Audit 316559

Finding #SA2022-007: Cash Management Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: The City should submit drawdown requests to San Joaquin County throughout the fiscal year as costs are incurred. Those drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the County, unless specifically authorized by the grantor, and costs reported on the SEFA should be the same as those included in requests for reimbursement. Condition: The City reported expenditures under the COVID-19 - CDBG-CV Program totaling $378,077 in fiscal year 2021. As noted in prior year finding SA2021-005, the City had not requested reimbursement for all of those costs during fiscal year 2021 or subsequent to fiscal year 2021. When we began our work on the fiscal year 2022 single audit, we noted that the COVID-19 - CDBG-CV Program was not included on the SEFA. The grant award was for $400,000 and we inquired about whether the remaining funding of $21,923 had been expended or reimbursed during the fiscal year 2022. In response to that question, City staff provided the grant drawdown information which totaled to $400,000, but only $40,200 of those costs had been included on the prior year SEFA. The remaining costs drawn down from the grant during fiscal year 2022 of $359,800 were different costs than were incurred during fiscal year 2021. Effect: The City is not matching expenditures with associated grant revenues throughout the fiscal year as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the County. In addition, when the City reports costs on the SEFA that are different from the costs requested for reimbursement from the grantor, it not only misstates the SEFA, but it could also mean ineligible costs are reported. Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to the late preparation of reimbursements and the inclusion of project expenditures on the reimbursement request that were different from those reported on the prior year SEFA. Identification as a repeat finding: Yes, since 2021 Recommendation: The City must develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year. In addition, City staff should ensure that program costs incurred are properly reported on the annual SEFA. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-008: Accurate Review and Payment of Vendor Reimbursement Requests Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Reimbursement requests received by the City from a vendor should be reviewed in detail to ensure that reimbursable expenditures are supported by documentation that is complete and clearly readable in order to ensure that any costs that will be reimbursed and charged to the grant are considered supported and allowable. In addition, the payment to the vendor should agree to the amount of eligible costs that are to be reimbursed. Condition: In our testing of expenditures related to the CDBG-CV grant we noted the following: • The City was invoiced for costs in the amount of $56,662, however the supporting documentation provided by the vendor totaled to $55,890 and the City issued a check to the vendor in the amount of $56,232, which did not agree to either the invoiced amount or the amount provided as support for the invoice. • The City was invoiced for the gross amount of payroll costs incurred by the vendor’s employees, however, the support provided for each of the invoices included the employee payroll checks which were net of the related payroll taxes. The City was unable to provide support to show that the vendor paid the payroll taxes to the applicable taxing entities. City staff determined that total gross payroll costs reimbursed to the vendor for fiscal year 2022 were $216,224 and supporting documentation for the net payroll totaled to only $178,538. The difference between the gross amount of payroll charged to the City by the vendor and the net amount of payroll support that was provided was $37,686. • One of the invoices included pages of support that were not readable with costs that totaled $347. We could not determine what the expenditures were for due to the condition of the scans of the supporting documentation. • The support for some of the payroll costs that were being charged to the grant by the vendor included timesheets that were not readable and therefore we could not agree the hours charged from the timesheet to the hours paid in the employees’ paycheck. Effect: Incorrect payments made to vendors or payments made with incomplete supporting documentation or based on documents that are not legible increases the risk that unallowable costs could be charged to the grant. Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to inaccurate reviews of reimbursements and payments to the vendor. In addition, City staff had noticed that some of the documentation was illegible or missing, but did not request the information from the vendor. Questioned Costs: We question costs of $38,033, which consist of $37,686 of payroll taxes paid for which support was not provided and the $347 that was supported by illegible documentation. Recommendation: The City should implement processes to ensure the review of any invoices or requests for reimbursement undergo a detailed review to ensure that all expenditures are supported by clearly legible documentation and that when payment is made to a vendor, the amount of the payment made agrees to the allowable and supported amount being requested by the vendor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-007: Cash Management Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: The City should submit drawdown requests to San Joaquin County throughout the fiscal year as costs are incurred. Those drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the County, unless specifically authorized by the grantor, and costs reported on the SEFA should be the same as those included in requests for reimbursement. Condition: The City reported expenditures under the COVID-19 - CDBG-CV Program totaling $378,077 in fiscal year 2021. As noted in prior year finding SA2021-005, the City had not requested reimbursement for all of those costs during fiscal year 2021 or subsequent to fiscal year 2021. When we began our work on the fiscal year 2022 single audit, we noted that the COVID-19 - CDBG-CV Program was not included on the SEFA. The grant award was for $400,000 and we inquired about whether the remaining funding of $21,923 had been expended or reimbursed during the fiscal year 2022. In response to that question, City staff provided the grant drawdown information which totaled to $400,000, but only $40,200 of those costs had been included on the prior year SEFA. The remaining costs drawn down from the grant during fiscal year 2022 of $359,800 were different costs than were incurred during fiscal year 2021. Effect: The City is not matching expenditures with associated grant revenues throughout the fiscal year as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the County. In addition, when the City reports costs on the SEFA that are different from the costs requested for reimbursement from the grantor, it not only misstates the SEFA, but it could also mean ineligible costs are reported. Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to the late preparation of reimbursements and the inclusion of project expenditures on the reimbursement request that were different from those reported on the prior year SEFA. Identification as a repeat finding: Yes, since 2021 Recommendation: The City must develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year. In addition, City staff should ensure that program costs incurred are properly reported on the annual SEFA. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-008: Accurate Review and Payment of Vendor Reimbursement Requests Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Reimbursement requests received by the City from a vendor should be reviewed in detail to ensure that reimbursable expenditures are supported by documentation that is complete and clearly readable in order to ensure that any costs that will be reimbursed and charged to the grant are considered supported and allowable. In addition, the payment to the vendor should agree to the amount of eligible costs that are to be reimbursed. Condition: In our testing of expenditures related to the CDBG-CV grant we noted the following: • The City was invoiced for costs in the amount of $56,662, however the supporting documentation provided by the vendor totaled to $55,890 and the City issued a check to the vendor in the amount of $56,232, which did not agree to either the invoiced amount or the amount provided as support for the invoice. • The City was invoiced for the gross amount of payroll costs incurred by the vendor’s employees, however, the support provided for each of the invoices included the employee payroll checks which were net of the related payroll taxes. The City was unable to provide support to show that the vendor paid the payroll taxes to the applicable taxing entities. City staff determined that total gross payroll costs reimbursed to the vendor for fiscal year 2022 were $216,224 and supporting documentation for the net payroll totaled to only $178,538. The difference between the gross amount of payroll charged to the City by the vendor and the net amount of payroll support that was provided was $37,686. • One of the invoices included pages of support that were not readable with costs that totaled $347. We could not determine what the expenditures were for due to the condition of the scans of the supporting documentation. • The support for some of the payroll costs that were being charged to the grant by the vendor included timesheets that were not readable and therefore we could not agree the hours charged from the timesheet to the hours paid in the employees’ paycheck. Effect: Incorrect payments made to vendors or payments made with incomplete supporting documentation or based on documents that are not legible increases the risk that unallowable costs could be charged to the grant. Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to inaccurate reviews of reimbursements and payments to the vendor. In addition, City staff had noticed that some of the documentation was illegible or missing, but did not request the information from the vendor. Questioned Costs: We question costs of $38,033, which consist of $37,686 of payroll taxes paid for which support was not provided and the $347 that was supported by illegible documentation. Recommendation: The City should implement processes to ensure the review of any invoices or requests for reimbursement undergo a detailed review to ensure that all expenditures are supported by clearly legible documentation and that when payment is made to a vendor, the amount of the payment made agrees to the allowable and supported amount being requested by the vendor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-003 Compliance with Grant Management Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: California Water and Wastewater Arrearage Payment Program Guidelines Section F.2.1, Notification of Customer Bill Credits, requires that the City allocate Water Arrearage Program payments as bill credits to customer accounts within 60 days of receiving payment or March 17, 2022, and Appendix A, Section 6.2.1, Notification of Customer Bill Credits, requires that the City allocate Wastewater Arrearage Program payments as bill credits to customer accounts within 60 days of receiving payment or July 7, 2022. In addition, sections F.3 and Appendix A, 6.3, Return of Funds Not Credited to Customers, require that any unexpended funds are to be returned to the grantor within six months of receipt. Condition: We understand the City calculated the customer arrearages and credits to be applied based on the total amount due from March 4, 2020 to June 15, 2021, but did not apply the water and wastewater credits to the customer accounts until dates ranging from March 30, 2022 to September 8, 2022. As noted in Finding #SA2022-006, we were not able to confirm the dates on which the credit calculations were based. In addition, unexpended water funds were due to the grantor by July 15, 2022, but the City did not return the funds to the grantor until October 4, 2022. Cause: We understand that the delay in posting the credits to customer accounts was caused by the adjustments being entered manually into the system by one staff member, which took much longer than anticipated. However, City staff could not provide documentation that the delay was communicated to the grantor. That delay, in turn, caused the delay in the return of unexpended funds to the grantor for the water program. Effect: The City is not in compliance with the terms and conditions of payment related to the required program deadlines of the California Arrearage Payment Programs. As a result, the City could have been required to return moneys to the grantor. Recommendation: Although it does not appear that the grantor disallowed any of the program costs, the City must develop procedures to ensure compliance with grant award terms and conditions of payment, including timely use of grant funds. In the event the City encounters delays that affect timely compliance, the City should communicate with the grantor and retain documentation of any such communications to show that they occurred timely and the grantor was aware of the delay. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-004 Compliance with Grant Reporting Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) agreement with the Department of the Treasury requires that the City “agrees to comply with any reporting obligations established by Treasury as they relate to this award”. The SLFRF Compliance and Reporting Guidance require the filing of a quarterly Project and Expenditure Report that is due by the end of the month following each quarter. Condition: We selected the Q1 2022 (Jan-Mar 2022) and Q2 2022 (April-June 2022) Project and Expenditure Reports for testing of timely filing and noted the Q1 2022 report was filed timely on April 28, 2022 but the Q2 2022 report was not filed until September 1, 2022. Cause: Due to staffing shortages, the City was not able to complete reporting timely. Effect: The City is not in compliance with the award terms and conditions of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with the timely reporting provisions of the grant award terms and conditions and the SLFRF Compliance and Reporting Guidance. