the COVID-19 pandemic. Despite these challenges, the City remained committed to ensuring the health and safety of affordable housing by maintaining an overall inspection rate of 19.65% in Fiscal Year 2023. Furthermore, the Community Development Department is taking comprehensive measures to address the needed maintenance completion timeframe following the required inspection, and the goal is to ensure repairs are completed within thirty days. Expected Completion Date: 12/31/2024

Finding Number: 2023-005 Program: COVID-19 Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through Entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year. Federal Award Year: 2023 Compliance Requirement: Eligibility, Special Tests – Selections from Waiting List Criteria Most PHAs devise their own application forms that are filled out by the PHA staff during an interview with the tenant. The head of the household signs (a) one or more release forms to allow the PHA to obtain information from third parties; (b) a federally prescribed general release form for employment information; and (c) a privacy notice. Under some circumstances, other members of the family are required to sign these forms (24 CFR sections 5.212 and 5.230). The PHA must do the following: (1) As a condition of admission or continued occupancy, require the tenant and other family members to provide necessary information, documentation, and releases for the PHA to verify income eligibility (24 CFR sections 5.230, 5.609, and 982.516). (2) For both family income examinations and reexaminations, obtain and document in the family file third-party verification of (a) reported family annual income; (b) the value of assets; (c) expenses related to deductions from annual income; and (d) other factors that affect the determination of adjusted income or income-based rent (24 CFR section 982.516). (3) Determine income eligibility and calculate the tenant’s rent payment using the documentation from third-party verification in accordance with 24 CFR Part 5 Subpart F (24 CFR section 5.601 et seq.) (24 CFR sections 982.201, 982.515, and 982.516). (4) Select tenants from the HCVP waiting list (see III.N.1, “Special Tests and Provisions – Selection from the Waiting List”) (24 CFR sections 982.202 through 982.207). (5) Reexamine family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation from third-party verification (24 CFR section 982.516). Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Conditions Found For 3 of 40 samples, the City did not re-examine eligible participants during the period ending September 30, 2023 or within the 12-month requirement, as noted above. Per discussion with the City and review of its policies and procedures over the eligibility process, the Housing Assistance Coordinator reviews and approves the re-examination sheets and supporting eligibility workpapers for each participant to ensure they continue to be eligible under the HCV program. For 40 of 40 sample selections, we noted that there was no evidence of this control being performed. Additionally, as part of the eligibility process and selecting individuals from the waiting list in accordance with policies, the City completes an intake form, which is reviewed and approved by a Housing Assistance Coordinator. Evidence of this control is noted at the end of the slip with a signature by the Housing Assistance Coordinator who completed the review. During our testing of this control, there were 14 of 40 samples where the intake route slip was not reviewed by the Housing Assistance Coordinator. Cause For the participants whose income was not re-examined during the fiscal year, it is due to the volume of participants within the City’s HCV program and the Housing Authority being understaffed. There are more than 7,000 participants of the HCV program and approximately 76 employees at the Housing Authority whose salaries are charged to the HCV grant. Due to the volume of new participants and active participants during the fiscal year ended September 30, 2023, the Housing Assistance Coordinator did not have the capacity to sign off on each individual’s eligibility package or review all intake forms upon initial pull from the waiting list. Effect Not properly reviewing participant’s eligibility status each 12 month period and upon initial selection, could cause the City to not be in compliance with HUD regulations. Additionally, it could cause the City to be providing assistance to ineligible participants, which would result in unallowable costs to the program. Questioned Costs Not applicable Repeat finding A similar finding was not reported in the prior year. Statistical sample The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the City continue reviewing each participant’s eligibility status once every 12 months and upon initial acceptance into the program. The City should implement a plan to ensure all participants are reviewed. Lastly, the Housing Assistance Coordinator who reviews the eligibility documents for each participant should evidence the review by signing or initialing the reexamination sheets. View of Responsible Officials While KPMG has opined that three out of the forty samples were not reexamined for eligibility within the 12-month requirement, on the contrary, HUD considers reexaminations being late if it has been fourteen months since the last reexamination (www.hud.gov/sites/dfiles/PIH/documents/Reexamination_Report_Instructions.pdf). For one of those three referenced samples, the annual reexamination was effective September 1, 2023, and it was completed on October 4, 2023. Therefore, the Housing Authority of the City of Long Beach (HACLB) disagrees with the finding for this particular sample, while it agrees that the other two samples were not reexamined timely. Due to staffing shortages experienced during the fiscal year and the high volume of participants in the City’s HCV program, HACLB had annual recertifications that were overdue, exceeding twelve months since the last recertification. Moreover, a significant amount of staff time was spent in training on Housing Opportunity Through Modernization Act (HOTMA) regulations that were continually revised and ultimately delayed, which reduced the amount of time that staff could have utilized for certification processes. The continuously changing regulations created ambiguity for existing and new staff. To address delays in recertification processes, HACLB has contracted with an agency to assist in processing the overdue recertifications, and HACLB has submitted recruiting requisitions to its Human Resources department to hire additional housing specialists to improve upon its management of the high volume of HCV program participants, documentation and processes, and comply with various deadlines. Regarding the Intake forms, HUD does not require an Intake/Eligibility sheet be completed. However, HACLB has typically included an Intake/Eligibility sheet to help ensure quality control. Recently, this was not consistently done, due to staffing shortages. To maintain this internal control in the process, staff will be reminded to ensure that an approved Intake/Eligibility sheet is included in the participant’s file. Response to Views of Responsible Officials Per HUD guidance and the OMB compliance supplement, which is outlined in the criteria section of this finding, a reexamination is required to be completed every 12 months. KPMG notes that the three samples outlined in the conditions found section of this finding had reexaminations that occurred outside the 12 month requirement. Further, the City communicated verbally and in writing, through process narrative understanding documents, that an intake form is completed for each new participant that is selected from the waiting list. Written process narratives were provided to KPMG on June 5, 2024.

