Audit 305456

Finding 2022-001 – Eligibility Federal Program: Home Investment Partnership Program (HOME) ALN Number: 14.239 Federal Agency: Department of Housing and Urban Development Federal Award Year: 2015 Grant number: M-15-MC060502 Pass-Through Entity: None Criteria: 24 CFR92.254 Qualification as affordable housing: Homeownership. (a) Acquisition with or without rehabilitation. Housing that is for acquisition by a family must meet the affordability requirements of this paragraph. (3) The housing must be acquired by a homebuyer whose family qualifies as a low-income family, and the housing must be the principal residence of the family throughout the period described in paragraph (a)(4) of this section. (4) Periods of affordability. The HOME-assisted housing must meet the affordability requirements for not less than the applicable period specified in the following table, beginning after project completion. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Condition and Context: During our testwork over continuing eligibility requirements for loan recipients of the program, we noted that the City did not have sufficient controls in place nor were adequate records maintained to verify that the property was the principal residence of the homebuyer during the period of affordability described above. Cause and Effect: The City’s process and controls are not designed with enough precision to ensure that loan recipients continued to meet the primary residence requirements within the period of affordability. As a result, the City was unable to verify that the homebuyer met the eligibility requirements during the period of affordability. Questioned Costs: 17 loans totaling $1,137,405 were identified as noncompliant. These loans represented 100% of the population of loans outstanding within the affordability period. Isolated or Systemic: Systematic Whether the sampling was a statistically valid sample: This sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: Yes. Finding 2021-001. Recommendation: We recommend that the City further refine the design of the internal controls that will ensure that the eligibility requirements for outstanding loans during the period of affordability are performed. Management’s Response: During fiscal year 2022, the Department underwent a reorganization as the City Council approved the establishment of two separate departments, Housing & Community Development and Economic Development. In April 2022, the Department contracted with Keyser Marston and Associates to train newly hired staff to assist the Department with Loan portfolio monitoring and to ensure on-going compliance. In addition, the Department will be implementing new procedures through a program called Neighborly to facilitate and streamline the process for all outstanding loans. The Neighborly program will assist with loan tracking, communicating with loan participants and obtaining annual compliance certifications. The Department will be focusing its resources to ensure on-going compliance and plans to close this finding in fiscal year 2023.

Finding 2022-002 – Allowable Costs/Costs Principles and Period of Performance Federal Program: Coronavirus State and Local Fiscal Recovery Funds ALN Number: 21.027 Federal Agency: United States Department of the Treasury Federal Award Year: 2022 Grant number: CAPP-PN-2022-05, CA 3010001, and 256399-01 Pass-Through Entity: State of California, Department of Community Services & Development and State Water Resources Control Board Criteria: The State of California (the State) passed through funding to the City of Anaheim (the City) for the California Arrearage Payment Program for electric customers (CAPP) and the California Water and Wastewater Arrearage Payment Program (CWWAPP). Both CAPP and CWWAPP have a provision that required the City to allocate payments to the customer accounts within 60 days of receiving payment from the State. Specifically, per section B, Program Requirements, of the California Water and Wastewater arrearage payment program guidelines, there is a requirement that notes “Water systems that participate in the program must allocate payments as bill credits to customer accounts within 60 days of receiving payment .” Per CAPP Program Notice No. 2022-01, there is a requirement that notes “Within 60 days of receiving CAPP funds, a utility applicant shall issue CAPP assistance benefits to customers as bill credits and include a statement that the credits are a result of California’s CAPP funding.” Additionally, both CAPP and CWWAPP provided for the funds to be utilized for customers arrearages accrued during the COVID-19 pandemic bill relief period of March 4, 2020 through June 15, 2021 net of any late fees which are to be waived. CWWAPP provisions are included in Section B Program Requirements and Appendix A, Section 1, Eligibility of the California Water and Wastewater arrearage payment program guidelines. For CAPP the eligibility determinations are included in the 2022 CAPP Frequently Asked Questions. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are allowable and adhere to the required period of performance. Condition and Context: The City made two disbursements under the CWAPP program for water customers on March 2, 2022 and June 21, 2022. The water funds were received by the City on January 25, 2022. The second disbursement made by the City on June 21, 2022 in the amount of approximately $102,000 was not within the 60-day requirement. The CAPP funds were received by the City on December 16, 2021. The City disbursed the CAPP funds on February 25, 2022 in the amount of approximately $4.7 million which was past the 60-day requirement. Additionally, we selected a sample of 60 customers totaling approximately $53,000 stratified between electric, water, and wastewater services and noted 3 of the samples where the City had credited the customer accounts in amounts that exceeded the eligible amounts billed during the period net of subsequent payments and adjustments from March 4, 2020 to June 15, 2021. Two of the three exceptions were residential water customers with a combined over award of $40.89 and one exception was for a commercial electric customer with an over award of $14.60. Cause and Effect: In discussing the 60-day disbursement condition with the City, management stated the focus was on disbursing the funds correctly. For the CAPP funds, the holidays impacted the disbursement timeline. For the CWWAPP funds, the first disbursement did not utilize all the funds. Therefore, management prepared a second disbursement to utilize the funds provided by the State which was 87 days outside the 60-day requirement. All three customer account over awards included partial cash payments and/or adjustments subsequent to management’s initial determination of delinquent account balances eligible for bill credits as defined by the grant guidance, but prior to the credit application date. The timing of the initial credit balance determinations versus the posting of ongoing adjustments could create differences in the allowable credit balances. The City’s manual review process of the adjustments did not identify the discrepancies. Questioned Costs: $55.49 Whether the sampling was a statistically valid sample: This sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: No Recommendation: We recommend the City enhance their internal controls to include a timeline that would comply with the grant requirements. In the event, such timelines can not be adhered to, the City should work with the grantor for a time extension. For accounts with multiple adjustments, a more detailed review of the accounts should be performed if adjustments or cash payments are made subsequent to the City’s credit amount determination. Management’s Response: Management agrees with this finding. In order to ensure adherence to the stipulated 60-day window for credit applications, we have initiated immediate testing of bill notices upon receipt of CWWAPP disbursement checks. Simultaneously, a secondary query has been implemented to validate consistency between the initial query and the present data. To mitigate the risk of over awarding eligible customers, a final query will be conducted prior to disbursement to confirm the accuracy of the awarded amounts for each eligible account.

Finding 2022-002 – Allowable Costs/Costs Principles and Period of Performance Federal Program: Coronavirus State and Local Fiscal Recovery Funds ALN Number: 21.027 Federal Agency: United States Department of the Treasury Federal Award Year: 2022 Grant number: CAPP-PN-2022-05, CA 3010001, and 256399-01 Pass-Through Entity: State of California, Department of Community Services & Development and State Water Resources Control Board Criteria: The State of California (the State) passed through funding to the City of Anaheim (the City) for the California Arrearage Payment Program for electric customers (CAPP) and the California Water and Wastewater Arrearage Payment Program (CWWAPP). Both CAPP and CWWAPP have a provision that required the City to allocate payments to the customer accounts within 60 days of receiving payment from the State. Specifically, per section B, Program Requirements, of the California Water and Wastewater arrearage payment program guidelines, there is a requirement that notes “Water systems that participate in the program must allocate payments as bill credits to customer accounts within 60 days of receiving payment .” Per CAPP Program Notice No. 2022-01, there is a requirement that notes “Within 60 days of receiving CAPP funds, a utility applicant shall issue CAPP assistance benefits to customers as bill credits and include a statement that the credits are a result of California’s CAPP funding.” Additionally, both CAPP and CWWAPP provided for the funds to be utilized for customers arrearages accrued during the COVID-19 pandemic bill relief period of March 4, 2020 through June 15, 2021 net of any late fees which are to be waived. CWWAPP provisions are included in Section B Program Requirements and Appendix A, Section 1, Eligibility of the California Water and Wastewater arrearage payment program guidelines. For CAPP the eligibility determinations are included in the 2022 CAPP Frequently Asked Questions. