Audit 316370

Title: NOTE 1 – REPORTING ENTITY Accounting Policies: NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are generally reported on the accrual or modified accrual basis of accounting depending on the type of fund. Some expenditures are reported when the reimbursement is received due to uncertainty of the source of funding at the time the expenditure is incurred. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, as applicable, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identifying numbers are presented where available. Certain financial awards were received by the City in the form of noncash direct assistance. These noncash awards are included on the Schedule under ALN 93.268. The Schedule of expenditures of federal awards includes a column titled Non-Federal Expenditures. Amounts reported in this column include the City’s required match for federal programs. The City has a cost allocation plan for allocation of common and indirect costs related to grant programs. The amounts allocated to 2023 grant programs are based primarily on 2022 budgeted amounts. Variances between actual costs and budgeted amounts are adjusted on a prospective basis. A copy of the cost allocation plan is kept on file at the City. The City’s cost allocation plan for 2023 has been prepared on a Direct Cost Base that does conform to the direct cost bases in the Uniform Guidance. The City’s 2023 Cost Allocation Plan (Local Organization Cost Allocation Plan – LOCAP) was provided for review and negotiation to the City’s indirect cost cognizant agency and is pending negotiation and approval, expected in 2024. The City has not elected to use the 10% de minimis indirect cost rate allowed by the Uniform Guidance. Individual City departments’ indirect cost rate proposals (ICRP’s) for 2023 have been prepared on a Salaries and Wages plus all Fringe Benefits (S&W+FB) Direct Cost Base that does conform to the Uniform Guidance. The 2023 Indirect Cost Rate Agreements related to the ICRP’s for the Chicago Departments of Planning and Development, Housing, Public Health, and Family and Support Services are pending negotiation with the City’s indirect cost cognizant agency. The provisional rates in the 2022 Indirect Cost Rate Agreement for these departments extending from 01/01/2023 through 12/31/2025 were used for 2023 indirect cost recovery. Federal/State Commingled Funds – The City of Chicago receives various federal awards that are passed through the State of Illinois. Many of these contracts contain a blend of state and federal awards. To the extent practical, the federal funding has been segregated from the state funding based on information provided by the state agencies. In some instances, individual state contracts contain multiple federal ALNs and the City has segregated the federal dollars associated with each contract award based on information received from the pass-through state agency. Due to the timing differences between the pass-through agency fiscal year end and the City’s reporting period, allocation differences may result. The state contract for the Child Care program (federal cluster 93.575/93.596), passed through the Illinois Department of Human Services (IDHS), has been considered a Type A cluster for audit testing purposes each year. The final allocation of federal expenditures varies depending on the most recent available information provided by IDHS and may be reported under both ALNs or one ALN. For FY2023 the Child Care program included federal funds confirmed by IDHS for ALN 93.596. COVID-19 While continuing to recover from the impacts of the COVID-19 pandemic, the City received federal and state grants, including $48.0 million of ARP Act funds used to replace lost revenues due to the impacts of the COVID-19 pandemic totaling $1,855.0 million. These revenues were primarily used to respond to the ongoing effects of the COVID-19 pandemic, such as housing and rental assistance, and public safety, as well as provide essential government services. In addition, the City is eligible for the Federal Emergency Management Agency (FEMA) Public Assistance Program and in FY2023 received reimbursements for eligible expenditures incurred in FY2020, FY2021 and FY2022 under this grant in the amount of $48,518, $10,336,243 and $7,511,864 respectively, as reflected under ALN 97.036 in the Schedule. Midway and O’Hare Airports Midway was awarded a total of $172.4 million of COVID-19 Relief Funds. Midway applied all of the COVID-19 Relief Funds through 2023 to airlines rates and charges. These funds were available for any airport purpose, including debt service payments, thus COVID-19 Relief Funds have been included in the calculation of the debt service covenant. O’Hare was awarded a total of $651.8 million of COVID-19 Relief Funds. Excluding Concessionaire Relief Grants, the City has applied $640.3 million of the COVID-19 Relief Funds through 2023 to airlines rates and charges, PFCs (Passenger Facility Charges) and CFCs (Customer Facility Charges), and has $11.5 million of funds remaining to be applied in 2024. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. NOTE 1 – REPORTING ENTITY The City of Chicago (the City) is a governmental entity established by laws of the State of Illinois and has the powers of a body corporate, as defined in the statutes. All significant operations of the City are included in the scope of the Office of Management and Budget (OMB) requirements contained in 2 CFR Part 200, Subpart F (Single Audit). The U.S. Department of Health and Human Services (HHS) has been designated as the City’s cognizant agency for the Single Audit. The reporting entity for the City is based upon criteria established by the Governmental Accounting Standards Board. Programs Subject to Single Audit – A Schedule of Expenditures of Federal Awards (the “Schedule”) is presented for each federal program and a summary of expenditures by federal agency is as follows: U.S. Department of Agriculture $ 4,362,283 U.S. Department of Commerce 88,070 U.S. Department of Housing and Urban Development 188,323,019 U.S. Department of Justice 12,416,427 U.S. Department of Transportation 91,072,528 U.S. Department of Treasury 312,402,656 U.S. National Endowment for the Arts 155,200 U.S. Institute of Museum and Library Services 27,355 U.S. Environmental Protection Agency 37,783,142 U.S. Department of Health and Human Services 342,191,243 U.S. Corporation for National and Community Service 711,704 U.S. Department of Homeland Security 93,549,570 Total Expenditures of Federal Awards $ 1,083,083,197 Passenger Facility Charges collected and expended, as prescribed by Sections 9110 and 9111 of the Aviation Safety and Capacity Expansion Act of 1990 issued by the Federal Aviation Administration of the United States Department of Transportation, are not included in this Single Audit report and are audited separately.