Program: Section 8 Housing Choice Vouchers Finding: 2023-005 Contact Person: Jennifer Saatjian Accounting Services Officer Health & Human Services Department Phone: (562) 570-4022 Email: Jennifer.Saatjian@longbeach.gov Planned Actions: To address delays in recertification processes, in fiscal year 2024, HACLB has contracted with an agency to assist in processing the overdue recertifications, and HACLB has submitted recruiting requisitions to its Human Resources department to hire additional housing specialists to improve upon its management of the high volume of HCV program participants, documentation and processes, and comply with various deadlines. Regarding the Intake forms, HUD does not require an Intake/Eligibility sheet be completed. However, HACLB has typically included an Intake/Eligibility sheet to help ensure quality control. Recently, this was not consistently done, due to staffing shortages. To maintain this internal control in the process, staff will be reminded to ensure that an approved Intake/Eligibility sheet is included in the participant’s file. Effective November 29, 2024, a reminder will be sent to staff to ensure that an approved Intake/Eligibility sheet is included in the participant’s file. Expected Completion Date: 12/31/2024

Finding Number: 2023-006 Program: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through Entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year. Federal Award Year: 2023 Compliance Requirement: Allowability Criteria PHAs may use HCVP and MV funds only for HAPs to participating owners, and for associated administrative fees (24 CFR sections 982.151 and 982.152). Accumulated administrative fees prior to fiscal year 2004, may be used for any housing-related purpose. Unspent administrative fees accumulated post fiscal year 2003 (i.e., fees from fiscal year 2004 and later funding, see III.L.1.e.(4)(a), “Financial Reporting – Financial Reports”) may be used only to support the HCVP. These funds still are considered to be administrative fee reserves and are subject to all of the requirements applicable to administrative fee reserves including, but not limited to, those in 24 CFR section 982.155. The fees accumulated from fiscal year 2004 and later funding must be used for activities related to the provision of tenant-based rental assistance authorized under Section 8 of the United States Housing Act of 1937, including related development activities. PHAs must maintain and report balances for both funding sources (see notice PIH 2015-17 (HA) dated October 6, 2015) (Division I, Title II, Section (5) of Consolidated Appropriations Act, 2005, Pub. L. No. 108-447, 118 Stat. 3296, and subsequent appropriations acts; see Section 5 of Notice PIH 2005-01; 24 CFR section 982.155). Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Conditions Found Based on the cost allocation plan that is prepared by the City annually, we recalculated the indirect costs that should have been charged to the HCV program. Based on an approved rate of 18.85%, we identified that there was an additional $86,163 of indirect expenses that were incorrectly charged to the program. We further note that there is no control over the review of the expenses that are applied to the indirect cost rate. Cause Per discussion with management, costs associated with the project string ‘FSS to HCV’ of $79,369 were inappropriately applied to the HCV grant/indirect cost calculation. Additionally, $6,794 was also inappropriately applied to the indirect cost calculation due to a City accountant incorrectly applying reclass and transfer amounts to the HCV program. Effect Not applying the proper expenses to the indirect cost rate has caused the City to charge unallowable costs to the HCV program and not to be in compliance with HUD regulations. Questioned Costs $86,163 – The difference between the indirect costs that should have been charged to the HCV program and what was applied. Repeat finding A similar finding was not reported in the prior year. Statistical sample The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the City implement a review process to ensure the indirect cost allocation rate is being applied to the proper expenses and, thus, properly being charged to the grant. View of Responsible Officials The Health and Human Services Department prepares an indirect cost allocation plan that has historically been used to allocate indirect cost charges to the HACLB. As part of the process to allocate indirect costs, a journal entry was processed for the transfer by fiscal year-end. The calculation method used the City’s legacy and current financial systems’ generated labor reports, capturing the labor cost amounts by legacy system index codes as the basis for the allocation calculation. One of the index codes had pointed to aFamily Self-Sufficiency program’s general ledger account that was later determined to be questionable by the auditor for inclusion under the HCV program. The Family Self-Sufficiency program does have an association with Housing Choice Vouchers, but was considered by KPMG as not having a direct relationship, and therefore should be excluded from the calculation basis. This amount that was in disagreement represented a majority of the calculated difference between that which was originally posted and the calculated HCV expenditures costs basis calculated by KPMG. The much smaller difference in the total costs basis resulted from later re-classed labor costs out of the HCV general ledger accounts, not reflected in the labor costs reports, and thus not accounted for. To ensure appropriate indirect cost charges going forward, costs will be taken from general ledger account balances near fiscal year-end, instead of only considering labor reports. HACLB does have a multi-step review and approval process for the processing and posting of journal entries and their support documentation, but an improved method of capturing final costs can be implemented in the analysis process. Furthermore, for upcoming fiscal years, the City has changed its indirect costs allocation methodology, in that the City will be directly charging HACLB’s funds its share of overhead costs thereby eliminating the Health and Human Services Department indirect cost allocation plan and related indirect cost charges. The $86,163 that was inappropriately charged to the Housing Fund was repaid by the Health Operating Fund, as of September 30, 2024. Response to Views of Responsible Officials The City provided the labor cost reports that were used to calculate the indirect costs that were charged to the program. KPMG compared the calculation the City completed, based on these labor reports, to what was actually charged to the program for payroll and fringe benefits. There was a difference of $86,163 between the actual costs charged and what the City initially calculated from the labor reports. When discussing the difference with the City, it was communicated in writing on August 20, 2024 that an additional $86,163 was inappropriately charged, and should have been excluded from the HCV program due to an oversight in the accounting department.