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are allowable and adhere to the required period of performance. Condition and Context: The City made two disbursements under the CWAPP program for water customers on March 2, 2022 and June 21, 2022. The water funds were received by the City on January 25, 2022. The second disbursement made by the City on June 21, 2022 in the amount of approximately $102,000 was not within the 60-day requirement. The CAPP funds were received by the City on December 16, 2021. The City disbursed the CAPP funds on February 25, 2022 in the amount of approximately $4.7 million which was past the 60-day requirement. Additionally, we selected a sample of 60 customers totaling approximately $53,000 stratified between electric, water, and wastewater services and noted 3 of the samples where the City had credited the customer accounts in amounts that exceeded the eligible amounts billed during the period net of subsequent payments and adjustments from March 4, 2020 to June 15, 2021. Two of the three exceptions were residential water customers with a combined over award of $40.89 and one exception was for a commercial electric customer with an over award of $14.60. Cause and Effect: In discussing the 60-day disbursement condition with the City, management stated the focus was on disbursing the funds correctly. For the CAPP funds, the holidays impacted the disbursement timeline. For the CWWAPP funds, the first disbursement did not utilize all the funds. Therefore, management prepared a second disbursement to utilize the funds provided by the State which was 87 days outside the 60-day requirement. All three customer account over awards included partial cash payments and/or adjustments subsequent to management’s initial determination of delinquent account balances eligible for bill credits as defined by the grant guidance, but prior to the credit application date. The timing of the initial credit balance determinations versus the posting of ongoing adjustments could create differences in the allowable credit balances. The City’s manual review process of the adjustments did not identify the discrepancies. Questioned Costs: $55.49 Whether the sampling was a statistically valid sample: This sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: No Recommendation: We recommend the City enhance their internal controls to include a timeline that would comply with the grant requirements. In the event, such timelines can not be adhered to, the City should work with the grantor for a time extension. For accounts with multiple adjustments, a more detailed review of the accounts should be performed if adjustments or cash payments are made subsequent to the City’s credit amount determination. Management’s Response: Management agrees with this finding. In order to ensure adherence to the stipulated 60-day window for credit applications, we have initiated immediate testing of bill notices upon receipt of CWWAPP disbursement checks. Simultaneously, a secondary query has been implemented to validate consistency between the initial query and the present data. To mitigate the risk of over awarding eligible customers, a final query will be conducted prior to disbursement to confirm the accuracy of the awarded amounts for each eligible account.

Finding 2022-002 – Allowable Costs/Costs Principles and Period of Performance Federal Program: Coronavirus State and Local Fiscal Recovery Funds ALN Number: 21.027 Federal Agency: United States Department of the Treasury Federal Award Year: 2022 Grant number: CAPP-PN-2022-05, CA 3010001, and 256399-01 Pass-Through Entity: State of California, Department of Community Services & Development and State Water Resources Control Board Criteria: The State of California (the State) passed through funding to the City of Anaheim (the City) for the California Arrearage Payment Program for electric customers (CAPP) and the California Water and Wastewater Arrearage Payment Program (CWWAPP). Both CAPP and CWWAPP have a provision that required the City to allocate payments to the customer accounts within 60 days of receiving payment from the State. Specifically, per section B, Program Requirements, of the California Water and Wastewater arrearage payment program guidelines, there is a requirement that notes “Water systems that participate in the program must allocate payments as bill credits to customer accounts within 60 days of receiving payment .” Per CAPP Program Notice No. 2022-01, there is a requirement that notes “Within 60 days of receiving CAPP funds, a utility applicant shall issue CAPP assistance benefits to customers as bill credits and include a statement that the credits are a result of California’s CAPP funding.” Additionally, both CAPP and CWWAPP provided for the funds to be utilized for customers arrearages accrued during the COVID-19 pandemic bill relief period of March 4, 2020 through June 15, 2021 net of any late fees which are to be waived. CWWAPP provisions are included in Section B Program Requirements and Appendix A, Section 1, Eligibility of the California Water and Wastewater arrearage payment program guidelines. For CAPP the eligibility determinations are included in the 2022 CAPP Frequently Asked Questions. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are allowable and adhere to the required period of performance. Condition and Context: The City made two disbursements under the CWAPP program for water customers on March 2, 2022 and June 21, 2022. The water funds were received by the City on January 25, 2022. The second disbursement made by the City on June 21, 2022 in the amount of approximately $102,000 was not within the 60-day requirement. The CAPP funds were received by the City on December 16, 2021. The City disbursed the CAPP funds on February 25, 2022 in the amount of approximately $4.7 million which was past the 60-day requirement. Additionally, we selected a sample of 60 customers totaling approximately $53,000 stratified between electric, water, and wastewater services and noted 3 of the samples where the City had credited the customer accounts in amounts that exceeded