County of Mono

Program: Community Development Block Grant (CDBG) Assistance Listing No.: 14.228 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Agency: State of California Department of Housing and Community Development Federal Award Year: FY 2024-25 Compliance Requirement: Eligibility Questioned Costs: $360,000 Condition: During our test of continuing loan compliance, the County was unable to provide supporting documentation relating to proof of insurance and occupancy for two out of three selected loans. Criteria: Federal requirements applicable to the CDBG program obligate the County to maintain ongoing compliance monitoring for all disbursed loans. This includes verifying that borrowers maintain adequate insurance coverage and that current occupancy is documented throughout the loan term. Cause: The County lacks a formalized system for tracking loan compliance documentation on an ongoing basis. Without structured monitoring procedures, required documentation is not systematically collected, retained, or escalated when borrowers fail to respond. The County Administrative Office sent out letters certified mail to all homeowners requiring proof of insurance and a utility bill. There were very few responses from homeowners during the 2024-25 fiscal year leading to this absence of documentation. Effect: The absence of required monitoring documentation impairs the County's ability to demonstrate adherence to federal grant provisions. If insurance coverage lapses or occupancy requirements are not met and go undetected, the California Department of Housing and Community Development (HCD) or the U.S. Department of Housing and Urban Development (HUD) may determine that the affected loans no longer satisfy program eligibility requirements, potentially resulting in disallowed costs and repayment obligations. Recommendation: The County should take the following steps: 1. Establish a formal compliance tracking log to document the status of required insurance and occupancy certifications for each active loan, updated no less than annually. 2. Develop a written escalation policy that specifies timelines for follow-up outreach to non-responsive borrowers and defines the circumstances under which a Notice of Default will be issued. 3. Implement monthly supervisory review of the compliance tracking log to ensure documentation gaps are identified and resolved on a timely basis, rather than through an annual review cycle alone. Management’s Response: See Corrective Action Plan.

Program: Home Investments Partnerships Program (HOME) Assistance Listing No.: 14.239 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Agency: State of California Department of Housing and Community Development Federal Award Year: FY 2024-25 Compliance Requirement: Eligibility Questioned Costs: $297,152 Condition: During our test of continuing loan compliance, the County was unable to provide supporting documentation relating to proof of insurance and occupancy for three out of three selected loans. Criteria: Federal requirements applicable to the HOME program obligate the County to maintain ongoing compliance monitoring for all disbursed loans. This includes verifying that borrowers maintain adequate insurance coverage and that current occupancy is documented throughout the loan term Cause: The County lacks a formalized system for tracking loan compliance documentation on an ongoing basis. Without structured monitoring procedures, required documentation is not systematically collected, retained, or escalated when borrowers fail to respond. Similar to the CDBG loans, the County Administrative Office sent out letters certified mail to all homeowners requiring proof of insurance and a utility bill. There were very few responses from homeowners during the 2024-25 fiscal year leading to this absence of documentation. Effect: The absence of required monitoring documentation impairs the County's ability to demonstrate adherence to federal grant provisions. If insurance coverage lapses or occupancy requirements are not met and go undetected, the California Department of Housing and Community Development (HCD) or the U.S. Department of Housing and Urban Development (HUD) may determine that the affected loans no longer satisfy program eligibility requirements, potentially resulting in disallowed costs and repayment obligations. Recommendation: The County should take the following steps: 1. Establish a formal compliance tracking log to document the status of required insurance and occupancy certifications for each active loan, updated no less than annually. 2. Develop a written escalation policy that specifies timelines for follow-up outreach to non-responsive borrowers and defines the circumstances under which a Notice of Default will be issued. 3. Implement monthly supervisory review of the compliance tracking log to ensure documentation gaps are identified and resolved on a timely basis, rather than through an annual review cycle alone. Management’s Response: See Corrective Action Plan