Program: Section 8 Housing Choice Vouchers Finding: 2023-006 Contact Person: Jennifer Saatjian Accounting Services Officer Health & Human Services Department Phone: (562) 570-4022 Email: Jennifer.Saatjian@longbeach.gov Planned Actions: The Housing Authority and the City of Long Beach already has a multi-step review and approval process in place for the processing and posting of journal entries and their support documentation. Moreover, for upcoming fiscal years 2024 and after, the City has changed its indirect costs allocation methodology, in that the City will be directly charging HACLB’s funds its share of overhead costs thereby eliminating the Health and Human Services Department indirect cost allocation plan and related indirect cost charges. However, HACLB will still review the accuracy of the charged overhead costs. Effective fiscal year 2024, September, 30, 2024, HACLB will review the affected general ledger accounts at fiscal year-end, with the new allocation methodology and will verify the charged overhead costs. Expected Completion Date: 9/30/2024

Finding Number: 2023-007 Program: COVID-19 Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through Entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year. Federal Award Year: 2023 Compliance Requirement: Special Tests- Quality Control Inspections Criteria Per 24 CFR 982.405(c), HUD required a PHA supervisory or other qualified person to conduct quality control inspections of a sample of units to ensure that each inspector is conducting accurate and complete inspections and that there is consistency in the application of Housing Quality Standards. The unit sample must include only units that have been inspected within the preceding three months. The selected sample should be drawn to represent a cross section of neighborhoods and the work of a cross section of inspectors. Per the City’s policies and procedures, 5% of the initial inspections will have a quality control inspection completed. Conditions Found Upon reviewing the population of completed quality control inspections, we noted that only 20 quality control inspections occurred in the fiscal year ended September 30, 2023. However, there was a total of 5,671 initial inspections completed during this time period and as such, there should have been approximately 284 quality control inspections completed as the City’s policy is to verify 5%. This is a difference of 264 quality control inspections that should have been completed. Cause Due to the required number of quality control inspections to be completed and limited resources to complete those quality control inspections, the City was not able to meet the requirement in during the fiscal year ended September 30, 2023. Effect Not completing the required number of quality control inspections could indicate that initial inspections are not being conducted accurately, completely, or consistently at the City. This has caused the City to not be in compliance with HUD regulations. Questioned Costs Not applicable Repeat finding A similar finding was not reported in the prior year. Statistical sample The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the City implement a process in which the City is able to complete quality control inspections over 5% of the initial inspections completed throughout the year. View of Responsible Officials The gap in completing the required number of quality control inspections was primarily due to lack of resources and training. In addressing the requirement for 5% of initial inspections having a quality control inspection completed, HACLB will establish clear criteria and standards for the Inspections Housing Assistance Coordinator, who is responsible for quality control inspections to ensure compliance with operational and regulatory requirements. Furthermore, the Inspections Housing Assistance Coordinator will receive additional training on quality control procedures to enhance their skills and understanding of the review process.

Program: Section 8 Housing Choice Vouchers Finding: 2023-007 Contact Person: Jennifer Saatjian Accounting Services Officer Health & Human Services Department Phone: (562) 570-4022 Email: Jennifer.Saatjian@longbeach.gov Planned Actions: The gap in completing the required number of quality control inspections was primarily due to lack of resources and training. In addressing the requirement for 5% of initial inspections having a quality control inspection completed, HACLB will establish clear criteria and standards for the Inspections Housing Assistance Coordinator, who is responsible for quality control inspections to ensure compliance with operational and regulatory requirements. Furthermore, the Inspections Housing Assistance Coordinator will receive additional training on quality control procedures to enhance their skills and understanding of the review process. Clear criteria and standards for the Inspections Housing Assistance Coordinator, who is responsible for quality control inspections to ensure compliance with operational and regulatory requirements will be established by January 31, 2025 The Inspections Housing Assistance Coordinator will receive additional training on quality control procedures to enhance their skills and understanding of the review process by May 2025, or earlier depending on the availability of training opportunities. Expected Completion Date: 6/30/2025

