City of Baldwin ParkLocal Government

2025-001 – Reporting – Internal Control and Compliance over Reporting (Material Weakness) Information of the Federal Program(s): Assistance Listing Number: 14.218 Federal Program Name: Community Development Block Grants-Entitlement Grants Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: B-24-MC-06-0554 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): The OMB Compliance Supplement requires that reports submitted to the Federal awarding agency include all activity of the reporting period, are supported by underlying accounting information and are presented in accordance with program requirements. Pursuant to the Guidance on Cash on Hand Quarterly Report (replaced the Federal Financial Report, SF-425) and financial reporting requirements in the cooperative agreement provisions, and 2 CFR 200.327: Quarterly reports: Program award recipients must submit Cash on Hand Quarterly Report reports to HUD quarterly, 30 days after the reporting period end date. Each report must cover all expenditures on the cooperative agreement from the start date of the reporting period to the reporting period end date. The following federal fiscal year quarter reporting period will be used for all quarterly reports, are due to HUD 30 days after the period end dates noted below: Reporting Period Due Date of Report Quarter 1: 7/1-9/30 October 30 Quarter 2: 10/1-12/31 January 30 Quarter 3: 1/1-3/31 April 30 Quarter 4: 4/1-6/30 July 30 Condition: The City did not submit the required Cash on Hand Quarterly Report in a timely manner. The quarterly Cash on Hand Quarterly Report for three (3) of the four (4) reporting periods were submitted past deadline. Report Report Submission Submission Report Type Reporting Period Deadline Date Federal Financial Report 10/01/2024-12/31/2024 1/30/2025 8/7/2025 Federal Financial Report 01/01/2025 - 03/31/2025 4/30/2025 8/7/2025 Federal Financial Report 04/01/2025 - 06/30/2025 7/30/2025 8/7/2025 Additionally, the City was unable to provide any record of internal approval on all four (4) quarterly reports prior to submission. Cause: Due to staff turnover, the City did not to consistently follow the program’s procedures to ensure that reports were submitted in a timely manner, in accordance with the timelines outlined in the Uniform Guidance. In addition, the City did not maintain documentation of internal review and approval for quarterly reports prior to submission. Effect or Potential Effect: Delays in filing the quarterly reports resulted in noncompliance with the compliance requirements. The internal approvals on the reports were not available, which increased risk of errors or incomplete reporting. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2024-002. Recommendation: We recommend that the City strengthen its reporting submission procedures to ensure that all required federal reports are reviewed, approved, and submitted in accordance with federal reporting deadlines. In addition, the City should maintain written documentation of supervisory review and approval for all required federal reports prior to submission. Views of Responsible Officials: Management concurs.

2025-002 – Subrecipient Monitoring – Internal Control and Compliance over Subrecipient Monitoring (Material Weakness) Identification of the Federal Program: Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: Department of Treasury Pass-Through Entity: N/A Federal Award Number and Award Year: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): C.F.R. § 200.332 prescribes that the pass-through entity must conduct monitoring activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Passthrough entity monitoring of the subrecipient must include: 1. Reviewing financial and performance reports required by the pass-through entity. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. 3. Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. 4. The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. The City’s Subrecipient Monitoring Policy and Procedures, effective April 17, 2024, requires departments to monitor subrecipients to ensure compliance with Uniform Guidance. The policy requires that prior to award, the department shall evaluate the subrecipient’s risk of noncompliance with the Uniform Guidance, and the terms and conditions of the subaward, which risk assessment shall be documented, 2 CFR § 200.332(b). The policy also states that the City shall monitor subrecipients on a quarterly basis (90 days) throughout the term of the agreement (department should establish a regular monitoring schedule and document all monitoring), to ensure all subrecipients comply with the Uniform Guidance, that the subaward is used for authorized purposes, and that the subaward performance goals are achieved, as follows 2 CFR § 200.332(d):  Reviewing subrecipient’s financial and performance reports.  Ensuring subrecipients provide timely reports and information, as required by the federal awards.  Following up and ensuring the subrecipient takes timely and appropriate action on all deficiencies as detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings.  Issuing a management decision on Audit Findings, as required by 2 CFR § 200.521 (Management Decision). Condition: During the review of subrecipient monitoring records, we tested all two (2) existing subrecipients during the fiscal year ended June 30, 2025, and noted the following:  The fully executed subrecipient agreements were not provided. One subrecipient agreement was executed via internal resolution and email approval; another subrecipient’s agreement does not have sufficient identification and award details, omitting key funding terminology.  The documentation of the review of Financial and Performance Reports, the Pre-Award Risk Assessments, or the performance of the required subrecipient monitoring procedures were not provided. Cause: These conditions resulted from staffing capacity constraints, which led to subrecipient monitoring procedures not being performed consistently since the implementation of the City’s new Monitoring Policy on April 17, 2024. Additionally, formal documentation processes were not fully established, resulting in informal approvals and incomplete documentation of Pre-Award Risk Assessments. Effect or Potential Effect: The City’s insufficient monitoring of the necessary subrecipient activities resulted to internal control and compliance requirement finding. Questioned Costs: None. Context: See condition above for context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2024-003. Recommendation: We recommended the City to fully implement its Monitoring Policy by formalizing subrecipient agreements, strengthening internal controls, and establishing consistent processes for documenting Pre-Award Risk Assessments and Financial and Performance Reports. Views of Responsible Officials: Management concurs.

