Audit 352902

2024-01 – Reporting (Significant Deficiency) Program: Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number 21.027, U.S. Department of Treasury, Direct Program Criteria: Per the State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, metropolitan cities with a population below 250,000 that are allocated more than $10 million in State and Local Fiscal Recovery Funds are required to submit Performance and Expenditure Reports (P&E Reports) quarterly. Internal controls over reporting compliance should ensure accurate, complete, and timely submission of all required reports. Condition: Management that tracked and submitted the P&E Reports left the City in August 2022, and new management was not aware of the requirement nor received correspondence from the U.S. Department of Treasury (Treasury). Effect: The City did not submit any of the required quarterly P&E Reports to the Treasury for the period that covered July 1, 2023 through September 30, 2023. Questioned Costs: None Repeat Finding: This is the continuation of finding 2023-04. Correction was implemented January 31, 2024. Recommendation: None Management’s Response: This is resolved.

2024-02 – Allowable Costs (Significant Deficiency) Program: Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number 21.027, U.S. Department of Treasury, Passed through the State Water Resources Control Board Criteria: Grant expenditures should be for costs that are allowable per the grant requirements. Internal controls over grant expenditures should ensure compliance over the grant requirements. The State Water Resources Control Board (State) grant allows credits to customer water and wastewater accounts for unpaid bills from the period July 1, 2021 through December 31, 2022. Additionally, customer accounts should be credited only for bills for services that remain unpaid as of the date the account credit is applied. Condition: The City calculated the unpaid bills as of December 2023 when applying for the grant but did not re-calculate those unpaid amounts as of the date the accounts were received from the State and credited with the grant funds in April 2024. Effect: Customers who paid down their liabilities to the City between the date the City applied for the grant and the date the grant funds were received from the State ended with accounts that had credit balances, thus pre-paying for future bills. Credits for future bills is not allowable per the grant. Questioned Costs: 10 of the 25 credited accounts we tested were over-credited by a total of $10,467. Some of the other credited accounts tested could have been credited more, resulting in a net over-credit of $6,921 for the selections as known questioned costs. Likely questioned costs for the program totaled $116,900, which includes the corresponding allowable administrative overhead charge of 3%. Repeat Finding: This is not a repeat finding. Recommendation: We recommend the City read and summarize grant requirements for all grants that the City participates in, as well as implementing controls over those grant requirements to prevent errors from occurring. Management’s Response: The City agrees that the absence of a structured data review and analysis process sufficient to fulfill reporting requirements creates a risk of noncompliance with federal statutes, regulations, and terms and conditions of the grant awards. The City will develop, document, and implement formal grant summary requirements review process and audit preparedness policy and procedures. The responsibilities, deliverables, and deadlines will be clearly outlined and communicated to all staff members. The City will remedy the customer account credit balances by October 2025. Management intends to review and adjust the customer account balances.

2024-01 – Reporting (Significant Deficiency) Program: Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number 21.027, U.S. Department of Treasury, Direct Program Criteria: Per the State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, metropolitan cities with a population below 250,000 that are allocated more than $10 million in State and Local Fiscal Recovery Funds are required to submit Performance and Expenditure Reports (P&E Reports) quarterly. Internal controls over reporting compliance should ensure accurate, complete, and timely submission of all required reports. Condition: Management that tracked and submitted the P&E Reports left the City in August 2022, and new management was not aware of the requirement nor received correspondence from the U.S. Department of Treasury (Treasury). Effect: The City did not submit any of the required quarterly P&E Reports to the Treasury for the period that covered July 1, 2023 through September 30, 2023. Questioned Costs: None Repeat Finding: This is the continuation of finding 2023-04. Correction was implemented January 31, 2024. Recommendation: None Management’s Response: This is resolved.

2024-02 – Allowable Costs (Significant Deficiency) Program: Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number 21.027, U.S. Department of Treasury, Passed through the State Water Resources Control Board Criteria: Grant expenditures should be for costs that are allowable per the grant requirements. Internal controls over grant expenditures should ensure compliance over the grant requirements. The State Water Resources Control Board (State) grant allows credits to customer water and wastewater accounts for unpaid bills from the period July 1, 2021 through December 31, 2022. Additionally, customer accounts should be credited only for bills for services that remain unpaid as of the date the account credit is applied. Condition: The City calculated the unpaid bills as of December 2023 when applying for the grant but did not re-calculate those unpaid amounts as of the date the accounts were received from the State and credited with the grant funds in April 2024. Effect: Customers who paid down their liabilities to the City between the date the City applied for the grant and the date the grant funds were received from the State ended with accounts that had credit balances, thus pre-paying for future bills. Credits for future bills is not allowable per the grant. Questioned Costs: 10 of the 25 credited accounts we tested were over-credited by a total of $10,467. Some of the other credited accounts tested could have been credited more, resulting in a net over-credit of $6,921 for the selections as known questioned costs. Likely questioned costs for the program totaled $116,900, which includes the corresponding allowable administrative overhead charge of 3%. Repeat Finding: This is not a repeat finding. Recommendation: We recommend the City read and summarize grant requirements for all grants that the City participates in, as well as implementing controls over those grant requirements to prevent errors from occurring. Management’s Response: The City agrees that the absence of a structured data review and analysis process sufficient to fulfill reporting requirements creates a risk of noncompliance with federal statutes, regulations, and terms and conditions of the grant awards. The City will develop, document, and implement formal grant summary requirements review process and audit preparedness policy and procedures. The responsibilities, deliverables, and deadlines will be clearly outlined and communicated to all staff members. The City will remedy the customer account credit balances by October 2025. Management intends to review and adjust the customer account balances.