the eligible amounts billed during the period net of subsequent payments and adjustments from March 4, 2020 to June 15, 2021. Two of the three exceptions were residential water customers with a combined over award of $40.89 and one exception was for a commercial electric customer with an over award of $14.60. Cause and Effect: In discussing the 60-day disbursement condition with the City, management stated the focus was on disbursing the funds correctly. For the CAPP funds, the holidays impacted the disbursement timeline. For the CWWAPP funds, the first disbursement did not utilize all the funds. Therefore, management prepared a second disbursement to utilize the funds provided by the State which was 87 days outside the 60-day requirement. All three customer account over awards included partial cash payments and/or adjustments subsequent to management’s initial determination of delinquent account balances eligible for bill credits as defined by the grant guidance, but prior to the credit application date. The timing of the initial credit balance determinations versus the posting of ongoing adjustments could create differences in the allowable credit balances. The City’s manual review process of the adjustments did not identify the discrepancies. Questioned Costs: $55.49 Whether the sampling was a statistically valid sample: This sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: No Recommendation: We recommend the City enhance their internal controls to include a timeline that would comply with the grant requirements. In the event, such timelines can not be adhered to, the City should work with the grantor for a time extension. For accounts with multiple adjustments, a more detailed review of the accounts should be performed if adjustments or cash payments are made subsequent to the City’s credit amount determination. Management’s Response: Management agrees with this finding. In order to ensure adherence to the stipulated 60-day window for credit applications, we have initiated immediate testing of bill notices upon receipt of CWWAPP disbursement checks. Simultaneously, a secondary query has been implemented to validate consistency between the initial query and the present data. To mitigate the risk of over awarding eligible customers, a final query will be conducted prior to disbursement to confirm the accuracy of the awarded amounts for each eligible account.

Finding 2022-001 – Eligibility Federal Program: Home Investment Partnership Program (HOME) ALN Number: 14.239 Federal Agency: Department of Housing and Urban Development Federal Award Year: 2015 Grant number: M-15-MC060502 Pass-Through Entity: None Criteria: 24 CFR92.254 Qualification as affordable housing: Homeownership. (a) Acquisition with or without rehabilitation. Housing that is for acquisition by a family must meet the affordability requirements of this paragraph. (3) The housing must be acquired by a homebuyer whose family qualifies as a low-income family, and the housing must be the principal residence of the family throughout the period described in paragraph (a)(4) of this section. (4) Periods of affordability. The HOME-assisted housing must meet the affordability requirements for not less than the applicable period specified in the following table, beginning after project completion. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Condition and Context: During our testwork over continuing eligibility requirements for loan recipients of the program, we noted that the City did not have sufficient controls in place nor were adequate records maintained to verify that the property was the principal residence of the homebuyer during the period of affordability described above. Cause and Effect: The City’s process and controls are not designed with enough precision to ensure that loan recipients continued to meet the primary residence requirements within the period of affordability. As a result, the City was unable to verify that the homebuyer met the eligibility requirements during the period of affordability. Questioned Costs: 17 loans totaling $1,137,405 were identified as noncompliant. These loans represented 100% of the population of loans outstanding within the affordability period. Isolated or Systemic: Systematic Whether the sampling was a statistically valid sample: This sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: Yes. Finding 2021-001. Recommendation: We recommend that the City further refine the design of the internal controls that will ensure that the eligibility requirements for outstanding loans during the period of affordability are performed. Management’s Response: During fiscal year 2022, the Department underwent a reorganization as the City Council approved the establishment of two separate departments, Housing & Community Development and Economic Development. In April 2022, the Department contracted with Keyser Marston and Associates to train newly hired staff to assist the Department with Loan portfolio monitoring and to ensure on-going compliance. In addition, the Department will be implementing new procedures through a program called Neighborly to facilitate and streamline the process for all outstanding loans. The Neighborly program will assist with loan tracking, communicating with loan participants and obtaining annual compliance certifications. The Department will be focusing its resources to ensure on-going compliance and plans to close this finding in fiscal year 2023.