2025-003 – Special Tests – Internal Control and Compliance over National Standards for the Physical Inspection of Real Estate (NSPIRE) / Housing Quality Standards Inspections (Material Weakness) Information on the Federal Program: Assistance Listing Number: 14.871 Federal Program Name: Housing Voucher Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: CA120 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to 24 CFR 982.405(b), the Public PHA (PHA) must inspect the unit leased to a family prior to the initial term of the lease, at least biennially during assisted occupancy, and at other times as needed, to determine if the unit meets Housing Quality Standards (HQS). Pursuant to 2025 Compliance Supplement: The PHA must inspect the unit leased to a family at least biennially to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality control re-inspections. The PHA must prepare a unit inspection report (24 CFR sections 982.158(d) and 982.405(b)). However, NSPIRE for HCV and Project Based Vouchers (PBV) programs, referred to as NSPIRE-V during HUD’s demonstration, was effective October 1, 2023, and replaced HQS, as previously defined in 24 CFR 982.401, as the inspection standards for these programs. As announced in the Federal Register, “Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE); Extension of NSPIRE Compliance Date for HCV Programs,” HUD extended the compliance date for HCV and PBV programs until October 1, 2024. This applies to all Public Housing Agencies (PHAs), including MTW PHAs, administering Section 8 Housing Choice Voucher programs. For units under HAP contract that fail to meet HQS, if the reported deficiency is life-threatening, the PHA must, within 24 hours of notification, both inspect the housing unit and notify the owner if the life-threatening deficiency is confirmed. The owner must then make the repairs within 24 hours of PHA notification. If the reported deficiency is non-life-threatening, the PHA must, within 15 days of notification, both inspect the unit and notify the owner if the deficiency is confirmed. The owner must then make the repairs within 30 days of notification from the PHA or within any PHA-approved extension. (24 CFR section 982.405(d)). If the owner does not correct the cited HQS deficiencies within the specified correction period, the PHA must stop (abate) HAPs beginning no later than the first of the month following the specified correction period or must terminate the HAP contract. The owner is not responsible for a breach of HQS as a 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). Condition: During the Housing Quality Standards (HQS) inspection testing, we tested twenty-three (23) samples and identified several instances in which the City did not comply with HUD inspection requirements. Specifically:  For seven (7) of twenty-three (23) inspections tested, required re-inspections were not completed within 30 days of the failed inspections, and the City was unable to provide documentation evidencing that an extension had been granted, as required by HUD program regulations.  For three (3) of twenty-three (23) inspections tested, re-inspections were either not performed or were performed without adequate supporting documentation to demonstrate compliance with HUD’s re inspection requirements.  For ten (10) samples out of twenty-three (23) samples, inspections were performed more than 24 months apart, exceeding HUD’s required inspection frequency.  For one (1) of twenty-three (23) inspections tested, the City was unable to locate prior inspection records to verify whether inspections were completed within the required 24-month inspection cycle.  For one (1) of twenty-three (23) inspections tested, the City was unable to locate documentation supporting issuance of the initial inspection notice letter to the participant.  For five (5) of twenty-three (23) inspections tested, the City was unable to locate documentation supporting issuance of failed inspection notice letters, as required to notify participants of deficiencies and required corrective actions.  Additionally, in the forty (40) samples we tested for eligibility, ten (10) samples had failed inspection documented and out of which six (6) re-inspections were not performed within 30 days of the failed inspections. These instances indicate that the City did not consistently perform and document HQS inspections and reinspections in accordance with HUD program requirements. Cause: The deficiencies occurred due to weaknesses in the City’s internal control procedures over the monitoring and documentation of Housing Quality Standards inspections. Specifically, the City did not maintain adequate tracking procedures to ensure inspections and re-inspections were completed within required timeframes, and supporting documentation for certain inspection activities was not consistently retained. Effect or Potential Effect: The City has not complied with the requirements of 24 CFR 982.405(b) – Housing Quality Standards Inspections. Questioned Costs: None. Context: See condition above for the context of the finding. Repeat Finding from Prior Year, If Applicable: Yes. See prior year finding 2024-004. Recommendation: We recommend that the City strengthen its internal control procedures over HQS inspections by implementing a formal tracking and monitoring process to ensure inspections and re-inspections are completed within HUDrequired timeframes. In addition, the City should maintain complete documentation of inspection activities, including inspection dates and supporting records, to demonstrate compliance with program requirements. Views of Responsible Officials: Management concurs.

2024-001 – Allowable Costs/Cost Principles – Internal Control and Compliance over Payroll Expenditures (Significant Deficiency) Information on the Federal Program(s): Assistance Listing Number: 14.218 Federal Program Name: Community Development Block Grants-Entitlement Grants Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: B-23-MC-06-0554 Assistance Listing Number: 14.871 Federal Program Name: Housing Voucher Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: CA120 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Total salaries charged to Federal awards (including extra service pay) are subject to the Standards of Documentation as described by 2 CFR §200.430(i). Per this section, salaries and wages charged to Federal awards must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records; • Reasonably reflect the total activity for which the employee is compensating across all grant related and non-grant related activities (100% effort); • Support the distribution of employee salary across multiple activities or cost objectives (for example, effort spent on multiple federal awards, spent on general/or administrative activities, vacation, sick leave, leave without pay, etc.); and Utilize an "after-the-fact" review of the employee’s actual hours worked during the reporting period for identifying and correcting significant changes (as defined by the organization’s written policies). Condition: Community Development Block Grants-Entitlement Grants Cluster During the audit period, the City has required all Housing Department staff, including administrative support staff, to fill out project activity timesheets reflecting the actual hours worked on the program. The City performed reconciliation on the staff payroll charges to reflect actual hours worked. However, not all staff members have fully complied with this policy. Payroll costs for the fourteen (14) out of forty (40) payroll samples tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on the grant. Housing Voucher Cluster During the audit period, the City has required all Housing Department staff, including administrative support staff, to fill out project activity timesheets reflecting the actual hours worked on the program. The City performed reconciliation on the staff payroll charges to reflect actual hours worked. However, not all staff members have fully complied with this policy. Payroll costs for the thirteen (13) out of forty (40) payroll samples tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on the grant. Cause: Due to staff turnover, the City did not fully implement its adopted policies and procedures for relating payroll charges to grants. The City's efforts to address the prior year finding were not deemed sufficient, as it was unable to retrospectively perform reconciliations of actual hours worked for all employees. This limitation applied to both former employees who had left the City and certain current employees with time charges during parts of the fiscal year in supporting roles. Effect or Potential Effect: The City did not fully comply with the program’s requirements for allowable costs. Questioned Costs: Community Development Block Grants-Entitlement Grants Cluster $53,625 Housing Voucher Cluster $19,099 Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2023-002. Recommendation: We recommend the City comply with federal regulation requiring that any employee funded by federal grant document the actual time they spend working on the grant’s objectives. Documentation must reflect “actual” time spent by employees on awards being charged. The City should develop and implement policies and procedures that ensure that employees’ compensation charged to federal programs reflect a contemporaneous or after-the-fact distribution of employees’ actual time and effort expended on federal programs. We also recommend the City enhance its internal controls over the payroll processes. Views of Responsible Officials: Management concurs.