Title: NOTE 2 – BASIS OF PRESENTATION Accounting Policies: NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are generally reported on the accrual or modified accrual basis of accounting depending on the type of fund. Some expenditures are reported when the reimbursement is received due to uncertainty of the source of funding at the time the expenditure is incurred. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, as applicable, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identifying numbers are presented where available. Certain financial awards were received by the City in the form of noncash direct assistance. These noncash awards are included on the Schedule under ALN 93.268. The Schedule of expenditures of federal awards includes a column titled Non-Federal Expenditures. Amounts reported in this column include the City’s required match for federal programs. The City has a cost allocation plan for allocation of common and indirect costs related to grant programs. The amounts allocated to 2023 grant programs are based primarily on 2022 budgeted amounts. Variances between actual costs and budgeted amounts are adjusted on a prospective basis. A copy of the cost allocation plan is kept on file at the City. The City’s cost allocation plan for 2023 has been prepared on a Direct Cost Base that does conform to the direct cost bases in the Uniform Guidance. The City’s 2023 Cost Allocation Plan (Local Organization Cost Allocation Plan – LOCAP) was provided for review and negotiation to the City’s indirect cost cognizant agency and is pending negotiation and approval, expected in 2024. The City has not elected to use the 10% de minimis indirect cost rate allowed by the Uniform Guidance. Individual City departments’ indirect cost rate proposals (ICRP’s) for 2023 have been prepared on a Salaries and Wages plus all Fringe Benefits (S&W+FB) Direct Cost Base that does conform to the Uniform Guidance. The 2023 Indirect Cost Rate Agreements related to the ICRP’s for the Chicago Departments of Planning and Development, Housing, Public Health, and Family and Support Services are pending negotiation with the City’s indirect cost cognizant agency. The provisional rates in the 2022 Indirect Cost Rate Agreement for these departments extending from 01/01/2023 through 12/31/2025 were used for 2023 indirect cost recovery. Federal/State Commingled Funds – The City of Chicago receives various federal awards that are passed through the State of Illinois. Many of these contracts contain a blend of state and federal awards. To the extent practical, the federal funding has been segregated from the state funding based on information provided by the state agencies. In some instances, individual state contracts contain multiple federal ALNs and the City has segregated the federal dollars associated with each contract award based on information received from the pass-through state agency. Due to the timing differences between the pass-through agency fiscal year end and the City’s reporting period, allocation differences may result. The state contract for the Child Care program (federal cluster 93.575/93.596), passed through the Illinois Department of Human Services (IDHS), has been considered a Type A cluster for audit testing purposes each year. The final allocation of federal expenditures varies depending on the most recent available information provided by IDHS and may be reported under both ALNs or one ALN. For FY2023 the Child Care program included federal funds confirmed by IDHS for ALN 93.596. COVID-19 While continuing to recover from the impacts of the COVID-19 pandemic, the City received federal and state grants, including $48.0 million of ARP Act funds used to replace lost revenues due to the impacts of the COVID-19 pandemic totaling $1,855.0 million. These revenues were primarily used to respond to the ongoing effects of the COVID-19 pandemic, such as housing and rental assistance, and public safety, as well as provide essential government services. In addition, the City is eligible for the Federal Emergency Management Agency (FEMA) Public Assistance Program and in FY2023 received reimbursements for eligible expenditures incurred in FY2020, FY2021 and FY2022 under this grant in the amount of $48,518, $10,336,243 and $7,511,864 respectively, as reflected under ALN 97.036 in the Schedule. Midway and O’Hare Airports Midway was awarded a total of $172.4 million of COVID-19 Relief Funds. Midway applied all of the COVID-19 Relief Funds through 2023 to airlines rates and charges. These funds were available for any airport purpose, including debt service payments, thus COVID-19 Relief Funds have been included in the calculation of the debt service covenant. O’Hare was awarded a total of $651.8 million of COVID-19 Relief Funds. Excluding Concessionaire Relief Grants, the City has applied $640.3 million of the COVID-19 Relief Funds through 2023 to airlines rates and charges, PFCs (Passenger Facility Charges) and CFCs (Customer Facility Charges), and has $11.5 million of funds remaining to be applied in 2024. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. The accompanying schedule of expenditures of federal awards includes the federal award activity of the City under programs of the federal government for the year ended December 31, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The Schedule presents only a selected portion of the operations of the City and accordingly, it is not intended to and does not present the financial position, changes in net position or cash flows of the City.