Finding 2022-002 – Allowable Costs/Costs Principles and Period of Performance Federal Program: Coronavirus State and Local Fiscal Recovery Funds ALN Number: 21.027 Federal Agency: United States Department of the Treasury Federal Award Year: 2022 Grant number: CAPP-PN-2022-05, CA 3010001, and 256399-01 Pass-Through Entity: State of California, Department of Community Services & Development and State Water Resources Control Board Criteria: The State of California (the State) passed through funding to the City of Anaheim (the City) for the California Arrearage Payment Program for electric customers (CAPP) and the California Water and Wastewater Arrearage Payment Program (CWWAPP). Both CAPP and CWWAPP have a provision that required the City to allocate payments to the customer accounts within 60 days of receiving payment from the State. Specifically, per section B, Program Requirements, of the California Water and Wastewater arrearage payment program guidelines, there is a requirement that notes “Water systems that participate in the program must allocate payments as bill credits to customer accounts within 60 days of receiving payment .” Per CAPP Program Notice No. 2022-01, there is a requirement that notes “Within 60 days of receiving CAPP funds, a utility applicant shall issue CAPP assistance benefits to customers as bill credits and include a statement that the credits are a result of California’s CAPP funding.” Additionally, both CAPP and CWWAPP provided for the funds to be utilized for customers arrearages accrued during the COVID-19 pandemic bill relief period of March 4, 2020 through June 15, 2021 net of any late fees which are to be waived. CWWAPP provisions are included in Section B Program Requirements and Appendix A, Section 1, Eligibility of the California Water and Wastewater arrearage payment program guidelines. For CAPP the eligibility determinations are included in the 2022 CAPP Frequently Asked Questions. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are allowable and adhere to the required period of performance. Condition and Context: The City made two disbursements under the CWAPP program for water customers on March 2, 2022 and June 21, 2022. The water funds were received by the City on January 25, 2022. The second disbursement made by the City on June 21, 2022 in the amount of approximately $102,000 was not within the 60-day requirement. The CAPP funds were received by the City on December 16, 2021. The City disbursed the CAPP funds on February 25, 2022 in the amount of approximately $4.7 million which was past the 60-day requirement. Additionally, we selected a sample of 60 customers totaling approximately $53,000 stratified between electric, water, and wastewater services and noted 3 of the samples where the City had credited the customer accounts in amounts that exceeded the eligible amounts billed during the period net of subsequent payments and adjustments from March 4, 2020 to June 15, 2021. Two of the three exceptions were residential water customers with a combined over award of $40.89 and one exception was for a commercial electric customer with an over award of $14.60. Cause and Effect: In discussing the 60-day disbursement condition with the City, management stated the focus was on disbursing the funds correctly. For the CAPP funds, the holidays impacted the disbursement timeline. For the CWWAPP funds, the first disbursement did not utilize all the funds. Therefore, management prepared a second disbursement to utilize the funds provided by the State which was 87 days outside the 60-day requirement. All three customer account over awards included partial cash payments and/or adjustments subsequent to management’s initial determination of delinquent account balances eligible for bill credits as defined by the grant guidance, but prior to the credit application date. The timing of the initial credit balance determinations versus the posting of ongoing adjustments could create differences in the allowable credit balances. The City’s manual review process of the adjustments did not identify the discrepancies. Questioned Costs: $55.49 Whether the sampling was a statistically valid sample: This sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: No Recommendation: We recommend the City enhance their internal controls to include a timeline that would comply with the grant requirements. In the event, such timelines can not be adhered to, the City should work with the grantor for a time extension. For accounts with multiple adjustments, a more detailed review of the accounts should be performed if adjustments or cash payments are made subsequent to the City’s credit amount determination. Management’s Response: Management agrees with this finding. In order to ensure adherence to the stipulated 60-day window for credit applications, we have initiated immediate testing of bill notices upon receipt of CWWAPP disbursement checks. Simultaneously, a secondary query has been implemented to validate consistency between the initial query and the present data. To mitigate the risk of over awarding eligible customers, a final query will be conducted prior to disbursement to confirm the accuracy of the awarded amounts for each eligible account.