2024-002 – Reporting – Internal Control and Compliance over Reporting (Material Weakness) Information of the Federal Program(s): Assistance Listing Number: 14.218 Federal Program Name: Community Development Block Grants-Entitlement Grants Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: B-23-MC-06-0554 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Community Development Block Grants-Entitlement Grants Cluster The OMB Compliance Supplement requires that reports submitted to the Federal awarding agency include all activity of the reporting period, are supported by underlying accounting information and are presented in accordance with program requirements. Pursuant to the Guidance on Cash on Hand Quarterly Report (replaced the Federal Financial Report, SF-425) and financial reporting requirements in the cooperative agreement provisions, and 2 CFR 200.327: Quarterly reports: Program award recipients must submit Cash on Hand Quarterly Report reports to HUD quarterly, 30 days after the reporting period end date. Each report must cover all expenditures on the cooperative agreement from the start date of the reporting period to the reporting period end date. The following federal fiscal year quarter reporting period will be used for all quarterly reports, are due to HUD 30 days after the period end dates noted below: Reporting Period Quarter 1: 7/1-9/30 Due Date of Report October 30 Reporting Period Quarter 2: 10/1-12/31 Due Date of Report January 30 Reporting Period Quarter 3: 1/1-3/31 Due Date of Report April 30 Reporting Period Quarter 4: 4/1-6/30 Due Date of Report July 30 Condition: The City did not submit the required Cash on Hand Quarterly Report in a timely manner. The quarterly Cash on Hand Quarterly Report for the all of the four (4) reporting periods were submitted past deadline. Federal Financial Report 7/1/2023 - 9/30/2023: Report Submission Deadline 10/20/2023, Report Submission Date 2/26/2024. Federal Financial Report 10/01/2023-12/31/2023: Report Submission Deadline 1/20/2024, Report Submission Date 2/26/2024. Federal Financial Report 01/01/2024 - 03/31/2024: Report Submission Deadline 4/30/2024, Report Submission Date 10/16/2024. Federal Financial Report 04/01/2024 - 06/30/2024: Report Submission Deadline 7/30/2024, Report Submission Date 10/16/2024. Cause: Due to staff turnover, the City did not to consistently follow the program’s procedures to ensure that reports were submitted in a timely manner, in accordance with the timelines outlined in the Uniform Guidance. Effect or Potential Effect: Delay in filing the reports resulted in noncompliance with the compliance requirements. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2023-005. Recommendation: We recommend that the City strengthen their report submission process and procedures to ensure all required reports are properly reviewed and approved and submitted timely. Views of Responsible Officials: Management concurs.

2024-003 – Subrecipient Monitoring – Internal Control and Compliance over Subrecipient Monitoring (Significant Deficiency) Identification of the Federal Program: Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: Department of Treasury Pass-Through Entity: N/A Federal Award Number and Award Year: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): C.F.R. § 200.332 prescribes that the pass-through entity must conduct monitoring activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: 1. Reviewing financial and performance reports required by the pass-through entity. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. 3. Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. 4. The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. Condition: During the review of subrecipient monitoring records, several areas were noted for improvement: • For two (2) out of three (3) subrecipients, the official agreement was not formally documented. One subrecipient agreement was executed via internal resolution and email approval; another subrecipient’s agreement lacked sufficient identification and award details, omitting key funding terminology. • The City’s Subrecipient Monitoring Policy, which became effective on April 17, 2024, does not cover the period before the policy took effect. For all three (3) subrecipients, the City is unable to provide any documentation of the review of Financial and Performance Reports. • The required Pre-Award Risk Assessments have not been provided for at least one subrecipient because the City’s Subrecipient Monitoring Policy, which became effective on April 17, 2024, does not cover the period before the policy took effect. Cause: These conditions appear to stem from transitional challenges as the City implemented the new Monitoring Policy on April 17, 2024. In addition, there is an opportunity to enhance the documentation processes by moving from informal approvals to more formal subrecipient agreements, and by ensuring that Pre-Award Risk Assessments are consistently documented and maintained. Effect or Potential Effect: The City was not able to do the necessary subrecipient monitoring activities resulted to internal control and compliance requirement finding. Questioned Costs: None. Context: See condition above for context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2023-006. Recommendation: We recommended the City to fully implement its Monitoring Policy by formalizing subrecipient agreements, strengthening internal controls, and establishing consistent processes for documenting Pre-Award Risk Assessments and Financial and Performance Reports. Views of Responsible Officials: Management concurs.

2024-004 – Special Tests – Internal Control and Compliance over Housing Quality Standards Inspections (Material Weakness) Information on the Federal Program: Assistance Listing Number: 14.871 Federal Program Name: Housing Voucher Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: CA120 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): 24 CFR 982.405(b) states that the Public PHA (PHA) must inspect the unit leased to a family prior to the initial term of the lease, at least biennially during assisted occupancy, and at other times as needed, to determine if the unit meets Housing Quality Standards (HQS). Condition: During the Fail Inspection Testing, we found five (5) instances out of nine (9) in which the City did not conduct the Housing Quality Standards (HQS) failed inspection follow-up in a timely manner. Specifically: • For two (2) samples, the reinspection was not performed within 30 days of the failed inspection, and the deficiencies were not confirmed to be resolved within the required timeframe. • For one (1) sample, the inspection checklist indicated a failed inspection, while the inspector erroneously documented and processed it as a passed inspection, meaning o reinspection was performed. • For one (1) sample, the reinspection was not performed, and no documentation was found to verify the follow-up inspection. We also noted one (1) additional instance out of forty (40) samples from Eligibility Cross Testing where the failed inspection did not have any record of a follow-up reinspection. Cause: The former Housing Inspector failed to follow the City’s policy for HQS inspections. As a result, the City identified key action items that were not being completed properly and timely by the inspector. To address these concerns, while the inspector was currently placed on leave, the City started to utilize the consulting firm Avant Garde, effective July 1, 2024, to assist with completing the required HQS inspections. Additionally, the Housing Manager and housing staff have taken on some inspection duties, while consultants continue to handle the majority of inspections until the personnel issue is resolved. Effect or Potential Effect: The City has not complied with the requirements of 24 CFR 982.405(b) – Housing Quality Standards Inspections. Questioned Costs: None. Context: See condition above for the context of the finding. Repeat Finding from Prior Year, If Applicable: Yes. See prior year finding 2023-007. Recommendation: We recommend that the City continue utilizing the consulting services provided by Avant Garde to complete the necessary HQS inspections while resolving the personnel issue. Additionally, the City should strengthen internal controls to ensure that future inspections are completed in a timely manner and in full compliance with City policies. Views of Responsible Officials: Management concurs.

