Audit 300999

Reference Number: 2023-001 Category of Finding: Other Compliance and Significant Deficiency Type of Finding: Significant Deficiency Federal program Title: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Agency: U.S. Department of the Treasury Pass Through Agency and Year: California State Water Resources Control Board (SWRCB) Pass-through Award Number and Year: CA3710020; FY 2022-23 Criteria: The California Water and Wastewater Arrearage Payment Program Guidelines: Wastewater Arrearages, Section 6: Wastewater Treatment Providers and Wastewater Billing, 6.2.1. The approved wastewater treatment provider and wastewater billing entities must: Notify customers in writing of the amount credited. The acknowledgement must state that the credited amount is being provided through funding from the State Water Resources Control Board using federal American Rescue Plan Act (ARPA) funds. Title 2 – Grants and Agreements, Subtitle A – Office of Management and Budget Guidance for Grants and Agreements, Chapter II – Office of Management and Budget Guidance, part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Wards, Subpart D – Post Federal Award Requirements, §200.303 Internal Controls. The non-Federal entity must: (a) 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 statute, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in Federal Government’ issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). §200.334 Retention requirements for records. Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure reports or, for Federal awards that are renewed quarterly or annually, form the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. The control objective related to documentation retention is to provide reasonable assurance that the Federal awards passed through the California SWRCB are used to credit the City’s water customer accounts, whose accounts had been in arrearages over 60 days, and the customer received a written notification of their arrearage being offset by the ARPA funds in accordance with the provision of California Water and Wastewater Arrearage Payment Program Guidelines. Condition: During our audit of the Coronavirus State and Local Fiscal Recovery Funds program, we noted that the City’s Public Utilities Department (PUD) did not maintain documentation demonstrating compliance with Section 6.2.1 of the grant guidelines with the State of California related to the Water and Wastewater Arrearage Payment Program. Of the 25 account credits selected for testing we were unable to validate that five (5) customers were sent the required notification in accordance with the program guidelines. Cause: The PUD did not implement a consistent process to maintain records demonstrating compliance with the requirement to notify customers of the nature and sources of the account credits funded by the Water and Wastewater Arrearage Payment Program. Effect: Not providing customer proper and timely information on relief programs could result in customers not knowing of needed government-funded support resulting in undue stress and/or incorrect payment expectations. There is also an expectation that customers are informed that the funding used to credit accounts was through the State Water Resources Control Board using the ARPA funds. Questioned Costs: There are no questioned costs. Context: We selected 25 customer credits from a total population of 18,495, and noted that documentation of customer notification was not available for five (5) customer credits. This sample was not a statistically valid sample. Identification as a Repeat Finding: This is a repeat finding as Finding 2022-001. Recommendation: The PUD should evaluate current practices of maintaining compliance documentation to ensure records are complete and consistent to support and demonstrate compliance with applicable requirements. Views of Responsible Officials: The PUD management is in agreement with the finding 2023-001. This a timing issue and repeated finding of 2022-001 deficiency discovered at the end of fiscal year 2022 Single Audit.

Reference Number: 2023-001 Category of Finding: Other Compliance and Significant Deficiency Type of Finding: Significant Deficiency Federal program Title: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Agency: U.S. Department of the Treasury Pass Through Agency and Year: California State Water Resources Control Board (SWRCB) Pass-through Award Number and Year: CA3710020; FY 2022-23 Criteria: The California Water and Wastewater Arrearage Payment Program Guidelines: Wastewater Arrearages, Section 6: Wastewater Treatment Providers and Wastewater Billing, 6.2.1. The approved wastewater treatment provider and wastewater billing entities must: Notify customers in writing of the amount credited. The acknowledgement must state that the credited amount is being provided through funding from the State Water Resources Control Board using federal American Rescue Plan Act (ARPA) funds. Title 2 – Grants and Agreements, Subtitle A – Office of Management and Budget Guidance for Grants and Agreements, Chapter II – Office of Management and Budget Guidance, part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Wards, Subpart D – Post Federal Award Requirements, §200.303 Internal Controls. The non-Federal entity must: (a) 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 statute, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in Federal Government’ issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). §200.334 Retention requirements for records. Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure reports or, for Federal awards that are renewed quarterly or annually, form the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. The control objective related to documentation retention is to provide reasonable assurance that the Federal awards passed through the California SWRCB are used to credit the City’s water customer accounts, whose accounts had been in arrearages over 60 days, and the customer received a written notification of their arrearage being offset by the ARPA funds in accordance with the provision of California Water and Wastewater Arrearage Payment Program Guidelines. Condition: During our audit of the Coronavirus State and Local Fiscal Recovery Funds program, we noted that the City’s Public Utilities Department (PUD) did not maintain documentation demonstrating compliance with Section 6.2.1 of the grant guidelines with the State of California related to the Water and Wastewater Arrearage Payment Program. Of the 25 account credits selected for testing we were unable to validate that five (5) customers were sent the required notification in accordance with the program guidelines. Cause: The PUD did not implement a consistent process to maintain records demonstrating compliance with the requirement to notify customers of the nature and sources of the account credits funded by the Water and Wastewater Arrearage Payment Program. Effect: Not providing customer proper and timely information on relief programs could result in customers not knowing of needed government-funded support resulting in undue stress and/or incorrect payment expectations. There is also an expectation that customers are informed that the funding used to credit accounts was through the State Water Resources Control Board using the ARPA funds. Questioned Costs: There are no questioned costs. Context: We selected 25 customer credits from a total population of 18,495, and noted that documentation of customer notification was not available for five (5) customer credits. This sample was not a statistically valid sample. Identification as a Repeat Finding: This is a repeat finding as Finding 2022-001. Recommendation: The PUD should evaluate current practices of maintaining compliance documentation to ensure records are complete and consistent to support and demonstrate compliance with applicable requirements. Views of Responsible Officials: The PUD management is in agreement with the finding 2023-001. This a timing issue and repeated finding of 2022-001 deficiency discovered at the end of fiscal year 2022 Single Audit.