Finding 2022-002 – Allowable Costs/Costs Principles and Period of Performance Federal Program: Coronavirus State and Local Fiscal Recovery Funds ALN Number: 21.027 Federal Agency: United States Department of the Treasury Federal Award Year: 2022 Grant number: CAPP-PN-2022-05, CA 3010001, and 256399-01 Pass-Through Entity: State of California, Department of Community Services & Development and State Water Resources Control Board Criteria: The State of California (the State) passed through funding to the City of Anaheim (the City) for the California Arrearage Payment Program for electric customers (CAPP) and the California Water and Wastewater Arrearage Payment Program (CWWAPP). Both CAPP and CWWAPP have a provision that required the City to allocate payments to the customer accounts within 60 days of receiving payment from the State. Specifically, per section B, Program Requirements, of the California Water and Wastewater arrearage payment program guidelines, there is a requirement that notes “Water systems that participate in the program must allocate payments as bill credits to customer accounts within 60 days of receiving payment .” Per CAPP Program Notice No. 2022-01, there is a requirement that notes “Within 60 days of receiving CAPP funds, a utility applicant shall issue CAPP assistance benefits to customers as bill credits and include a statement that the credits are a result of California’s CAPP funding.” Additionally, both CAPP and CWWAPP provided for the funds to be utilized for customers arrearages accrued during the COVID-19 pandemic bill relief period of March 4, 2020 through June 15, 2021 net of any late fees which are to be waived. CWWAPP provisions are included in Section B Program Requirements and Appendix A, Section 1, Eligibility of the California Water and Wastewater arrearage payment program guidelines. For CAPP the eligibility determinations are included in the 2022 CAPP Frequently Asked Questions. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are allowable and adhere to the required period of performance. Condition and Context: The City made two disbursements under the CWAPP program for water customers on March 2, 2022 and June 21, 2022. The water funds were received by the City on January 25, 2022. The second disbursement made by the City on June 21, 2022 in the amount of approximately $102,000 was not within the 60-day requirement. The CAPP funds were received by the City on December 16, 2021. The City disbursed the CAPP funds on February 25, 2022 in the amount of approximately $4.7 million which was past the 60-day requirement. Additionally, we selected a sample of 60 customers totaling approximately $53,000 stratified between electric, water, and wastewater services and noted 3 of the samples where the City had credited the customer accounts in amounts that exceeded the eligible amounts billed during the period net of subsequent payments and adjustments from March 4, 2020 to June 15, 2021. Two of the three exceptions were residential water customers with a combined over award of $40.89 and one exception was for a commercial electric customer with an over award of $14.60. Cause and Effect: In discussing the 60-day disbursement condition with the City, management stated the focus was on disbursing the funds correctly. For the CAPP funds, the holidays impacted the disbursement timeline. For the CWWAPP funds, the first disbursement did not utilize all the funds. Therefore, management prepared a second disbursement to utilize the funds provided by the State which was 87 days outside the 60-day requirement. All three customer account over awards included partial cash payments and/or adjustments subsequent to management’s initial determination of delinquent account balances eligible for bill credits as defined by the grant guidance, but prior to the credit application date. The timing of the initial credit balance determinations versus the posting of ongoing adjustments could create differences in the allowable credit balances. The City’s manual review process of the adjustments did not identify the discrepancies. Questioned Costs: $55.49 Whether the sampling was a statistically valid sample: This sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: No Recommendation: We recommend the City enhance their internal controls to include a timeline that would comply with the grant requirements. In the event, such timelines can not be adhered to, the City should work with the grantor for a time extension. For accounts with multiple adjustments, a more detailed review of the accounts should be performed if adjustments or cash payments are made subsequent to the City’s credit amount determination. Management’s Response: Management agrees with this finding. In order to ensure adherence to the stipulated 60-day window for credit applications, we have initiated immediate testing of bill notices upon receipt of CWWAPP disbursement checks. Simultaneously, a secondary query has been implemented to validate consistency between the initial query and the present data. To mitigate the risk of over awarding eligible customers, a final query will be conducted prior to disbursement to confirm the accuracy of the awarded amounts for each eligible account.