2023-002 - Allowable Costs/Cost Principles – Internal Control and Compliance over Payroll Expenditures (Significant Deficiency) Information on the Federal Program(s): Assistance Listing Number: 14.218 Federal Program Name: Community Development Block Grants-Entitlement Grants Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: B-21-MC-06-0554 B-20-MW-06-0554 Assistance Listing Number: 14.871 Federal Program Name: Housing Voucher Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: CA120 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Total salaries charged to Federal awards (including extra service pay) are subject to the Standards of Documentation as described by 2 CFR §200.430(i). Per this section, salaries and wages charged to Federal awards must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records; • Reasonably reflect the total activity for which the employee is compensating across all grant related and non-grant related activities (100% effort); • Support the distribution of employee salary across multiple activities or cost objectives (for example, effort spent on multiple federal awards, spent on general/or administrative activities, vacation, sick leave, leave without pay, etc.); and Utilize an "after-the-fact" review of the employee’s actual hours worked during the reporting period for identifying and correcting significant changes (as defined by the organization’s written policies). Condition: Community Development Block Grants-Entitlement Grants Cluster We determined the City did not comply with federal requirements for direct payroll charges. Payroll costs for all eight employees tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation methods/plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on these grants. In April 2023, the City has required all Housing Department staff to retrospectively fill out timesheets pertaining to actual hours worked on the program during fiscal year 2023, The City performed reconciliation on Housing Department staff payroll charges to reflect actual hours worked. However, for the admin supporting staff did not use the same method due to the low percentage of the payroll charges to the grant. Housing Voucher Cluster We determined the City did not comply with federal requirements for direct payroll charges. Payroll costs for all five employees tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation methods/plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on these grants. In April 2023, the City has required all Housing Department staff to retrospectively fill out timesheets pertaining to actual hours worked on the program during fiscal year 2023, The City performed reconciliation on Housing Department staff payroll charges to reflect actual hours worked. However, for the admin supporting staff did not use the same method due to the low percentage of the payroll charges to the grant. Cause: The City did not follow its adopted policies and procedures for ensuring employees’ compensation charged to federal programs was supported by contemporaneous time record or an after-the-fact distribution of employees’ actual time and effort expended on federal program activities. The City’s attempt in addressing prior year finding was not deemed sufficient due to lack of reconciliation for actual hours worked for payroll charges from Administrative, Finance, and Other Departments. Effect or Potential Effect: The City did not comply with the program’s requirements for allowable costs. There is an increased risk that employees’ compensation charged to the program may not have represented an actual time and effort expended on the program’s activities. Questioned Costs: Community Development Block Grants-Entitlement Grants Cluster $41,821 Housing Voucher Cluster $15,986 Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2022-003. Recommendation: We recommend the City comply with federal regulation requiring that any employee funded by federal grant document the actual time they spend working on the grant’s objectives. Documentation must reflect “actual” time spent by employees on awards being charged. The City should develop and implement policies and procedures that ensure that employees’ compensation charged to federal programs reflect a contemporaneous or after-the-fact distribution of employees’ actual time and effort expended on federal programs. We also recommend the City enhance its internal controls over the payroll processes. Views of Responsible Officials: Management concurs the finding.

2023-003 – Allowable Costs/Cost Principles – Internal Control and Compliance over Allowable Costs/Cost Principles (Significant Deficiency) Identification of the Federal Program: Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: Department of Treasury Pass-Through Entity: N/A Federal Award Number and Award Year: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to Code of Federal Regulation §200.403 Requirements for pass-through entities. Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. See also § 200.306(b). (g) Be adequately documented. See also §§ 200.300 through 200.309 of this part. (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). Condition: During our audit, we noted that three (3) out of forty (40) samples summed up to $39,055.50 had no proper source documents to support the transactions charged to the grant brought by lost official receipts, hence, identified as not adequately documented. Alternatively, the City created a memo to document the loss of receipts signed by the department head. Cause: The City was not able to safeguard the documents substantiating the transactions being charged to the grant. Effect or Potential Effect: The City did not comply with the CFR’s requirements for allowable costs. There is an increased risk that the charges do not represent the actual costs incurred. Questioned Costs: Known questionable cost $39,056 and the estimated questionable cost is projected to be $69,269. Context: See condition above for context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommended the City to strengthen safeguarding of source documents to properly substantiate the charges made to the grant. Views of Responsible Officials: Management concurs the finding.

2023-004 - Procurement, Suspension, and Debarment – Internal Control over Procurement and Verification Against the System for Award Management (“SAM”) (Significant Deficiency) Identification of the Federal Program: Assistance Listing Number: 14.218 Federal Program Name: Community Development Block Grants-Entitlement Grants Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: B-21-MC-06-0554 Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: Department of Treasury Pass-Through Entity: N/A Federal Award Number and Award Year: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Suspension and Debarment, Non-Federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include those procurement contracts for goods and services awarded under a nonprocurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. All nonprocurement transactions entered into by a recipient (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR section 180.215. When a non-Federal entity enters into a covered transaction with an entity at a lower tier, the non-Federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA) and available at https://www.sam.gov/portal/public/SAM/ (Note: The OMB guidance at 2 CFR part 180 and agency implementing regulations still refer to the SAM Exclusions as the Excluded Parties List System (EPLS)), (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). In accordance with OMB Uniform Guidance, entities under the program, including subrecipients of a state, must follow the procurement standards in 2 CFR sections § 200.318 through § 200.327, including ensuring that the procurement method used for the contracts are appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. C.F.R. § 200.319 prescribes that all procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and § 200.320. Further, the non-Federal entity must ensure that all prequalified lists of persons, firms, or products which are used in acquiring goods and services are current and include enough qualified sources to ensure maximum open and free competition. Also, the non-Federal entity must not preclude potential bidders from qualifying during the solicitation period. Condition: Community Development Block Grants-Entitlement Grants Cluster Based on the City’s formal purchasing policy, purchase orders are required to initiate purchases from procured vendors for transactions above $5,000. During our audit, we noted that seven (7) out of forty (40) samples did have purchase order approval made subsequent to invoice approval. The aforementioned circumstance suggests that the method of procurement was not in line with the City’s adopted policy established in line with the Uniform Guidance. Coronavirus State and Local Fiscal Recovery Funds We determined that seven (7) out of forty (40) samples did have purchase order approval made subsequent to invoice approval. The aforementioned circumstance suggests that the method of procurement was not in line with the City’s adopted policy established in line with the Uniform Guidance. During our audit, we also noted that there was no supporting document to indicate that the City verified the vendor against the SAM to ensure the vendor was not suspended or debarred from federally-funded programs before the contract was entered into. Cause: The City did not follow its policies and process in place to check and ensure the suspension and debarment review process over vendors that provides goods or services to the City’s programs was conducted prior to enter into contract. The City implemented necessary procedures to address the finding discovered during the audit for the year ended June 30,2022 prospectively, however, due to the timing of the previous audit, the City was not able to address for the year ended June 30, 2023. Effect or Potential Effect: Without verifying whether vendors are suspended or debarred from working on federally-funded projects prior to the contract awarded, the City could be contracting with vendors that are prohibited from working on federally funded projects. Questioned Costs: None. Context: See condition above for context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2022-004. Recommendation: We recommended the City follow internal control policies and procedures to incorporate the suspension and debarment verification prior to awarding contracts. Views of Responsible Officials: Management concurs the finding.