Finding Number: 2023-008 Program: COVID-19 Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through Entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year. Federal Award Year: 2023 Compliance Requirement: Special Tests- Housing Quality Standards Enforcement Criteria For units under housing assistance payment (HAP) contracts 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 result of the family’s failure to pay for utilities for which the family is responsible under the lease 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). Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Conditions Found During our testing, we noted that for 10 of 40 samples selected, the required repairs were not completed within the 30-day time period, and the City did not properly abate voucher payments by the abatement effective date. As noted above, this date is to be no later than the first of the month following the specified correction period. Additionally, for 31 of 40 sample selections, we noted that deficiencies were not remediated within 30 days, and therefore, the control failed to ensure that repairs were completed timely. The City’s control of sending a letter to the tenant to inform them of the deficiency ensures they are aware of the time frame, but does not ensure action is taken. The City's control over ensuring that voucher payments are properly stopped for abated units, requires the Inspection Supervisor to sign the bi-monthly check run to ensure the HAP register's completeness and accuracy. For six of the seven samples selected, the check run/HAP register did not include the signature of the Inspection Supervisor. Cause Due to the required number of deficiencies and limited resources, the City was not able to abate payments, or prorate the payments based on the effective abatement date. The City was also unable to enforce the housing quality standards. Effect The City is not in compliance with the housing quality standards enforcement requirements as set by HUD. Questioned Costs Not applicable Repeat finding A similar finding was not reported in the prior year. Statistical sample The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the City implement additional control procedures to ensure that deficiencies are remediated within 30 days. Additionally, control procedures should be in place for those that are not remediated within 30 days to ensure HAP payments are abated or prorated, as appropriate. View of Responsible Officials Due primarily to limited staffing resources, HACLB was unable to verify whether required repairs were completed by the owners, and was unable to take the proper subsequent steps of abating payments to them. To ensure that required repairs are completed within the 30-day time period, HACLB will implement a process to ensure reinspection dates occur before the expiration of the 30-day remediation period. HACLB will also establish clear criteria and standards for the Inspections Housing Assistance Coordinator who is responsible for timely abatement entries, ensuring compliance with operational and regulatory requirements. The Inspections Housing Assistance Coordinator will receive additional training on abatement procedures to enhance their skills and understanding. Furthermore, the Housing Assistance Coordinator will conduct weekly reviews of deficiencies that exceed the 30-day remediation period to ensure timely action for abatement or proration. Response to Views of Responsible Officials The City communicated verbally and in writing, through process narrative understanding documents, that the Inspection Supervisor reviews the register to ensure that payments are stopped for abated units, or restarted for units coming off the abatement list. The Inspection Supervisor is required to sign or initial each check run/HAP register to ensure its completeness and accuracy. It is further noted that when one coordinator is unavailable, another coordinator will perform their review and approval of the register. Written process narratives were provided to KPMG on June 5, 2024.

Program: Section 8 Housing Choice Vouchers Finding: 2023-008 Contact Person: Jennifer Saatjian Accounting Services Officer Health & Human Services Department Phone: (562) 570-4022 Email: Jennifer.Saatjian@longbeach.gov Planned Actions: To ensure that required repairs are completed within the 30-day time period, in fiscal year 2024, HACLB has implemented a process to ensure reinspection dates occur before the expiration of the 30-day remediation period. By January 31, 2025, HACLB will also establish clear criteria and standards for the Inspections Housing Assistance Coordinator who is responsible for timely abatement entries, ensuring compliance with operational and regulatory requirements. The Inspections Housing Assistance Coordinator will receive additional training on abatement procedures to enhance their skills and understanding by May 2025, or earlier, depending upon the availability of training opportunities. Furthermore, by January 1, 2025, the Housing Assistance Coordinator will conduct weekly reviews of deficiencies that exceed the 30-day remediation period to ensure timely action for abatement or proration. Regarding the City’s control with the HAP register’s required signatures, HACLB’s internal procedures do not require all six Housing Coordinators to approve the check run/HAP register, as KPMG assumed. There are only three assigned Housing Assistance Coordinators that have designated staff who are allowed to make adjustments and review the check-run adjustment register to confirm the work of their respective teams. If one of the approvers is absent, another approver may review and approve the adjustments that can be completed via email. No further change or action is necessary for this process. Expected Completion Date: 1/1/2025