Finding 2022-002 – Allowable Costs/Costs Principles and Period of Performance Federal Program: Coronavirus State and Local Fiscal Recovery Funds ALN Number: 21.027 Federal Agency: United States Department of the Treasury Federal Award Year: 2022 Grant number: CAPP-PN-2022-05, CA 3010001, and 256399-01 Pass-Through Entity: State of California, Department of Community Services & Development and State Water Resources Control Board Criteria: The State of California (the State) passed through funding to the City of Anaheim (the City) for the California Arrearage Payment Program for electric customers (CAPP) and the California Water and Wastewater Arrearage Payment Program (CWWAPP). Both CAPP and CWWAPP have a provision that required the City to allocate payments to the customer accounts within 60 days of receiving payment from the State. Specifically, per section B, Program Requirements, of the California Water and Wastewater arrearage payment program guidelines, there is a requirement that notes “Water systems that participate in the program must allocate payments as bill credits to customer accounts within 60 days of receiving payment .” Per CAPP Program Notice No. 2022-01, there is a requirement that notes “Within 60 days of receiving CAPP funds, a utility applicant shall issue CAPP assistance benefits to customers as bill credits and include a statement that the credits are a result of California’s CAPP funding.” Additionally, both CAPP and CWWAPP provided for the funds to be utilized for customers arrearages accrued during the COVID-19 pandemic bill relief period of March 4, 2020 through June 15, 2021 net of any late fees which are to be waived. CWWAPP provisions are included in Section B Program Requirements and Appendix A, Section 1, Eligibility of the California Water and Wastewater arrearage payment program guidelines. For CAPP the eligibility determinations are included in the 2022 CAPP Frequently Asked Questions. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are allowable and adhere to the required period of performance. Condition and Context: The City made two disbursements under the CWAPP program for water customers on March 2, 2022 and June 21, 2022. The water funds were received by the City on January 25, 2022. The second disbursement made by the City on June 21, 2022 in the amount of approximately $102,000 was not within the 60-day requirement. The CAPP funds were received by the City on December 16, 2021. The City disbursed the CAPP funds on February 25, 2022 in the amount of approximately $4.7 million which was past the 60-day requirement. Additionally, we selected a sample of 60 customers totaling approximately $53,000 stratified between electric, water, and wastewater services and noted 3 of the samples where the City had credited the customer accounts in amounts that exceeded the eligible amounts billed during the period net of subsequent payments and adjustments from March 4, 2020 to June 15, 2021. Two of the three exceptions were residential water customers with a combined over award of $40.89 and one exception was for a commercial electric customer with an over award of $14.60. Cause and Effect: In discussing the 60-day disbursement condition with the City, management stated the focus was on disbursing the funds correctly. For the CAPP funds, the holidays impacted the disbursement timeline. For the CWWAPP funds, the first disbursement did not utilize all the funds. Therefore, management prepared a second disbursement to utilize the funds provided by the State which was 87 days outside the 60-day requirement. All three customer account over awards included partial cash payments and/or adjustments subsequent to management’s initial determination of delinquent account balances eligible for bill credits as defined by the grant guidance, but prior to the credit application date. The timing of the initial credit balance determinations versus the posting of ongoing adjustments could create differences in the allowable credit balances. The City’s manual review process of the adjustments did not identify the discrepancies. Questioned Costs: $55.49 Whether the sampling was a statistically valid sample: This sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: No Recommendation: We recommend the City enhance their internal controls to include a timeline that would comply with the grant requirements. In the event, such timelines can not be adhered to, the City should work with the grantor for a time extension. For accounts with multiple adjustments, a more detailed review of the accounts should be performed if adjustments or cash payments are made subsequent to the City’s credit amount determination. Management’s Response: Management agrees with this finding. In order to ensure adherence to the stipulated 60-day window for credit applications, we have initiated immediate testing of bill notices upon receipt of CWWAPP disbursement checks. Simultaneously, a secondary query has been implemented to validate consistency between the initial query and the present data. To mitigate the risk of over awarding eligible customers, a final query will be conducted prior to disbursement to confirm the accuracy of the awarded amounts for each eligible account.