Finding 2019-001 (Significant Deficiency) Program: Block Grants for the Prevention and Treatment of Substance Abuse CFDA Number: 93.959 Federal Agency: Department of Health and Human Services Passed-Through: State Department of Health Care Services Award Number: 17-94143 Passed-Through: State Department of Health Care Services Award Year: FY 2018 Compliance Requirement: Activities Allowed or Unallowed/Allowable Costs ? Payroll Questioned Costs: Unknown Criteria: In accordance with 2 CFR ?200.303(a), a non-federal entity must establish and maintain effective internal control over the federal award that provides 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. 2CFR Part 200, Subpart F (Uniform Guidance) Section 200.430 requires that personnel expenses (payroll) charged to the federal awards must be based on records that accurately reflect the work performed. These records must be supported by a system of internal controls which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Conditions Found: Out of the 40 payroll samples selected for testing, we noted the following exceptions: - We were unable to determine how payroll was tracked and charged from the County?s timekeeping system, to the ShareCare Time Study system, to the Quarterly Federal Financial Management Reports (QFFMR) for all of the employees who provide direct services related to this program for the entire fiscal year. - There was no evidence to support that the hours reported in the ShareCare Time Study system were complete, accurate, or reviewed. - For the employees who have an indirect cost allocation charged to this program, we were unable to determine how payroll was tracked and charged from the County?s timekeeping system to the QFFMR for all of the employees who provide indirect services related to this program for the entire fiscal year. Cause: The County?s Behavioral Health Department did not have adequate documentation or systems in place to support how payroll was recorded and reported on the QFFMR. The Department also had internal personnel changes which also caused this issue as there was no documentation available for how the QFFMR?s were prepared and supported.Effect: Payroll related charges that are being reported on the QFFMR?s are not supported. The Behavioral Health Department may not be able to fully rely on the ShareCare Time Study system as there is no evidence to support the data is accurate and complete. Recommendation: We recommend the Behavioral Health Department create a formal process so hours worked by Direct-charge employees are fully utilizing the ShareCare Time Study system. The ShareCare reports should be reviewed for accuracy and completeness. In addition, there should be evidence of that review and documented as such. Those reports will then be the basis for tracking the payroll charges being submitted on the QFFMR?s. Another process should also be created to detail how Indirect-charge employees? time is tracked and reported on the QFFMR?s. All related reports should be reviewed for accuracy, completeness, and allowability in accordance with the program?s grant contract agreement, and should include evidence that this review took place and who performed it. Views of Responsible Officials and Planned Corrective Actions: The County concurs ? see Corrective Action Plan.

Finding 2019-002 (Significant Deficiency) Program: Block Grants for the Prevention and Treatment of Substance Abuse CFDA Number: 93.959 Federal Agency: Department of Health and Human Services Passed-Through: State Department of Health Care Services Award Number: 17-94143 Passed-Through: State Department of Health Care Services Award Year: FY 2018 Compliance Requirement: Reporting Questioned Costs: Unknown Criteria: In accordance with 2 CFR ?200.303(a), a non-federal entity must establish and maintain effective internal control over the federal award that provides 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. Per the program grant award agreement, the County shall submit the QFFMR and a quarterly general ledger detail 60 days after quarter-end. Conditions Found: We found the following exceptions during our review of the reporting requirement: - The quarters ending September 2018, March 2019, and June 2019 were submitted past the 60 day window. - There is no supporting documentation for how the amounts listed on the QFFMR?s were derived or calculated for the quarters ending September 2018 and December 2018. Cause: The County?s Behavioral Health Department did not have adequate documentation or systems in place to support how (and if) this requirement was being met. The Department also had internal personnel changes which also caused this issue as there was no documentation available for how this requirement was being tracked. Effect: As this is a requirement noted in the program grant award agreement, the County could potentially delay or lose funding from this program if not supported or reported correctly. In addition, not having support or documentation for the QFFMR?s will create issues when preparing the subsequent versions of those reports for the next fiscal year. Recommendation: We recommend the Behavioral Health Department use the general ledger as a basis for the amounts reported on the QFFMR, and begin developing a reconciling worksheet to assist in the preparation of the QFFMR every quarter. We also recommend the reports be reviewed and submitted within the 60 day window after quarter end. Views of Responsible Officials and Planned Corrective Actions: The County concurs ? see Corrective Action Plan.