2023-005 - Reporting – Internal Control and Compliance over Reporting (Material Weakness) Information of the Federal Program(s): Assistance Listing Number: 14.218 Federal Program Name: Community Development Block Grants-Entitlement Grants Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: B-21-MC-06-0554 B-20-MW-06-0554 Assistance Listing Number: 14.871 Federal Program Name: Housing Voucher Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: CA120 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Community Development Block Grants-Entitlement Grants Cluster The OMB Compliance Supplement requires that reports submitted to the Federal awarding agency include all activity of the reporting period, are supported by underlying accounting information and are presented in accordance with program requirements. Pursuant to the Guidance on Cash on Hand Quarterly Report (replaced the Federal Financial Report, SF-425) and financial reporting requirements in the cooperative agreement provisions, and 2 CFR 200.327: Quarterly reports: Program award recipients must submit Cash on Hand Quarterly Report reports to HUD quarterly, 30 days after the reporting period end date. Each report must cover all expenditures on the cooperative agreement from the start date of the reporting period to the reporting period end date. The following federal fiscal year quarter reporting period will be used for all quarterly reports, are due to HUD 30 days after the period end dates noted below: Reporting Period: Quarter 1: 7/1-9/30 Quarter 2: 10/1-12/31 Quarter 3: 1/1-3/31 Quarter 4: 4/1-6/30 Due Date of Report: October 30 January 30 April 30 July 30 Community Development Block Grants-Entitlement Grants Cluster (Continued) Pursuant to Guidance on Section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding submit, not later than 10 days after the end of each calendar quarter, a report containing: information regarding the amount of funds received; the amount of funds obligated or expended for each project or activity; a detailed list of all such projects or activities, including a description of the project or activity; and detailed information on any subcontracts or subgrants awarded by the recipient. This report is limited to Community Development Block Grants/Entitlement Grants Cluster - COVID-19 funding and does not include other Community Development Block Grants/Entitlement Grants Cluster funds that may be used to address coronavirus. Grantees and subrecipients have reported data meeting the Section 15011 requirements at usaspending.gov. The Pandemic Response Accountability Committee (PRAC), an independent oversight committee within the Council of the Inspectors General on Integrity and Efficiency, has determined that the data reported in usaspending.gov has fulfilled these reporting requests. (“Section 15011 Report”). Housing Voucher Cluster Per 24 CFR § 5.801(d)(1) - Uniform financial reporting standards, unaudited financial statements will be required 60 days after the Public Housing Authority’s (“PHA”) fiscal year end, and audited financial statements will then be required no later than 9 months after the PHA's fiscal year end, in accordance with the Single Audit Act and 2 CFR part 200, subpart F. The PHA is required to submit the HUD-52681-B, Voucher for Payment of Annual Contributions and Operating Statement form monthly to HUD electronically via the Voucher Management System (VMS). Congress has instructed HUD to use VMS data to determine renewal funding levels. HUD also uses VMS data for other funding, monitoring, and SEMAP- related decisions. Condition: As a result of our test work, we noted the following exceptions: Community Development Block Grants-Entitlement Grants Cluster The City did not submit the required Cash on Hand Quarterly Report in a timely manner. The quarterly Cash on Hand Quarterly Report for the all of the four (4) reporting periods were submitted on February 26, 2024. The City did not submit any of the four (4) quarterly Section 15011 Reports for the year ended June 30, 2023. Housing Voucher Cluster The audited Financial Data Schedule (FDS) for the fiscal year ended June 30, 2022 was not submitted on or before the March 31, 2023 due date. The unaudited Financial Data Schedule (FDS) for the fiscal year ended June 30, 2023 was not submitted on or before the August 31, 2023 due date. Housing Voucher Cluster (Continued) We also noted for 2 out of 4 VMS reports tested, there was no evidence of review and approval prior to submission to HUD. A nonstatistical sample of 4 out of 12 VMS reports were selected for test work. Cause: Community Development Block Grants-Entitlement Grants Cluster There was a change in personnel monitoring the compliance requirements for CDBG reporting, and there was no proper task delegation and turnover made upon separation of the previously assigned staff. Hence, the staff assuming the post was unable to meet the due date to ensure filing the Cash on Hand quarterly reports timely, and also was not aware of the Section 15011 CARES reporting. Housing Voucher Cluster Due to the effects of COVID-19 and staff turnover, the program’s procedures did not consistently ensure that the reports were submitted timely in accordance with the timelines in the Uniform Guidance, or properly reviewed and approved prior to submission. The City has implemented internal controls designed to review the VMS report prior to submission, effective starting in March 2023, in an effort to address the finding noted during the audit for the year ended June 30, 2022. Due to the timing of implementation, any VMS report prior to March 2023 do not have any evidence of approval before submission. Effect or Potential Effect: Community Development Block Grants-Entitlement Grants Cluster Delay in filing and not filing the reports resulted in noncompliance with the compliance requirements. Housing Voucher Cluster Failure to submit the audited FDS timely results in noncompliance with the compliance requirements. Failure to review the VMS reports prior to submittal can result in errors going undetected by management. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2022-005. Recommendation: We recommend that the City strengthen their report submission process and procedures to ensure all required reports are properly reviewed and approved and submitted timely. When a report cannot be submitted by the due date, the City should request an extension from the funding agency and maintain a record of the approval. Views of Responsible Officials: Management concurs the finding.