Finding Number: 2023-010 Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds ALN #: 21.027 Pass-through Entity: N/A – Direct Award Federal Agency: U.S. Department of Treasury Federal Award Numbers: N/A Federal Award Year: 2021 Compliance Requirement: Allowability Criteria Recipients may use SLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 codified at 42 USC sections 802 and 803 respectively. Recipients may use payments from CSLFRF to: a. Respond to the public health and negative economic impacts of the pandemic, by supporting the health of communities, and helping households, small businesses, impacted industries, and the public sector recover from economic impacts of the pandemic. b. Replace lost public sector revenue to provide government services; recipients may use this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic. c. Provide premium pay for essential workers, offering additional support to those who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors; and d. Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support, vital wastewater and storm water infrastructure, and to expand access to broadband internet. Additionally, per 2 CFR 200.303, non-federal entities must establish and maintain effective internal control over federal awards that provide reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. This would include internal controls related to the review and approval of allowable costs. Conditions Found The City utilized a portion of the funds received under the Coronavirus State and Local Fiscal Recovery Funds program to establish and fund a Guaranteed Income Program. The Guaranteed Income Program provided payments to individuals who experienced negative economic impacts as a result of the pandemic. To determine who would be eligible to receive assistance under the Guaranteed Income Program, the City developed specific eligibility criteria whereby applicants that had a household income below the poverty line would meet the criteria of having a negative economic impact. The total amount paid under this program for the year ended September 30, 2023 was $623,500. During our testwork over the allowability of payments made under the Guaranteed Income Program, we identified that for 5 of 25 payments selected for testwork, the applicant did not meet the criteria of having a household income of less than the poverty line as established by the City. While each of the five applications reported household income that was lower than the poverty line, the additional documentation provided by the applicant to substantiate what their actual income was showed household income that exceeded the poverty line. As a result, these applicants were not eligible for the program and the payments made to the five applicants. Cause The cause of the condition found was due to insufficient review controls over the processing and approval of participant applications. The City utilized a vendor to assist in the processing of applications for this program. The City had implemented a policy whereby the City reviewed 10% of the applications approved by the vendor. The errors identified during our testwork related to applications that the City did not review. Effect The effect of the condition found is that payments under the Guaranteed Income program were made to ineligible participants resulting in unallowable costs. Questioned Costs $2,500 – The amount paid to the five ineligible applicants identified Repeat finding A similar finding was not reported in the prior year. Statistical sample The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend that the existing internal controls related to the review and approval of applications for the Guaranteed Income Program be evaluated to ensure that all applications approved by the vendor were appropriately approved by the City. View of Responsible Officials The utilization of a vendor to evaluate, approve and process applications was critical to the speedy and successful deployment of the Guaranteed Income Program in response to the COVID-19 pandemic. The Economic Development Department does not have the staff capacity to evaluate the volume of applications received under this and similar programs implemented under the Coronavirus State and Local Fiscal Recovery Funds program. Accordingly, the Economic Development Department relied on its contracted partner to verify applicants for enrollment in the program and conducted a secondary review of 10% of all applications approved by the vendor prior to authorizing disbursement. As noted in the finding, the errors identified in the test work related to applications that the Economic Development Department did not review. Nonetheless, the Economic Development Department acknowledges that insufficient review controls contributed to payments made to ineligible applicants. In response to the findings, Economic Development Department has worked with the vendor to improve evaluation processes related to the income eligibility verification process, including: a. Enhanced Training: The vendor will provide comprehensive training to all reviewers involved in verifying income documentation. This training will emphasize the importance of accurately inputting pay period frequency and using gross income for calculations. b. Secondary checks: The vendor will establish additional quality assurance checks to validate the accuracy of income calculations before final eligibility determinations are made. This may include double-checking calculations by a second reviewer or implementing automated systems to flag potential errors. Additionally, the Economic Development Department has re-evaluated and revised its policy for additional review by staff; increasing the number of applications reviewed by the Economic Development Department from 10% to 30%. In the view of Management of Economic Development Department, increasing the review sample size to 30% sufficiently mitigates the risk of further error while preserving the benefits and efficiencies that utilizing a contract processor provides. Further, the Economic Development Department worked with the vendor to review all applications manually qualified by the vendor to identify any further ineligible applications not found in the sample. Regarding the questioned costs, the Economic Development Department implemented a second round of the Guaranteed Income Program that was funded by non-grant funds. Costs associated with the ineligible applications identified in the audit were reclassified from American Rescue Plan Act funding to the City’s General Fund, and replaced by costs from confirmed eligible applications in the second round of the program. Finally, the City has sought restitution from the vendor for administrative costs of the improperly vetted applications. The City will not seek repayment from the ineligible applicants. The applicants were not responsible for the error.

Program: Coronavirus State and Local Fiscal Recovery Funds Finding: 2023-010 Contact Person: Arlen Crabtree Business Operations Manager Economic Development Department Phone: (562) 570-5024 Email: Arlen.Crabtree@longbeach.gov Planned Actions: In April 2024, Economic Development Department worked with the vendor to implement improved evaluation processes related to the income eligibility verification process, including: a. Enhanced Training: The vendor will provide comprehensive training to all reviewers involved in verifying income documentation. This training will emphasize the importance of accurately inputting pay period frequency and using gross income for calculations. b. Secondary checks: The vendor will establish additional quality assurance checks to validate the accuracy of income calculations before final eligibility determinations are made. This may include double-checking calculations by a second reviewer or implementing automated systems to flag potential errors. Additionally, in May 2024 the Economic Development Department has re-evaluated and revised its policy for additional review by staff; increasing the number of applications reviewed by the Economic Development Department from 10% to 30%. In the view of Management of Economic Development Department, increasing the review sample size to 30% sufficiently mitigates the risk of further error while preserving the benefits and efficiencies that utilizing a contract processor provides. Further, the Economic Development Department worked with the vendor to review all applications manually qualified by the vendor to identify any further ineligible applications not found in the sample. Regarding the questioned costs, the Economic Development Department implemented a second round of the Guaranteed Income Program that was funded by non-grant funds. Costs associated with the ineligible applications identified in the audit were reclassified from American Rescue Plan Act funding to the City’s General Fund, and replaced by costs from confirmed eligible applications in the second round of the program. Finally, the City has sought restitution from the vendor on August 29, 2024 for administrative costs of the improperly vetted applications. The City will not seek repayment from the ineligible applicants. The applicants were not responsible for the error. Expected Completion Date: 9/30/2024

