Audit 301060

Finding Reference Number: SA2023-001 Suspension and Debarment Documentation for Contracts and Subcontracts Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Federal Award Identification Number: SLFRP2686 68-0281986 Name of Pass-Through Entity: California State Water Resources Control Board Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds agreement with the Department of the Treasury requires that the City comply with OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), 2 C.F.R. Part 180, including the requirement to include a term or condition in all lower tier covered transactions (contracts and subcontracts described in 2 C.F.R. Part 180, subpart B) that the award is subject to 2 C.F.R. Part 180 and Treasury’s implementing regulation at 31 C.F.R. Part 19. In addition, the OMB Compliance Supplement for the Program requires that prior to entering into subawards and contracts with award funds, recipients must verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded pursuant to 31 CFR section 19.300. Condition: We selected ten contracts and two subrecipient agreements for testing and noted that City did not include a term or condition related to compliance with debarment and suspension compliance provisions and we understand that the City did not verify the contractors and subrecipient were not suspended, debarred, or otherwise excluded prior to entering into the agreements. We did note that City staff did have documentation of checking the status of seven of the vendors in April or September 2023. For the remaining three vendors, City staff could not locate the earlier documentation, so they provided documentation that the vendors were not included on the exclusions list on SAM.gov as of March 2024. Cause: We understand that staff was not aware of the requirement to include the debarment and suspension provisions in the contracts and the requirement to verify the status of contractors or subrecipients prior to entering into agreements with the entities. City staff became aware of the requirements in March 2023 and established a policy effective April 1, 2023. Effect: The City is not in compliance with the award terms and conditions and the OMB Compliance Supplement requirements of the Coronavirus State and Local Fiscal Recovery Funds program. Identification as a repeat finding: Yes, since 2022 Recommendation: The City should ensure compliance with debarment and suspension provisions of the grant award terms and conditions and the OMB Compliance Supplement of the Coronavirus State and Local Fiscal Recovery Funds program prior to entering into contracts and retain documentation in the grant project files to provide evidence of compliance. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-001 Suspension and Debarment Documentation for Contracts and Subcontracts Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Federal Award Identification Number: SLFRP2686 68-0281986 Name of Pass-Through Entity: California State Water Resources Control Board Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds agreement with the Department of the Treasury requires that the City comply with OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), 2 C.F.R. Part 180, including the requirement to include a term or condition in all lower tier covered transactions (contracts and subcontracts described in 2 C.F.R. Part 180, subpart B) that the award is subject to 2 C.F.R. Part 180 and Treasury’s implementing regulation at 31 C.F.R. Part 19. In addition, the OMB Compliance Supplement for the Program requires that prior to entering into subawards and contracts with award funds, recipients must verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded pursuant to 31 CFR section 19.300. Condition: We selected ten contracts and two subrecipient agreements for testing and noted that City did not include a term or condition related to compliance with debarment and suspension compliance provisions and we understand that the City did not verify the contractors and subrecipient were not suspended, debarred, or otherwise excluded prior to entering into the agreements. We did note that City staff did have documentation of checking the status of seven of the vendors in April or September 2023. For the remaining three vendors, City staff could not locate the earlier documentation, so they provided documentation that the vendors were not included on the exclusions list on SAM.gov as of March 2024. Cause: We understand that staff was not aware of the requirement to include the debarment and suspension provisions in the contracts and the requirement to verify the status of contractors or subrecipients prior to entering into agreements with the entities. City staff became aware of the requirements in March 2023 and established a policy effective April 1, 2023. Effect: The City is not in compliance with the award terms and conditions and the OMB Compliance Supplement requirements of the Coronavirus State and Local Fiscal Recovery Funds program. Identification as a repeat finding: Yes, since 2022 Recommendation: The City should ensure compliance with debarment and suspension provisions of the grant award terms and conditions and the OMB Compliance Supplement of the Coronavirus State and Local Fiscal Recovery Funds program prior to entering into contracts and retain documentation in the grant project files to provide evidence of compliance. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-002 Documenting Payroll Costs Charged to Grant Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grants COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0010 COVID-19 - B-20-MW-06-0010 Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award. Section 200.430(i)(viii) indicates that budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that the system for establishing the estimates produces reasonable approximations of the activity actually performed, among other requirements. Condition: We noted that the payroll costs for three employees were charged to the program based on a flat rate percentage of the payroll and benefits costs, rather than based on the actual hours worked. Although we understand the housing staff periodically reviews the estimates to ensure they were supported and did not need adjustment, there is no formal documentation of the review and conclusions reached. City staff did provide us with the annual timesheet reconciliation worksheets for two of the employees that showed that on average over fiscal year 2023, the employees spent more actual time than was allocated via the flat percentage rate to the grant program. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that grant program staff were not aware of the payroll documentation requirement. Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are documented in accordance with 2 CFR Part 200.430 for the CDBG program and all federal grant programs. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-002 Documenting Payroll Costs Charged to Grant Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grants COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0010 COVID-19 - B-20-MW-06-0010 Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award. Section 200.430(i)(viii) indicates that budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that the system for establishing the estimates produces reasonable approximations of the activity actually performed, among other requirements. Condition: We noted that the payroll costs for three employees were charged to the program based on a flat rate percentage of the payroll and benefits costs, rather than based on the actual hours worked. Although we understand the housing staff periodically reviews the estimates to ensure they were supported and did not need adjustment, there is no formal documentation of the review and conclusions reached. City staff did provide us with the annual timesheet reconciliation worksheets for two of the employees that showed that on average over fiscal year 2023, the employees spent more actual time than was allocated via the flat percentage rate to the grant program. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that grant program staff were not aware of the payroll documentation requirement. Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are documented in accordance with 2 CFR Part 200.430 for the CDBG program and all federal grant programs. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-003 Cash Management - Draw Down of Community Development Block Grant Funds in Advance of Disbursement Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grants COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0010 COVID-19 - B-20-MW-06-0010 Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted two disbursement in April 2023 and June 2023 totaling $268,439 had been charged to the CDBG program in the amount of $282.567. The difference of $14,128 was the retention payable to the vendor, which was not paid in cash until after June 30, 2023. However, the City included the retentions payable in the grant drawdowns filed and received in May 2023 and September 2023. We also noted that total retentions payable charged to the CDBG program for the project were $17,301 as of June 30, 2023. Cause: We understand that the retentions were included in the grant drawdowns due to staff oversight. Questioned Costs: We question costs in the amount of $17,301. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program. Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event, drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. In addition, the City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-003 Cash Management - Draw Down of Community Development Block Grant Funds in Advance of Disbursement Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grants COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0010 COVID-19 - B-20-MW-06-0010 Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted two disbursement in April 2023 and June 2023 totaling $268,439 had been charged to the CDBG program in the amount of $282.567. The difference of $14,128 was the retention payable to the vendor, which was not paid in cash until after June 30, 2023. However, the City included the retentions payable in the grant drawdowns filed and received in May 2023 and September 2023. We also noted that total retentions payable charged to the CDBG program for the project were $17,301 as of June 30, 2023. Cause: We understand that the retentions were included in the grant drawdowns due to staff oversight. Questioned Costs: We question costs in the amount of $17,301. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program. Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event, drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. In addition, the City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-001 Suspension and Debarment Documentation for Contracts and Subcontracts Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Federal Award Identification Number: SLFRP2686 68-0281986 Name of Pass-Through Entity: California State Water Resources Control Board Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds agreement with the Department of the Treasury requires that the City comply with OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), 2 C.F.R. Part 180, including the requirement to include a term or condition in all lower tier covered transactions (contracts and subcontracts described in 2 C.F.R. Part 180, subpart B) that the award is subject to 2 C.F.R. Part 180 and Treasury’s implementing regulation at 31 C.F.R. Part 19. In addition, the OMB Compliance Supplement for the Program requires that prior to entering into subawards and contracts with award funds, recipients must verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded pursuant to 31 CFR section 19.300. Condition: We selected ten contracts and two subrecipient agreements for testing and noted that City did not include a term or condition related to compliance with debarment and suspension compliance provisions and we understand that the City did not verify the contractors and subrecipient were not suspended, debarred, or otherwise excluded prior to entering into the agreements. We did note that City staff did have documentation of checking the status of seven of the vendors in April or September 2023. For the remaining three vendors, City staff could not locate the earlier documentation, so they provided documentation that the vendors were not included on the exclusions list on SAM.gov as of March 2024. Cause: We understand that staff was not aware of the requirement to include the debarment and suspension provisions in the contracts and the requirement to verify the status of contractors or subrecipients prior to entering into agreements with the entities. City staff became aware of the requirements in March 2023 and established a policy effective April 1, 2023. Effect: The City is not in compliance with the award terms and conditions and the OMB Compliance Supplement requirements of the Coronavirus State and Local Fiscal Recovery Funds program. Identification as a repeat finding: Yes, since 2022 Recommendation: The City should ensure compliance with debarment and suspension provisions of the grant award terms and conditions and the OMB Compliance Supplement of the Coronavirus State and Local Fiscal Recovery Funds program prior to entering into contracts and retain documentation in the grant project files to provide evidence of compliance. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-001 Suspension and Debarment Documentation for Contracts and Subcontracts Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Federal Award Identification Number: SLFRP2686 68-0281986 Name of Pass-Through Entity: California State Water Resources Control Board Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds agreement with the Department of the Treasury requires that the City comply with OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), 2 C.F.R. Part 180, including the requirement to include a term or condition in all lower tier covered transactions (contracts and subcontracts described in 2 C.F.R. Part 180, subpart B) that the award is subject to 2 C.F.R. Part 180 and Treasury’s implementing regulation at 31 C.F.R. Part 19. In addition, the OMB Compliance Supplement for the Program requires that prior to entering into subawards and contracts with award funds, recipients must verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded pursuant to 31 CFR section 19.300. Condition: We selected ten contracts and two subrecipient agreements for testing and noted that City did not include a term or condition related to compliance with debarment and suspension compliance provisions and we understand that the City did not verify the contractors and subrecipient were not suspended, debarred, or otherwise excluded prior to entering into the agreements. We did note that City staff did have documentation of checking the status of seven of the vendors in April or September 2023. For the remaining three vendors, City staff could not locate the earlier documentation, so they provided documentation that the vendors were not included on the exclusions list on SAM.gov as of March 2024. Cause: We understand that staff was not aware of the requirement to include the debarment and suspension provisions in the contracts and the requirement to verify the status of contractors or subrecipients prior to entering into agreements with the entities. City staff became aware of the requirements in March 2023 and established a policy effective April 1, 2023. Effect: The City is not in compliance with the award terms and conditions and the OMB Compliance Supplement requirements of the Coronavirus State and Local Fiscal Recovery Funds program. Identification as a repeat finding: Yes, since 2022 Recommendation: The City should ensure compliance with debarment and suspension provisions of the grant award terms and conditions and the OMB Compliance Supplement of the Coronavirus State and Local Fiscal Recovery Funds program prior to entering into contracts and retain documentation in the grant project files to provide evidence of compliance. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-002 Documenting Payroll Costs Charged to Grant Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grants COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0010 COVID-19 - B-20-MW-06-0010 Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award. Section 200.430(i)(viii) indicates that budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that the system for establishing the estimates produces reasonable approximations of the activity actually performed, among other requirements. Condition: We noted that the payroll costs for three employees were charged to the program based on a flat rate percentage of the payroll and benefits costs, rather than based on the actual hours worked. Although we understand the housing staff periodically reviews the estimates to ensure they were supported and did not need adjustment, there is no formal documentation of the review and conclusions reached. City staff did provide us with the annual timesheet reconciliation worksheets for two of the employees that showed that on average over fiscal year 2023, the employees spent more actual time than was allocated via the flat percentage rate to the grant program. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that grant program staff were not aware of the payroll documentation requirement. Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are documented in accordance with 2 CFR Part 200.430 for the CDBG program and all federal grant programs. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-002 Documenting Payroll Costs Charged to Grant Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grants COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0010 COVID-19 - B-20-MW-06-0010 Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award. Section 200.430(i)(viii) indicates that budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that the system for establishing the estimates produces reasonable approximations of the activity actually performed, among other requirements. Condition: We noted that the payroll costs for three employees were charged to the program based on a flat rate percentage of the payroll and benefits costs, rather than based on the actual hours worked. Although we understand the housing staff periodically reviews the estimates to ensure they were supported and did not need adjustment, there is no formal documentation of the review and conclusions reached. City staff did provide us with the annual timesheet reconciliation worksheets for two of the employees that showed that on average over fiscal year 2023, the employees spent more actual time than was allocated via the flat percentage rate to the grant program. Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i). Cause: We understand that grant program staff were not aware of the payroll documentation requirement. Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are documented in accordance with 2 CFR Part 200.430 for the CDBG program and all federal grant programs. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-003 Cash Management - Draw Down of Community Development Block Grant Funds in Advance of Disbursement Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grants COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0010 COVID-19 - B-20-MW-06-0010 Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted two disbursement in April 2023 and June 2023 totaling $268,439 had been charged to the CDBG program in the amount of $282.567. The difference of $14,128 was the retention payable to the vendor, which was not paid in cash until after June 30, 2023. However, the City included the retentions payable in the grant drawdowns filed and received in May 2023 and September 2023. We also noted that total retentions payable charged to the CDBG program for the project were $17,301 as of June 30, 2023. Cause: We understand that the retentions were included in the grant drawdowns due to staff oversight. Questioned Costs: We question costs in the amount of $17,301. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program. Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event, drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. In addition, the City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding Reference Number: SA2023-003 Cash Management - Draw Down of Community Development Block Grant Funds in Advance of Disbursement Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grants COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0010 COVID-19 - B-20-MW-06-0010 Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted two disbursement in April 2023 and June 2023 totaling $268,439 had been charged to the CDBG program in the amount of $282.567. The difference of $14,128 was the retention payable to the vendor, which was not paid in cash until after June 30, 2023. However, the City included the retentions payable in the grant drawdowns filed and received in May 2023 and September 2023. We also noted that total retentions payable charged to the CDBG program for the project were $17,301 as of June 30, 2023. Cause: We understand that the retentions were included in the grant drawdowns due to staff oversight. Questioned Costs: We question costs in the amount of $17,301. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program. Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event, drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. In addition, the City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.