2023-006 – Subrecipient Monitoring – Internal Control and Compliance over Subrecipient Monitoring (Significant Deficiency) Identification of the Federal Program: Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: Department of Treasury Pass-Through Entity: N/A Federal Award Number and Award Year: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): C.F.R. § 200.332 prescribes that the pass-through entity must conduct monitoring activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: 1. Reviewing financial and performance reports required by the pass-through entity. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. 3. Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. 4. The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. Condition: During our audit, we noted that the City did not have established monitoring policies and procedures for its subrecipients to address the compliance requirements. Consequently, no subrecipient monitoring activities were conducted during the year. Cause: The City does not have any written policy and sufficient procedures for subrecipient monitoring activities tailored to address the subrecipient monitoring compliance requirements of the grant. Effect or Potential Effect: The City was not able to do the necessary subrecipient monitoring activities resulted to internal control and compliance requirement finding. Questioned Costs: None. Context: See condition above for context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommended the City establish a formal policy over review procedures on subrecipient monitoring to ensure the City is in compliance the grant requirement. Views of Responsible Officials: Management concurs the finding.

2023-007 - Special Tests – Internal Control and Compliance over Housing Quality Standards Inspections (Material Weakness) Information on the Federal Program: Assistance Listing Number: 14.871 Federal Program Name: Housing Voucher Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: CA120 – FY22-23 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): 24 CFR 982.405(b) states that the Public PHA (PHA) must inspect the unit leased to a family prior to the initial term of the lease, at least biennially during assisted occupancy, and at other times as needed, to determine if the unit meets Housing Quality Standards (HQS). Condition: We found five (5) instances out of 9 in which the City did not conduct the HQS failed inspection follow up in a timely manner. We also noted three (3) instances out of 40 samples for eligibility testing has HQS inspections that are over a year apart, which shows that the City did not conduct the HQS biennial inspection in a timely manner. Cause: The City currently has no policies or procedures in place to ensure that Housing Quality Standard Inspections are performed timely. Effect or Potential Effect: The City has not complied with the requirements of 24 CFR 982.405(b) – Housing Quality Standards Inspections. Questioned Costs: None. Context: See condition above for the context of the finding. Repeat Finding from Prior Year(s): Yes. See prior year finding 2022-006. Recommendation: We recommend that the City implement procedures to ensure that Housing Quality Standard Inspections are performed timely. Views of Responsible Officials: Management concurs the finding.

Community Development Block Grants-Entitlement Grants Cluster We determined the City did not comply with federal requirements for direct payroll charges. Payroll costs for all eight employees tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation methods/plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on these grants. . During our testing of payroll expenditures, 40 of the 40 payroll charges non-statistically sampled were based on payroll budget allocations. Housing Voucher Cluster We determined the City did not comply with federal requirements for direct payroll charges. Payroll costs for all six employees tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation methods/plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on these grants. During our testing of payroll expenditures, 25 of the 25 payroll charges non-statistically sampled were based on payroll budget allocations. Coronavirus State and Local Fiscal Recovery Funds One out of 40 samples selected for testing that staff was not able to provide the personal action form for the auditors to verify the employee title and step in order to verify the pay rate against to the adopted salary schedule.

During our audit, we noted that there was no supporting document to indicate that the City verified the vendor against the SAM to ensure the vendor was not suspended or debarred from federally-funded programs before the contract was entered into.

As a result of our test work, we noted the following exceptions: Community Development Block Grants-Entitlement Grants Cluster The City did not submit the required Cash on Hand Quarterly Report in a timely manner. The quarterly Cash on Hand Quarterly Report for the reporting period ended September 30, 2021 was submitted on Nov 1, 2021 and for the reporting period ended March 31, 2022 was submitted on May 4, 2022. The City did not submit any of the four (4) quarterly Section 15011 Reports for the year ended June 30, 2022. Housing Voucher Cluster The audited Financial Data Schedule (FDS) for the fiscal year ended June 30, 2022 was not submitted on or before the March 31, 2023 due date. We also noted for 4 out of 4 VMS reports tested, there was no evidence of review and approval prior to submission to HUD. We noted the City does not have internal controls designed to review the VMS report prior to submission. A nonstatistical sample of 4 out of 12 VMS reports were selected for test work.

We found seven (7) instances out of 40 in which the City did not conduct the HQS biennial inspection in a timely manner. A nonstatistical sample of 40 of 5,523 HAP payments were selected to test compliance over special tests and provisions – Housing Quality Standards Inspections (HQS).

The PHA does not have a review process in place to determine if the utility allowance schedule is accurate and updated. During our review, the PHA could not provide documentation that the utility allowance schedule has been reviewed annually for each utility category to determine if there has been a rate change of ten percent or more. Therefore, we could not determine if the appropriate utility allowance was given for tenant-paid utilities. For 2022, the utility allowance schedule used was from 2019, and documentation was not provided to determine that utility rates have not changed by 10 percent or more for a utility category.