Finding Number: 2023-011 Program: Disaster Grants – Public Assistance (Presidentially Declared Disasters) ALN #: 97.036 Pass-through Entity: State of California – Office of Emergency Services Federal Agency: Federal Emergency Management Agency (FEMA) Grant Award Numbers: 3100202051, 3100202055, 3100202058, and 3100202059 Federal Award Years: January 27, 2023, March 12, 2023, July 17, 2023, July 21, 2023 Compliance Requirement: Other – Inaccurate reporting of the Schedule of Expenditures of Federal Awards Criteria According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the entity’s financial statements which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are accurately and completely reported on the SEFA. Conditions Found The City did not have adequate internal controls related to the reporting of expenditures on the SEFA for Disaster Grants – Public Assistance (Presidentially Declared Disasters) (Disaster Grants) program. The City incorrectly reported $2,165,166 in expenditures on the September 30, 2023 draft Schedule of Expenditures of Federal Awards (SEFA) related to grants that were not obligated by the Federal Emergency Management Agency (FEMA) as of September 30, 2023, resulting in the draft SEFA being overstated. While the City had incurred costs under these FEMA projects, nonfederal entities may not record expenditures on the SEFA until FEMA has approved the nonfederal entity’s project and has obligated those expenditures to the nonfederal entity. The City subsequently revised the SEFA so that the expenditures reported are accurate. Cause In discussing these conditions with the City, it stated the error was primarily due to the City not understanding the updated guidance issued by FEMA that notes FEMA expenditures are to be recorded on the SEFA at the later of the FEMA obligation date or the incurrence of an allowable expense. Effect Failure to establish effective internal controls regarding financial reporting for the preparation of the Schedule may prevent the City from completing an audit in accordance with the timelines of Uniform Guidance. Questioned Costs Not applicable Repeat finding A similar finding was not reported in the prior year. Statistical sample The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the City implement a system of internal control that is designed and operating at a level of precision to ensure the Schedule is complete and accurate. View of Responsible Officials The Financial Management Department acknowledges there was a deficiency in the manner that expenditures were reported for a declared disaster on the SEFA for the fiscal year ended September 30, 2023. The $2,165,166 overstatement represented expenditures that FEMA obligated within 60 days of September 30, 2023. Given the program is maintained in a Governmental Fund, the Department recorded a revenue accrual in the FY 2023 Annual Comprehensive Financial Report (ACFR) to align with the City’s existing policy to record grant revenue expected to be collected within one year in the same fiscal year expenditures are reported. The Department recognizes FEMA Disaster Grants should be an exception and will prevent this reporting error by updating the Revenue Recognition Policy and issuing a Financial Management Disaster Procedure Manual that will include a narrative on this specific matter. The Procedures Manual will be published on the City Intranet and utilized for all City Staff as a resource for all future disaster grants funded by FEMA’s Public Assistance Program (ALN 97.036). Revisions to the Procedure Manual will be made as needed to ensure the City is current with the latest compliance changes. In addition to attending regular meetings and obtaining direct correspondence and guidance from FEMA representatives, Financial Management will also perform its own research to obtain, read, and apply the latest Uniform Guidance Compliance Supplement prior to the annual SEFA preparation process to ensure the City is meeting compliance requirements. The proper FEMA expenditures amount for fiscal year ended September 30, 2023, was revised in subsequent SEFA drafts and is reflected in the final Single Audit report.

Program: Disaster Grants - Public Assistance (Presidentially Declared Disasters) Finding: 2023-011 Contact Person: Sarah Castillo Grants Accounting Officer Emergency Operations Center (EOC) Finance Division Phone: (562) 570-5479 Email: Sarah.Castillo@longbeach.gov Planned Actions: The Emergency Operations Center (EOC) Finance division acknowledges there has been deficiencies in the manner we report expenditures related to a declared disaster on the SEFA, which will be addressed by issuing a Financial Management Disaster Procedure Manual that will include a narrative on this specific matter. The manual will be published on our City Intranet and utilized for all City Staff as a resource for all future disasters that occur. Revisions to the Procedure Manual will be made as needed to ensure we are up to date with the latest compliance changes. Expected Completion Date: 12/31/2024