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-005 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 Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) 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: The City was unable to provide support showing that suspension and debarment checks were completed during the fiscal year and prior to disbursement to the vendors. We did note that the two vendors we selected for testing were not listed as suspended or debarred on the SAM.gov system as of July 7, 2024. Cause: Due to turnover in staffing, the City was not able to provide support showing that the City was in compliance with the requirement to verify the status of contractors prior to entering into agreements with the entities. Effect: The City is not in compliance with the award terms and conditions and the OMB Compliance Supplement requirements of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with debarment and suspension provisions of the grant award terms and conditions and the OMB Compliance Supplement of the CSLFRF program prior to expending additional funds. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-006 Compliance with Grant Documentation Requirements Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The California Water and Wastewater Arrearage Payment Program Guidelines include the following requirements: • Section F.2.1, Notification of Customer Bill Credits, and Appendix A, Section 6.2.1, Notification of Customer Bill Credits require that the City notify water and wastewater customers, respectively, in writing of the amount credited. The acknowledgement must state that the credited amount is being provided through the California Water and Wastewater Arrearage Payment Program through funding from the State Water Resources Control Board using federal ARPA funds. • Section F.2.2, Payment Plans, requires that the City offer any residential and commercial water customers with remaining balances after the credits have been applied the option to enroll in a payment plan. The notice offering the payment plan must provide the customer with 30 days to enroll in the plan from the date of the notice. Condition: We selected forty-one customer credits (water and wastewater) for testing of the documentation of the date the credit was calculated and whether the notification included the required elements noted in the Guidelines. Although we understand the City calculated the customer arrearages and credits to be applied based on the total amount due from March 4, 2020 to June 15, 2021, City staff was unable to locate documentation to show the actual dates the credits were calculated for each customer and how the credits applied were calculated. We did note that the customers we tested had amounts due during the eligible period in excess of the credits applied. As for the notifications to the customers, City staff could not provide the notifications sent to the customers selected for testing. City staff did provide an example notification for a different water customer credit dated April 28, 2022 that included the required Notification and Payment Plan elements noted above. Cause: We understand that the documentation of how the customer credits were calculated, including the period covered by the credit, could not be located due to staff turnover and due to the approach of the adjustments being entered manually into the system by one staff member. In addition, we understand the notification letters to the individual customers were not retained – only the one example letter was retained in the City’s files. Questioned Costs: We question costs of $735,218, which consists of the amounts charged to the Arrearage Program, because we were unable to verify the dates the credits were calculated. Effect: The City is not in compliance with the terms and conditions of the California Arrearage Payment Programs related to Notification of Customer Credits and Payment Plans. Recommendation: The City should determine if reports can be generated from the utility billing system to show the amounts due from the customers during the eligible period of March 4, 2020 to June 15, 2021 and how the customer credits were calculated. In addition, the City must develop procedures to ensure compliance with all grant award terms and conditions and retain documentation to demonstrate such compliance until the grantor has closed-out the grant award program. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-003 Compliance with Grant Management Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: California Water and Wastewater Arrearage Payment Program Guidelines Section F.2.1, Notification of Customer Bill Credits, requires that the City allocate Water Arrearage Program payments as bill credits to customer accounts within 60 days of receiving payment or March 17, 2022, and Appendix A, Section 6.2.1, Notification of Customer Bill Credits, requires that the City allocate Wastewater Arrearage Program payments as bill credits to customer accounts within 60 days of receiving payment or July 7, 2022. In addition, sections F.3 and Appendix A, 6.3, Return of Funds Not Credited to Customers, require that any unexpended funds are to be returned to the grantor within six months of receipt. Condition: We understand the City calculated the customer arrearages and credits to be applied based on the total amount due from March 4, 2020 to June 15, 2021, but did not apply the water and wastewater credits to the customer accounts until dates ranging from March 30, 2022 to September 8, 2022. As noted in Finding #SA2022-006, we were not able to confirm the dates on which the credit calculations were based. In addition, unexpended water funds were due to the grantor by July 15, 2022, but the City did not return the funds to the grantor until October 4, 2022. Cause: We understand that the delay in posting the credits to customer accounts was caused by the adjustments being entered manually into the system by one staff member, which took much longer than anticipated. However, City staff could not provide documentation that the delay was communicated to the grantor. That delay, in turn, caused the delay in the return of unexpended funds to the grantor for the water program. Effect: The City is not in compliance with the terms and conditions of payment related to the required program deadlines of the California Arrearage Payment Programs. As a result, the City could have been required to return moneys to the grantor. Recommendation: Although it does not appear that the grantor disallowed any of the program costs, the City must develop procedures to ensure compliance with grant award terms and conditions of payment, including timely use of grant funds. In the event the City encounters delays that affect timely compliance, the City should communicate with the grantor and retain documentation of any such communications to show that they occurred timely and the grantor was aware of the delay. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-004 Compliance with Grant Reporting Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) agreement with the Department of the Treasury requires that the City “agrees to comply with any reporting obligations established by Treasury as they relate to this award”. The SLFRF Compliance and Reporting Guidance require the filing of a quarterly Project and Expenditure Report that is due by the end of the month following each quarter. Condition: We selected the Q1 2022 (Jan-Mar 2022) and Q2 2022 (April-June 2022) Project and Expenditure Reports for testing of timely filing and noted the Q1 2022 report was filed timely on April 28, 2022 but the Q2 2022 report was not filed until September 1, 2022. Cause: Due to staffing shortages, the City was not able to complete reporting timely. Effect: The City is not in compliance with the award terms and conditions of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with the timely reporting provisions of the grant award terms and conditions and the SLFRF Compliance and Reporting Guidance. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-005 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 Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) 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: The City was unable to provide support showing that suspension and debarment checks were completed during the fiscal year and prior to disbursement to the vendors. We did note that the two vendors we selected for testing were not listed as suspended or debarred on the SAM.gov system as of July 7, 2024. Cause: Due to turnover in staffing, the City was not able to provide support showing that the City was in compliance with the requirement to verify the status of contractors prior to entering into agreements with the entities. Effect: The City is not in compliance with the award terms and conditions and the OMB Compliance Supplement requirements of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with debarment and suspension provisions of the grant award terms and conditions and the OMB Compliance Supplement of the CSLFRF program prior to expending additional funds. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-006 Compliance with Grant Documentation Requirements Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The California Water and Wastewater Arrearage Payment Program Guidelines include the following requirements: • Section F.2.1, Notification of Customer Bill Credits, and Appendix A, Section 6.2.1, Notification of Customer Bill Credits require that the City notify water and wastewater customers, respectively, in writing of the amount credited. The acknowledgement must state that the credited amount is being provided through the California Water and Wastewater Arrearage Payment Program through funding from the State Water Resources Control Board using federal ARPA funds. • Section F.2.2, Payment Plans, requires that the City offer any residential and commercial water customers with remaining balances after the credits have been applied the option to enroll in a payment plan. The notice offering the payment plan must provide the customer with 30 days to enroll in the plan from the date of the notice. Condition: We selected forty-one customer credits (water and wastewater) for testing of the documentation of the date the credit was calculated and whether the notification included the required elements noted in the Guidelines. Although we understand the City calculated the customer arrearages and credits to be applied based on the total amount due from March 4, 2020 to June 15, 2021, City staff was unable to locate documentation to show the actual dates the credits were calculated for each customer and how the credits applied were calculated. We did note that the customers we tested had amounts due during the eligible period in excess of the credits applied. As for the notifications to the customers, City staff could not provide the notifications sent to the customers selected for testing. City staff did provide an example notification for a different water customer credit dated April 28, 2022 that included the required Notification and Payment Plan elements noted above. Cause: We understand that the documentation of how the customer credits were calculated, including the period covered by the credit, could not be located due to staff turnover and due to the approach of the adjustments being entered manually into the system by one staff member. In addition, we understand the notification letters to the individual customers were not retained – only the one example letter was retained in the City’s files. Questioned Costs: We question costs of $735,218, which consists of the amounts charged to the Arrearage Program, because we were unable to verify the dates the credits were calculated. Effect: The City is not in compliance with the terms and conditions of the California Arrearage Payment Programs related to Notification of Customer Credits and Payment Plans. Recommendation: The City should determine if reports can be generated from the utility billing system to show the amounts due from the customers during the eligible period of March 4, 2020 to June 15, 2021 and how the customer credits were calculated. In addition, the City must develop procedures to ensure compliance with all grant award terms and conditions and retain documentation to demonstrate such compliance until the grantor has closed-out the grant award program. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-002: Timely Submission of Financial and Performance Reports Assistance Listing Number 97.083 Assistance Listing Title Staffing for Adequate Fire and Emergency Responses (SAFER) Name of Federal Agency Department of Homeland Security Federal Award Identification number: EMW-2018-FH-00543 Criteria: Financial and performance reports should be filed with the grantor timely. Financial reports (SF-425) are required to be submitted semi-annually within 90 days of the reporting period end and performance progress reports are required to be submitted within 30 days of the reporting period end. Condition: City staff stated that the SF-425 report for the period ending June 30, 2022 was never submitted, and the performance progress reports for the periods ending December 31, 2021 and June 30, 2022 were not submitted until February 2, 2024. Effect: Without timely submission of reports the City is not in compliance with the reporting requirements of the grant agreement. Cause: We understand City staff did not submit the financial and performance reports timely due to continuous staff turnover and the lack of workforce availability contributed to the shifting of grant responsibilities between different employees. Recommendation: The City must implement procedures to ensure financial and performance reports are submitted in a timely manner in compliance with grant requirements. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-007: Cash Management Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: The City should submit drawdown requests to San Joaquin County throughout the fiscal year as costs are incurred. Those drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the County, unless specifically authorized by the grantor, and costs reported on the SEFA should be the same as those included in requests for reimbursement. Condition: The City reported expenditures under the COVID-19 - CDBG-CV Program totaling $378,077 in fiscal year 2021. As noted in prior year finding SA2021-005, the City had not requested reimbursement for all of those costs during fiscal year 2021 or subsequent to fiscal year 2021. When we began our work on the fiscal year 2022 single audit, we noted that the COVID-19 - CDBG-CV Program was not included on the SEFA. The grant award was for $400,000 and we inquired about whether the remaining funding of $21,923 had been expended or reimbursed during the fiscal year 2022. In response to that question, City staff provided the grant drawdown information which totaled to $400,000, but only $40,200 of those costs had been included on the prior year SEFA. The remaining costs drawn down from the grant during fiscal year 2022 of $359,800 were different costs than were incurred during fiscal year 2021. Effect: The City is not matching expenditures with associated grant revenues throughout the fiscal year as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the County. In addition, when the City reports costs on the SEFA that are different from the costs requested for reimbursement from the grantor, it not only misstates the SEFA, but it could also mean ineligible costs are reported. Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to the late preparation of reimbursements and the inclusion of project expenditures on the reimbursement request that were different from those reported on the prior year SEFA. Identification as a repeat finding: Yes, since 2021 Recommendation: The City must develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year. In addition, City staff should ensure that program costs incurred are properly reported on the annual SEFA. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-008: Accurate Review and Payment of Vendor Reimbursement Requests Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Reimbursement requests received by the City from a vendor should be reviewed in detail to ensure that reimbursable expenditures are supported by documentation that is complete and clearly readable in order to ensure that any costs that will be reimbursed and charged to the grant are considered supported and allowable. In addition, the payment to the vendor should agree to the amount of eligible costs that are to be reimbursed. Condition: In our testing of expenditures related to the CDBG-CV grant we noted the following: • The City was invoiced for costs in the amount of $56,662, however the supporting documentation provided by the vendor totaled to $55,890 and the City issued a check to the vendor in the amount of $56,232, which did not agree to either the invoiced amount or the amount provided as support for the invoice. • The City was invoiced for the gross amount of payroll costs incurred by the vendor’s employees, however, the support provided for each of the invoices included the employee payroll checks which were net of the related payroll taxes. The City was unable to provide support to show that the vendor paid the payroll taxes to the applicable taxing entities. City staff determined that total gross payroll costs reimbursed to the vendor for fiscal year 2022 were $216,224 and supporting documentation for the net payroll totaled to only $178,538. The difference between the gross amount of payroll charged to the City by the vendor and the net amount of payroll support that was provided was $37,686. • One of the invoices included pages of support that were not readable with costs that totaled $347. We could not determine what the expenditures were for due to the condition of the scans of the supporting documentation. • The support for some of the payroll costs that were being charged to the grant by the vendor included timesheets that were not readable and therefore we could not agree the hours charged from the timesheet to the hours paid in the employees’ paycheck. Effect: Incorrect payments made to vendors or payments made with incomplete supporting documentation or based on documents that are not legible increases the risk that unallowable costs could be charged to the grant. Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to inaccurate reviews of reimbursements and payments to the vendor. In addition, City staff had noticed that some of the documentation was illegible or missing, but did not request the information from the vendor. Questioned Costs: We question costs of $38,033, which consist of $37,686 of payroll taxes paid for which support was not provided and the $347 that was supported by illegible documentation. Recommendation: The City should implement processes to ensure the review of any invoices or requests for reimbursement undergo a detailed review to ensure that all expenditures are supported by clearly legible documentation and that when payment is made to a vendor, the amount of the payment made agrees to the allowable and supported amount being requested by the vendor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-007: Cash Management Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: The City should submit drawdown requests to San Joaquin County throughout the fiscal year as costs are incurred. Those drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the County, unless specifically authorized by the grantor, and costs reported on the SEFA should be the same as those included in requests for reimbursement. Condition: The City reported expenditures under the COVID-19 - CDBG-CV Program totaling $378,077 in fiscal year 2021. As noted in prior year finding SA2021-005, the City had not requested reimbursement for all of those costs during fiscal year 2021 or subsequent to fiscal year 2021. When we began our work on the fiscal year 2022 single audit, we noted that the COVID-19 - CDBG-CV Program was not included on the SEFA. The grant award was for $400,000 and we inquired about whether the remaining funding of $21,923 had been expended or reimbursed during the fiscal year 2022. In response to that question, City staff provided the grant drawdown information which totaled to $400,000, but only $40,200 of those costs had been included on the prior year SEFA. The remaining costs drawn down from the grant during fiscal year 2022 of $359,800 were different costs than were incurred during fiscal year 2021. Effect: The City is not matching expenditures with associated grant revenues throughout the fiscal year as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the County. In addition, when the City reports costs on the SEFA that are different from the costs requested for reimbursement from the grantor, it not only misstates the SEFA, but it could also mean ineligible costs are reported. Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to the late preparation of reimbursements and the inclusion of project expenditures on the reimbursement request that were different from those reported on the prior year SEFA. Identification as a repeat finding: Yes, since 2021 Recommendation: The City must develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year. In addition, City staff should ensure that program costs incurred are properly reported on the annual SEFA. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-008: Accurate Review and Payment of Vendor Reimbursement Requests Assistance Listing Number: 14.218 Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Reimbursement requests received by the City from a vendor should be reviewed in detail to ensure that reimbursable expenditures are supported by documentation that is complete and clearly readable in order to ensure that any costs that will be reimbursed and charged to the grant are considered supported and allowable. In addition, the payment to the vendor should agree to the amount of eligible costs that are to be reimbursed. Condition: In our testing of expenditures related to the CDBG-CV grant we noted the following: • The City was invoiced for costs in the amount of $56,662, however the supporting documentation provided by the vendor totaled to $55,890 and the City issued a check to the vendor in the amount of $56,232, which did not agree to either the invoiced amount or the amount provided as support for the invoice. • The City was invoiced for the gross amount of payroll costs incurred by the vendor’s employees, however, the support provided for each of the invoices included the employee payroll checks which were net of the related payroll taxes. The City was unable to provide support to show that the vendor paid the payroll taxes to the applicable taxing entities. City staff determined that total gross payroll costs reimbursed to the vendor for fiscal year 2022 were $216,224 and supporting documentation for the net payroll totaled to only $178,538. The difference between the gross amount of payroll charged to the City by the vendor and the net amount of payroll support that was provided was $37,686. • One of the invoices included pages of support that were not readable with costs that totaled $347. We could not determine what the expenditures were for due to the condition of the scans of the supporting documentation. • The support for some of the payroll costs that were being charged to the grant by the vendor included timesheets that were not readable and therefore we could not agree the hours charged from the timesheet to the hours paid in the employees’ paycheck. Effect: Incorrect payments made to vendors or payments made with incomplete supporting documentation or based on documents that are not legible increases the risk that unallowable costs could be charged to the grant. Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to inaccurate reviews of reimbursements and payments to the vendor. In addition, City staff had noticed that some of the documentation was illegible or missing, but did not request the information from the vendor. Questioned Costs: We question costs of $38,033, which consist of $37,686 of payroll taxes paid for which support was not provided and the $347 that was supported by illegible documentation. Recommendation: The City should implement processes to ensure the review of any invoices or requests for reimbursement undergo a detailed review to ensure that all expenditures are supported by clearly legible documentation and that when payment is made to a vendor, the amount of the payment made agrees to the allowable and supported amount being requested by the vendor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-003 Compliance with Grant Management Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: California Water and Wastewater Arrearage Payment Program Guidelines Section F.2.1, Notification of Customer Bill Credits, requires that the City allocate Water Arrearage Program payments as bill credits to customer accounts within 60 days of receiving payment or March 17, 2022, and Appendix A, Section 6.2.1, Notification of Customer Bill Credits, requires that the City allocate Wastewater Arrearage Program payments as bill credits to customer accounts within 60 days of receiving payment or July 7, 2022. In addition, sections F.3 and Appendix A, 6.3, Return of Funds Not Credited to Customers, require that any unexpended funds are to be returned to the grantor within six months of receipt. Condition: We understand the City calculated the customer arrearages and credits to be applied based on the total amount due from March 4, 2020 to June 15, 2021, but did not apply the water and wastewater credits to the customer accounts until dates ranging from March 30, 2022 to September 8, 2022. As noted in Finding #SA2022-006, we were not able to confirm the dates on which the credit calculations were based. In addition, unexpended water funds were due to the grantor by July 15, 2022, but the City did not return the funds to the grantor until October 4, 2022. Cause: We understand that the delay in posting the credits to customer accounts was caused by the adjustments being entered manually into the system by one staff member, which took much longer than anticipated. However, City staff could not provide documentation that the delay was communicated to the grantor. That delay, in turn, caused the delay in the return of unexpended funds to the grantor for the water program. Effect: The City is not in compliance with the terms and conditions of payment related to the required program deadlines of the California Arrearage Payment Programs. As a result, the City could have been required to return moneys to the grantor. Recommendation: Although it does not appear that the grantor disallowed any of the program costs, the City must develop procedures to ensure compliance with grant award terms and conditions of payment, including timely use of grant funds. In the event the City encounters delays that affect timely compliance, the City should communicate with the grantor and retain documentation of any such communications to show that they occurred timely and the grantor was aware of the delay. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-004 Compliance with Grant Reporting Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) agreement with the Department of the Treasury requires that the City “agrees to comply with any reporting obligations established by Treasury as they relate to this award”. The SLFRF Compliance and Reporting Guidance require the filing of a quarterly Project and Expenditure Report that is due by the end of the month following each quarter. Condition: We selected the Q1 2022 (Jan-Mar 2022) and Q2 2022 (April-June 2022) Project and Expenditure Reports for testing of timely filing and noted the Q1 2022 report was filed timely on April 28, 2022 but the Q2 2022 report was not filed until September 1, 2022. Cause: Due to staffing shortages, the City was not able to complete reporting timely. Effect: The City is not in compliance with the award terms and conditions of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with the timely reporting provisions of the grant award terms and conditions and the SLFRF Compliance and Reporting Guidance. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-005 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 Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) 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: The City was unable to provide support showing that suspension and debarment checks were completed during the fiscal year and prior to disbursement to the vendors. We did note that the two vendors we selected for testing were not listed as suspended or debarred on the SAM.gov system as of July 7, 2024. Cause: Due to turnover in staffing, the City was not able to provide support showing that the City was in compliance with the requirement to verify the status of contractors prior to entering into agreements with the entities. Effect: The City is not in compliance with the award terms and conditions and the OMB Compliance Supplement requirements of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with debarment and suspension provisions of the grant award terms and conditions and the OMB Compliance Supplement of the CSLFRF program prior to expending additional funds. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-006 Compliance with Grant Documentation Requirements Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The California Water and Wastewater Arrearage Payment Program Guidelines include the following requirements: • Section F.2.1, Notification of Customer Bill Credits, and Appendix A, Section 6.2.1, Notification of Customer Bill Credits require that the City notify water and wastewater customers, respectively, in writing of the amount credited. The acknowledgement must state that the credited amount is being provided through the California Water and Wastewater Arrearage Payment Program through funding from the State Water Resources Control Board using federal ARPA funds. • Section F.2.2, Payment Plans, requires that the City offer any residential and commercial water customers with remaining balances after the credits have been applied the option to enroll in a payment plan. The notice offering the payment plan must provide the customer with 30 days to enroll in the plan from the date of the notice. Condition: We selected forty-one customer credits (water and wastewater) for testing of the documentation of the date the credit was calculated and whether the notification included the required elements noted in the Guidelines. Although we understand the City calculated the customer arrearages and credits to be applied based on the total amount due from March 4, 2020 to June 15, 2021, City staff was unable to locate documentation to show the actual dates the credits were calculated for each customer and how the credits applied were calculated. We did note that the customers we tested had amounts due during the eligible period in excess of the credits applied. As for the notifications to the customers, City staff could not provide the notifications sent to the customers selected for testing. City staff did provide an example notification for a different water customer credit dated April 28, 2022 that included the required Notification and Payment Plan elements noted above. Cause: We understand that the documentation of how the customer credits were calculated, including the period covered by the credit, could not be located due to staff turnover and due to the approach of the adjustments being entered manually into the system by one staff member. In addition, we understand the notification letters to the individual customers were not retained – only the one example letter was retained in the City’s files. Questioned Costs: We question costs of $735,218, which consists of the amounts charged to the Arrearage Program, because we were unable to verify the dates the credits were calculated. Effect: The City is not in compliance with the terms and conditions of the California Arrearage Payment Programs related to Notification of Customer Credits and Payment Plans. Recommendation: The City should determine if reports can be generated from the utility billing system to show the amounts due from the customers during the eligible period of March 4, 2020 to June 15, 2021 and how the customer credits were calculated. In addition, the City must develop procedures to ensure compliance with all grant award terms and conditions and retain documentation to demonstrate such compliance until the grantor has closed-out the grant award program. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-003 Compliance with Grant Management Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: California Water and Wastewater Arrearage Payment Program Guidelines Section F.2.1, Notification of Customer Bill Credits, requires that the City allocate Water Arrearage Program payments as bill credits to customer accounts within 60 days of receiving payment or March 17, 2022, and Appendix A, Section 6.2.1, Notification of Customer Bill Credits, requires that the City allocate Wastewater Arrearage Program payments as bill credits to customer accounts within 60 days of receiving payment or July 7, 2022. In addition, sections F.3 and Appendix A, 6.3, Return of Funds Not Credited to Customers, require that any unexpended funds are to be returned to the grantor within six months of receipt. Condition: We understand the City calculated the customer arrearages and credits to be applied based on the total amount due from March 4, 2020 to June 15, 2021, but did not apply the water and wastewater credits to the customer accounts until dates ranging from March 30, 2022 to September 8, 2022. As noted in Finding #SA2022-006, we were not able to confirm the dates on which the credit calculations were based. In addition, unexpended water funds were due to the grantor by July 15, 2022, but the City did not return the funds to the grantor until October 4, 2022. Cause: We understand that the delay in posting the credits to customer accounts was caused by the adjustments being entered manually into the system by one staff member, which took much longer than anticipated. However, City staff could not provide documentation that the delay was communicated to the grantor. That delay, in turn, caused the delay in the return of unexpended funds to the grantor for the water program. Effect: The City is not in compliance with the terms and conditions of payment related to the required program deadlines of the California Arrearage Payment Programs. As a result, the City could have been required to return moneys to the grantor. Recommendation: Although it does not appear that the grantor disallowed any of the program costs, the City must develop procedures to ensure compliance with grant award terms and conditions of payment, including timely use of grant funds. In the event the City encounters delays that affect timely compliance, the City should communicate with the grantor and retain documentation of any such communications to show that they occurred timely and the grantor was aware of the delay. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-004 Compliance with Grant Reporting Deadlines Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) agreement with the Department of the Treasury requires that the City “agrees to comply with any reporting obligations established by Treasury as they relate to this award”. The SLFRF Compliance and Reporting Guidance require the filing of a quarterly Project and Expenditure Report that is due by the end of the month following each quarter. Condition: We selected the Q1 2022 (Jan-Mar 2022) and Q2 2022 (April-June 2022) Project and Expenditure Reports for testing of timely filing and noted the Q1 2022 report was filed timely on April 28, 2022 but the Q2 2022 report was not filed until September 1, 2022. Cause: Due to staffing shortages, the City was not able to complete reporting timely. Effect: The City is not in compliance with the award terms and conditions of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with the timely reporting provisions of the grant award terms and conditions and the SLFRF Compliance and Reporting Guidance. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-005 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 Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The award terms and conditions of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) 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: The City was unable to provide support showing that suspension and debarment checks were completed during the fiscal year and prior to disbursement to the vendors. We did note that the two vendors we selected for testing were not listed as suspended or debarred on the SAM.gov system as of July 7, 2024. Cause: Due to turnover in staffing, the City was not able to provide support showing that the City was in compliance with the requirement to verify the status of contractors prior to entering into agreements with the entities. Effect: The City is not in compliance with the award terms and conditions and the OMB Compliance Supplement requirements of the CSLFRF program. Recommendation: The City must develop procedures to ensure compliance with debarment and suspension provisions of the grant award terms and conditions and the OMB Compliance Supplement of the CSLFRF program prior to expending additional funds. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-006 Compliance with Grant Documentation Requirements Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Pass Through Entity: California State Water Resources Control Board Federal Award Identification Number: 68-0281986 Criteria: The California Water and Wastewater Arrearage Payment Program Guidelines include the following requirements: • Section F.2.1, Notification of Customer Bill Credits, and Appendix A, Section 6.2.1, Notification of Customer Bill Credits require that the City notify water and wastewater customers, respectively, in writing of the amount credited. The acknowledgement must state that the credited amount is being provided through the California Water and Wastewater Arrearage Payment Program through funding from the State Water Resources Control Board using federal ARPA funds. • Section F.2.2, Payment Plans, requires that the City offer any residential and commercial water customers with remaining balances after the credits have been applied the option to enroll in a payment plan. The notice offering the payment plan must provide the customer with 30 days to enroll in the plan from the date of the notice. Condition: We selected forty-one customer credits (water and wastewater) for testing of the documentation of the date the credit was calculated and whether the notification included the required elements noted in the Guidelines. Although we understand the City calculated the customer arrearages and credits to be applied based on the total amount due from March 4, 2020 to June 15, 2021, City staff was unable to locate documentation to show the actual dates the credits were calculated for each customer and how the credits applied were calculated. We did note that the customers we tested had amounts due during the eligible period in excess of the credits applied. As for the notifications to the customers, City staff could not provide the notifications sent to the customers selected for testing. City staff did provide an example notification for a different water customer credit dated April 28, 2022 that included the required Notification and Payment Plan elements noted above. Cause: We understand that the documentation of how the customer credits were calculated, including the period covered by the credit, could not be located due to staff turnover and due to the approach of the adjustments being entered manually into the system by one staff member. In addition, we understand the notification letters to the individual customers were not retained – only the one example letter was retained in the City’s files. Questioned Costs: We question costs of $735,218, which consists of the amounts charged to the Arrearage Program, because we were unable to verify the dates the credits were calculated. Effect: The City is not in compliance with the terms and conditions of the California Arrearage Payment Programs related to Notification of Customer Credits and Payment Plans. Recommendation: The City should determine if reports can be generated from the utility billing system to show the amounts due from the customers during the eligible period of March 4, 2020 to June 15, 2021 and how the customer credits were calculated. In addition, the City must develop procedures to ensure compliance with all grant award terms and conditions and retain documentation to demonstrate such compliance until the grantor has closed-out the grant award program. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2022-002: Timely Submission of Financial and Performance Reports Assistance Listing Number 97.083 Assistance Listing Title Staffing for Adequate Fire and Emergency Responses (SAFER) Name of Federal Agency Department of Homeland Security Federal Award Identification number: EMW-2018-FH-00543 Criteria: Financial and performance reports should be filed with the grantor timely. Financial reports (SF-425) are required to be submitted semi-annually within 90 days of the reporting period end and performance progress reports are required to be submitted within 30 days of the reporting period end. Condition: City staff stated that the SF-425 report for the period ending June 30, 2022 was never submitted, and the performance progress reports for the periods ending December 31, 2021 and June 30, 2022 were not submitted until February 2, 2024. Effect: Without timely submission of reports the City is not in compliance with the reporting requirements of the grant agreement. Cause: We understand City staff did not submit the financial and performance reports timely due to continuous staff turnover and the lack of workforce availability contributed to the shifting of grant responsibilities between different employees. Recommendation: The City must implement procedures to ensure financial and performance reports are submitted in a timely manner in compliance with grant requirements. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.