Program: COVID-19 - CDBG - Entitlement Grants Cluster Federal Financial Assistance Listing No.: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Award Year: 2020/2021 Grant Award Number: Multiple Compliance Requirements: Reporting Type of Finding: Material Instance of Noncompliance and Material Weakness in Internal Control over Compliance Criteria: The OMB Compliance Supplement requires that reports submitted to the Federal awarding agency include all activity of the reporting period, are supported by underlying accounting information and are presented in accordance with program requirements. Condition: As a result of our testwork, we noted the following exceptions: ? We noted amounts reported on the C04PR03 - Activity Summary Report were not supported by the underlying accounting information and therefore, were not reported in accordance with program requirements. We also noted there was no evidence of management review of the reports. ? We noted the amounts reported on the Consolidated Annual Performance and Evaluation Report (CAPER) and the related C04PR26 reports did not reconcile to the total expenditures reported on the SEFA and general ledger. We noted total expenditures on the FY 2021 SEFA were $1,180,207, and amounts reported on the CAPER and the related C04PR26 reports were $1,760,873, a difference of $580,666. In addition, the draft SEFA provided by the City did not identify or report any expenditures related to CDBG-CV (COVID-19), while the accomplishments listed in the 2021 CAPER indicated the City expended a total of $604,193 in CDBG-CV (COVID-19) funds in FY 2021. It was later determined that $236,791 was expended in FY 2021 related to COVID-19. We also noted there was no evidence of management review of the reports. ? We noted amounts reported on the December 31, 2020 C04PR29 CDBG and CDBG-CV Cash on Hand Quarterly Reports were not supported by the underlying accounting information and therefore, were not reported in accordance with program requirements. We also noted there was no evidence of management review of the reports and the CDBG-CV Cash on Hand Quarterly Reports were not submitted timely. Cause: The annual reports submitted during fiscal year 2021 were selected for testing. The reports were not supported by the underlying accounting information and therefore, were not reported in accordance with program requirements. We also noted there was no evidence of management review of the reports. Effect: Inaccurate information was reported to the federal awarding agency. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: A sample of 1 out of 1 C04PR03 Activity Summary Report was selected for testwork. A sample of 4 out of 4 C04PR29 Cash on Hand Quarterly Reports were selected for testwork. A sample of 2 out of 2 C0PR26 Financial Summary Reports were selected for testwork. Repeat Finding from Prior Year(s): No. Recommendation: We recommend the City implement policies and procedures and the proper internal control systems to ensure the C04PR03 - Activity Summary Report, C04PR29 Cash on Hand Quarterly Reports and C0PR26 Financial Summary Reports are reported accurately, properly supported and reviewed and approved. Views of Responsible Officials and Planned Corrective Actions: See separate corrective action plan.

Program: COVID-19 - CDBG - Entitlement Grants Cluster / COVID-19 - Housing Voucher Cluster / COVID-19 - Coronavirus Relief Funds/Highway Planning and Construction Cluster Federal Financial Assistance Listing No.: 14.218/14.871/20.205/21.019 Federal Agency: U.S. Department of Housing and Urban Development / U.S. Department of the Treasury / U.S. Department of Transportation Direct Award: U.S. Department of Housing and Urban Development / U.S. Department of the Treasury Pass-through: California Department of Transportation in relation to the Highway Planning and Construction Cluster. Award Year: 2020/2021 Grant Award Number: Multiple Compliance Requirements: Other - Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) ?200.510(b) - Schedule of expenditures of Federal awards Type of Finding: Material Weakness in Internal Control over Compliance Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) ?200.510(b) states that the auditee (the City) must 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 ?200.502. In addition, ?200.303 of the Uniform Guidance states that the City must establish and maintain effective internal control over the federal awards, including controls over the accuracy of program information and expenditure amounts. Condition: During our audit procedures performed over the SEFA and expenditures reported for the CDBG - Entitlement Grants Cluster, Housing Voucher Cluster, and COVID-19 Coronavirus Relief Funds, we noted the following: 1. The City did not properly identify the amount expended for the Coronavirus Relief Funds, AL No. 21.019. The expenditures reported by the City were overstated by $344,305. 2. The City did not properly classify on the SEFA the amount expended for COVID-19 for the CDBG - Entitlement Grants Cluster, AL No. 14.218. The City expended a total of $247,922 in CDBG-CV funds during FY 2021. 3. The City did not properly classify on the SEFA the amount expended for COVID-19 for Housing Voucher Cluster, AL No. 14.871. The City expended a total of $22,947 and $92,450 in CARES Act and Emergency Housing Vouchers, respectively during FY 2021. 4. The City did not properly report the amount expended for the Highway Planning and Construction Cluster, AL No. 20.205. The expenditures reported by the City were understated by $27,000. 5. The City failed to report on the prior year June 30, 2020 SEFA, expenditures totaling $1,029,231 for the Highway Planning and Construction Cluster, AL No. 20.205. This program would have required to be audited as a Major Program had it been properly listed on the June 30, 2020 SEFA. Multiple audit adjustments were necessary to correct the SEFA. Cause: The City is responsible for submitting state and federal grant reimbursement requests to the appropriate funding agency in addition to managing the COVID-19 funds received from the US Treasury. Reimbursement requests and drawdowns are typically prepared by separate city departments. Often, these requests are submitted to the finance department only after the project is complete. We noted that the City has taken an excessively long time (from one to three years) to assemble the cost documentation needed to bill for in-progress and completed capital projects. As a result, the City lacks adequate internal controls to ensure the SEFA is completely and accurately stated. Specifically, the City?s processes for recording and tracking expenditures of federal awards are not designed so that expenditures are identified when incurred and assigned to the correct program name or cluster in a complete and timely manner. We also noted the City failed to report expenditures related to the Highway Planning and Construction Cluster on its June 30, 2020 SEFA. The City mistakenly omitted the expenditures for the Highway Planning and Construction Cluster from the FY 2020 SEFA primarily due to the significant delays in the City requesting reimbursements from the granting agency. Effect: The SEFA, as originally presented, was overstated by $317,305. We also noted the SEFA did not identify program expenditures related COVID-19. We also noted the City failed to report expenditures related to the Highway Planning and Construction Cluster on its June 30, 2020 SEFA. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: No sampling was used; program expenditures on the SEFA were reconciled to supporting records. Repeat Finding from Prior Year(s): No. Recommendation: The City should establish policies and implement internal controls to ensure all federal expenditures are accurately tracked and reported on the SEFA. Specifically, expenditure GL accounts should be reviewed on a timely and routine basis and reconciled to the SEFA. Personnel knowledgeable of federal expenditures should review amounts coded to federal programs for completeness and accuracy. The SEFA should be reviewed in a timely manner and reconciled to underlying records as well as the basic financial statements. We also recommend the City hire a full-time grant accountant or an outside contract grant accountant to ensure the City properly accounts for all federal expenditures to ensure the SEFA is complete and accurate. Views of Responsible Officials and Planned Corrective Actions: See separate corrective action plan.