Finding 2022-001 ? EligibilityFederal Program: Home Investment Partnership Program (HOME)ALN Number: 14.239Federal Agency: Department of Housing and Urban DevelopmentFederal Award Year: 2018Grant number: M-18-MC-06-0518Pass-Through Entity: NoneCriteria24 CFR92.252 Qualification as affordable housing: Rental housing.(e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not lessthan the applicable period specified in the following table, beginning after project completion.(1) The affordability requirements:(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment,or the transfer of ownership;(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreementrestricting the use of the property, or other mechanisms approved by HUD and must give theparticipating jurisdiction the right to require specific performance (except that the participatingjurisdiction may provide that the affordability restrictions may terminate upon foreclosure ortransfer in lieu of foreclosure); and(iii) Must be recorded in accordance with State recordation laws.(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptiverights to purchase the housing before foreclosure or deed in lieu of foreclosure in order to preserveaffordability.(3) The affordability restrictions shall be revived according to the original terms if, during the originalaffordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or anyentity that includes the former owner or those with whom the former owner has or had family orbusiness ties, obtains an ownership interest in the project or property.(4) The termination of the restrictions on the project does not terminate the participating jurisdiction?srepayment obligation under ? 92.503(b).Minimum periodof affordabilityRental housing activity in yearsRehabilitation or acquisition of existing housing per unit amount ofHOME funds: Under $15,000 515,000 to $40,000 10Over $40,000 or rehabilitation involving refinancing 15New construction or acquisition of newly constructed housing 20(h) Tenant income. The income of each tenant must be determined initially in accordance with ?92.203(a)(1)(i). In addition, each year during the period of affordability the project owner mustre-examine each tenant?s annual income in accordance with one of the options in ? 92.203 selected bythe participating jurisdiction.24 CFR92.203 Income determinations.(a) The HOME program has income targeting requirements for the HOME program and for HOMEprojects. Therefore, the participating jurisdiction must determine each family is income eligible bydetermining the family?s annual income.(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-basedrental assistance, the participating jurisdiction must initially determine annual income using themethod in paragraph (a)(1)(i) of this section. For subsequent income determinations during theperiod of affordability, the participating jurisdiction may use any one of the following methods inaccordance with ? 92.252(h):(ii) Obtain from the family a written statement of the amount of the family?s annual income andfamily size, along with a certification that the information is complete and accurate. Thecertification must state that the family will provide source documents upon request.Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements,Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederalentities must establish and maintain effective internal control over the federal award that providesreasonable assurance that the nonfederal entity is managing the federal award in compliance with federalstatutes, regulations and the terms and conditions of the federal award.Condition and ContextDuring our testwork over continuing eligibility requirements for loan recipients of the program, we noted thatthe City did not have sufficient controls in place for the program, nor were adequate records maintained toverify that the tenant income was verified during the period of affordability.Cause and EffectDuring the period under audit, the City experienced turnover with the staff members responsible forcontinuing compliance requirement monitoring. As a result of this turnover, the City was unable to providethe necessary documentation. City management was aware that documentation was not available prior tothe audit, however, management was not able to recreate all documentation necessary for the audit. As aresult, the City was unable to verify that the loans continued to meet the eligibility requirements during theperiod of affordability.Questioned CostsFifteen loans totaling $9,380,325 were identified as noncompliant. Our sample consisted of 25 loanbalances which represents 26% of the total loan balance. Ten loans in our sample totaling $9,056,580 weredetermined to be compliant.Isolated or SystemicSystematicWhether the sampling was a statistically valid sampleThis sample was not intended to be, and was not, a statistically valid sample.Repeat FindingNoRecommendationWe recommend that the City further refine the design of the internal controls that will ensure thatdocumentation is maintained in a location accessible to multiple employees and that all relevantdocumentation is retained when there is employee turnover.Management?s ResponseThe Development Services Department?s storage options for data changed rapidly during the quick shift toremote work during the COVID-19 pandemic. As a result, there was a gap in understanding andcomprehension of data storage and capabilities, which resulted in the loss of documentation during staffturnover. The eligibility requirements and monitoring for HOME loan recipients were met and managementis working on securing all documentation that was lost. As of this writing, 13 of the 15 non-compliantsamples have been secured and communication has been sent to retrieve the remaining two from thedevelopers. Internal controls for documentation will be strengthened by filling two vacancies. Until thosevacancies are filled, a staff member has been reassigned to review monitoring files for the loan portfolio toensure that the monitoring files are saved locally in the Housing and Neighborhood Services Bureau?spermanent files, and maintained on computer servers as well as in the cloud. When the two vacancies arefilled, it will be the procedure to save backups of documents to local servers. Additionally, access to thesefiles will be granted to the Bureau?s management team and multiple monitoring staff to prevent the futureloss of data.

Program: HOME Investment Partnership Program (HOME)Finding: 2022-001Contact Person: April ApodacaFinancial Services OfficerDevelopment Services DepartmentPhone: (562) 570-6611Email: april.apodaca@longbeach.govPlanned Actions:The Development Services Department (Department) will securely file all HOME monitoring documents and ensure it is accessible to multiple staff. As of June 27, 2023, thirteen of the fifteen non-compliant samples have been secured and communication has been sent to retrieve the remaining two from the developers. The final two samples are due on July 21, 2023, and we fully expect to show compliance documentation by that date. If the documents are not received by the due date, the Department will continue to communicate with the developers by telephone, mail, and email to provide second and third notices. If no response is submitted by the third notice (August 7, 2023) the Department will escalate the matter to the City Attorney?s Office to formally begin taking action for non-compliance

Finding 2021-002 Federal Program: Transportation Infrastructure Finance and Innovation Act (TIFIA) Program ALN Number: 20.223 Federal Agency: U.S. Department of Transportation – Direct Program Federal Award Year: 2021 Grant number: N/A Compliance Requirement: Other – Inaccurate reporting of the Schedule of Expenditures of Federal Awards Criteria: According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are accurately and completely reported on the SEFA. Conditions Found: The City did not have adequate internal controls related to the reporting of expenditures on the SEFA for the Transportation Infrastructure Finance and Innovation Act (TIFIA) Program. In 2007, the City completed plans for the reconstruction of the Gerald Desmond Bridge (Harbor Bridge), which was a $1.6 billion design, development, and construction project that included multiple funding sources, including federal, state, and private funds. During fiscal year 2014, the City entered into a loan agreement with the U.S. Department of Transportation for $325,000,000 of TIFIA Program funds. During fiscal year 2020, the loan agreement was modified for $500,000,000 of TIFIA Program funds. The executed loan agreement contained a clause that the TIFIA Program loan funds were not available to be drawn until the Harbor Bridge was certified as substantially complete. In January 2021 (fiscal year 2021) the Harbor Bridge was certified as substantially complete and the TIFIA Program loan was made. As a result, the City should have reported the $500,000,000 TIFIA Program loan on the SEFA for the year ended September 30, 2021. Cause and Effect: In discussing these conditions with the City, they stated the error was primarily due to the TIFIA Program not being a traditional federal award where expenses were reimbursed as incurred. When the City certified the substantial completion of the Harbor Bridge project and the TIFIA Program loan was made during fiscal year 2021, the City was not aware the TIFIA Program loan was reportable on the SEFA. Additionally, the management review controls in place over the completeness and accuracy of the SEFA were not designed to detect the error. Failure to establish effective internal controls regarding financial reporting for the preparation of the Schedule may prevent the City from completing an audit in accordance with the timelines of Uniform Guidance. Questioned Costs: Not applicable. Statistical Sampling: Not applicable. Repeat Finding: A similar finding was reported in the prior year report. Recommendation: We recommend the City implement a system of internal control that is designed and operating at a level of precision to ensure the Schedule is complete and accurate. View of Responsible Official: The Harbor Department was not aware that a TIFIA loan was required to be reported on the SEFA. Our understanding of the SEFA is to report the federal share of expenditures. TIFIA loan expenditures are comprised of the expenses for which no grant reimbursement was sought, therefore, these expenses are the cost share or local share, not the federal share. The Harbor Department now understands that all federal assistance including loans should be reported on the SEFA. KPMG has been the City’s auditor since 2001 and was aware of the TIFIA loan agreement in 2014 and the TIFIA loan draw down in 2021. KPMG did not inform us that the TIFIA loan was required to be reported on the SEFA when they performed the single audit in 2021.

Program: Transportation Infrastructure Finance & Innovation Action (TIFIA) Program (ALN 20.223) Finding: 2021-002 Contact Person: Wei Chi Director of Finance City of Long Beach Harbor Department Phone: (562) 283-7594 Email: wei.chi@polb.com Corrective Action Plan: Going forward, the Harbor Department will ensure that federal loans are reported on the SEFA. The expected completion date for implementation of these planned actions is no later than June 30, 2025.

Finding 2020-001 Federal Program: Highway Planning and Construction CFDA Number: 20.205 Federal Agency: U.S. Department of Transportation Federal Award Year: 2020 Grant numbers: ACNH 7101 (807), BRLS-5108 (137) Pass-Through Entity: State of California Department of Transportation Compliance Requirement: Other – Inaccurate reporting of the Schedule of Expenditures of Federal Awards Criteria: According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the entity’s financial statements which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are accurately and completely reported on the SEFA. Conditions Found: The City did not have adequate internal controls related to the reporting of expenditures on the SEFA for the Highway Planning and Construction program. The Gerald Desmond Bridge (Harbor Bridge) reconstruction was a $1.6 billion design, development, and construction project that included multiple funding sources, including federal, state, and private funds. As part of the completeness and accuracy of the SEFA control, the City needed to timely prepare and review a reconciliation of all of the federal, state, and private funding sources received for the overall Harbor Bridge project year-to-date, and determine at a proper level of precision, which expenditures were being reimbursed with federal funding sources to determine what amounts to report on the SEFA for the year ended September 30, 2020. This overall year-to-date reconciliation was not timely performed and as a result, an additional $21,383,260 of federal expenditures related to the Highway Planning and Construction program should have been reported on the SEFA for the year ended September 30, 2020. Cause and Effect: In discussing these conditions with the City, they stated the error was primarily due to the control over the completeness and accuracy of the SEFA was not timely performed and designed at the appropriate precision level for multi-year and multi-funded construction projects. Failure to establish effective internal controls regarding financial reporting for the preparation of the Schedule may prevent the City from completing an audit in accordance with the timelines of Uniform Guidance. Questioned Costs: Not applicable. Statistical sampling: Not applicable. Repeat Finding: A similar finding was not reported in the prior year. Recommendation: We recommend the City implement a system of internal control that is designed and operating at a level of precision to ensure the Schedule is complete and accurate. View of Responsible Official: The Harbor Department acknowledges the finding. The Harbor Department believes this omission was the result of an internal miscommunication.

Program: Highway Planning & Construction (ALN 20.205) Finding: 2020-001 Contact Person: Wei Chi Director of Finance City of Long Beach Harbor Department Phone: (562) 283-7594 Email: wei.chi@polb.com Corrective Action Plan: The Harbor Department will ensure that federal expenditures are accurately and completely reported on the SEFA. The expected completion date for implementation of these planned actions will be completed Fiscal Year 2024.

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