Program: COVID-19 - Housing Voucher Cluster Federal Financial Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Pass-through: N/A Award Year: 2020/2021 Compliance Requirement: Special Tests and Provisions ? Housing Quality Standards Inspection Type of Finding: Material Instance of Noncompliance and Material Weakness in Internal Control over Compliance Criteria: 24 CFR 982.405(b) states that the Public Housing Authority (PHA) must inspect the unit leased to a family prior to the initial term of the lease, at least biennially during assisted occupancy, and at other times as needed, to determine if the unit meets Housing Quality Standards (HQS). Condition: We found fourteen (14) instances out of 40 in which the City did not conduct the HQS biennial inspection in a timely manner. Cause: The City stopped conducting the biennial inspections and reinspections due to the COVID-19 pandemic. Due to COVID-19, HUD Public and Indian Housing (PIH) Notice 2020-05 states that PHAs are required to keep written documentation that record which waivers related to COVID-19 the PHA applied to their programs(s) and the effective dates. However, the City failed to document in the ?Notification of Adoption of Waivers Contained in Department of Housing and Urban Development Notice PIH 2020-05? a waiver and alternative procedures for the HQS-5: HQS Inspection Requirement ? Biennial Inspections compliance requirement. The waiver would have provided for an extension of time to conduct the biennial inspections. Effect: The City has not complied with the requirements of 24 CFR 982.405(b) ? Housing Quality Standards Inspections. Questioned Costs: No questioned costs have been identified. Context/Sampling: A nonstatistical sample of 40 of 5,794 HAP payments were selected to test compliance over special tests and provisions ? Housing Quality Standards Inspections (HQS). Repeat Finding from Prior Year(s): No. Recommendation: We recommend that the City implement procedures to ensure that Housing Quality Standard Inspections are performed timely. Views of Responsible Officials and Plan Correction Action: See separate corrective action plan.

Program: COVID-19 - Housing Voucher Cluster Federal Financial Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Pass-through: N/A Award Year: 2020/2021 Compliance Requirement: Reporting Type of Finding: Material Instance of Noncompliance and Material Weakness in Internal Control over Compliance Criteria: Per 24 CFR ? 5.801(d)(1) - Uniform financial reporting standards, unaudited financial statements will be required 60 days after the PHA's fiscal year end, and audited financial statements will then be required no later than 9 months after the PHA's fiscal year end, in accordance with the Single Audit Act and 2 CFR part 200, subpart F. In addition, the PHA is required to submit the HUD-52681-B, Voucher for Payment of Annual Contributions and Operating Statement form monthly to HUD electronically via the Voucher Management System (VMS). Congress has instructed HUD to use VMS data to determine renewal funding levels. HUD also uses VMS data for other funding, monitoring, and SEMAP-related decisions. Condition: The audited Financial Data Schedule (FDS) for the fiscal year ended June 30, 2021 was not submitted on or before the September 30, 2022 due date. We also noted for 3 out of 3 VMS reports tested, there was no evidence of review and approval prior to submission to HUD. We noted the City does not have internal controls designed to review the VMS report prior to submission. Cause: Due to the effects of COVID-19 and staff turnover, the program?s procedures did not consistently ensure that the reports were submitted timely in accordance with the timelines in the Uniform Guidance, or properly reviewed and approved prior to submission. Effect: Failure to submit the audited FDS timely results in noncompliance with the reporting requirements in the grant agreement. Failure to review the VMS reports prior to submittal can result in errors going undetected by management. Questioned Costs: No questioned costs have been identified. Context/Sampling: A nonstatistical sample of 3 out of 12 Voucher for Payment of Annual Contributions and Operating Statement forms were selected for testwork. One (1) out of one (1) FDS was required to be submitted to HUD by September 30, 2022. Recommendation: We recommend that the City strengthen their report submission process and procedures to ensure all required reports are properly reviewed and approved and submitted timely. When a report cannot be submitted by the due date, the City should request an extension from the funding agency and maintain a record of the approval. Management?s Response and Corrective Action Plan: Refer to the separate corrective action plan.

Program: COVID-19 - Housing Voucher Cluster Federal Financial Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Pass-through: N/A Award Year: 2020/2021 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Eligibility Type of Finding: Material Instance of Noncompliance and Material Weakness in Internal Control over Compliance Criteria: Per the 2021 OMB Compliance Supplement, the Public Housing Authority (PHA) verifies a family?s eligibility (including income eligibility) and then issues the family a voucher. The family has a minimum of 60 days to locate a rental unit where the landlord agrees to participate in the program (the PHA establishes the maximum number of days). The PHA determines whether the unit meets housing quality standards (HQS). If the PHA approves a family?s unit and determines that the rent is reasonable, the PHA contracts with the owner to make Housing Assistance payments (HAP) on behalf of the family (24 CFR section 982.1(a)(2)). PHAs must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements. PHAs are required to maintain a HAP contract register or similar record in which to record the PHA?s obligation for monthly HAPs. This record must provide information as to (1) the name and address of the family, (2) the name and address of the owner, (3) dwelling unit size, (4) the beginning date of the lease term, (5) the monthly rent payable to the owner, (6) monthly rent payable by the family to the owner, and (7) the monthly HAP (24 CFR section 982.158). Per 24 CFR sections 5.230, 5.609, and 982.516, the Public Housing Authority (PHA) must do the following: As a condition of admission or continued occupancy, require the tenant and other family member to provide necessary information, documentation, and releases for the PHA to verify income eligibility (24 CFR sections 5.230, 5.609, and 982.516). These files are required to be maintained and available for examination at the time of audit. Condition: As a result of our testwork, we noted the following exceptions: ? 1 out of 40 tenant files tested did not contain the HUD-52646 voucher signed by both the participant and the Housing Authority official and the HUD-52580 Housing Quality Standards Report, signed by Housing Analyst/Inspector. ? 2 out of 40 tenant files tested did not contain the HAP contract (HUD 52641) signed by the Housing Division and owner. Cause: Due to the effects of COVID-19, staff turnover, and an office remodel project, the program?s internal controls and policies and procedures did not ensure that the all tenant files were adequately maintained and available for audit. In some cases, the tenant files were maintained on site at the City?s business offices, or at an off-site records storage facility. Effect: The City was unable to locate all the required documentation for two (2) tenant file selected for testwork. We also noted the City was unable to provide the additional samples required as a result of increasing our sample size in response to the known exception rate. This results in material noncompliance. Questioned Costs: We noted known questioned costs of $2,177. Context/Sampling: A nonstatistical sample of 40 out of 5,794 HAP payments were selected totaling $39,885 out of $6,603,957 of federal program expenditures. Recommendation: We recommend that the City implement policies and procedures to ensure active tenant files are properly maintained, physically stored on site at the City, and maintain a management system to track the physical location of each tenant file and its contents. Management?s Response and Corrective Action Plan: Refer to the separate corrective action plan.

GSA_MIGRATION

GSA_MIGRATION