Audit 3605

2022-001 The City did not have adequate internal controls for ensuring compliance with federal reporting requirements. Assistance Listing Number and Title: 14.218 – COVID-19 – Community Development Block Grant/Entitlement Grants 14.218 – Community Development Block Grants/Entitlement Grants Federal Grantor Name: U.S. Department of Housing and Urban Development (HUD) Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The primary objective of the Community Development Block Grants/Entitlement Grants (CDBG) program is to help provide decent and affordable housing, particularly for people with moderate, low and very low incomes. Funds also help recipients implement strategies for achieving an adequate supply of decent housing and providing suitable living environments and expanded economic opportunities for people with low incomes. In 2022, the City spent $1,538,040 for its CDBG program. Of this amount, it passed $1,156,939 through to subrecipients. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring with effectiveness of established controls. The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The City has until the end of the month plus one additional month after obligating a subaward to fulfill this reporting requirement. Description of Condition We found the City’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the City made seven subawards in 2022 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as required. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition City staff said they stopped using the FSRS.gov website when performance reporting systems changed. As a result, the City stopped receiving reminder notifications related to reporting deadlines. While FFATA reporting was included in the award agreements, staff in the responsible department were unaware the requirements still existed. Staff relied on the HUD platform and thought the City would not receive reimbursement if all the reporting requirements had not been met. Effect of Condition Failing to submit the required reports diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The City has since submitted all FFATA reports applicable to the audit period. Below is a summary of the discrepancies we identified. Recommendation We recommend the City strengthen its internal controls to ensure it prepares and submits FFATA reports for all subawards subject to the requirement, as federal regulations require. City’s Response The City of Bellingham has corrected its oversight in failing to file FFATA reports related to Housing and Services Program federal funding, and all reports are now up to date. In the future, the City will ensure timely reporting with procedures in place for the responsible staff to report regularly and verify reporting is completed via email to the Housing and Services Program Manager. Auditor’s Remarks We appreciate the City’s commitment to resolve this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS). The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.

2022-001 The City did not have adequate internal controls for ensuring compliance with federal reporting requirements. Assistance Listing Number and Title: 14.218 – COVID-19 – Community Development Block Grant/Entitlement Grants 14.218 – Community Development Block Grants/Entitlement Grants Federal Grantor Name: U.S. Department of Housing and Urban Development (HUD) Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The primary objective of the Community Development Block Grants/Entitlement Grants (CDBG) program is to help provide decent and affordable housing, particularly for people with moderate, low and very low incomes. Funds also help recipients implement strategies for achieving an adequate supply of decent housing and providing suitable living environments and expanded economic opportunities for people with low incomes. In 2022, the City spent $1,538,040 for its CDBG program. Of this amount, it passed $1,156,939 through to subrecipients. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring with effectiveness of established controls. The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The City has until the end of the month plus one additional month after obligating a subaward to fulfill this reporting requirement. Description of Condition We found the City’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the City made seven subawards in 2022 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as required. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition City staff said they stopped using the FSRS.gov website when performance reporting systems changed. As a result, the City stopped receiving reminder notifications related to reporting deadlines. While FFATA reporting was included in the award agreements, staff in the responsible department were unaware the requirements still existed. Staff relied on the HUD platform and thought the City would not receive reimbursement if all the reporting requirements had not been met. Effect of Condition Failing to submit the required reports diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The City has since submitted all FFATA reports applicable to the audit period. Below is a summary of the discrepancies we identified. Recommendation We recommend the City strengthen its internal controls to ensure it prepares and submits FFATA reports for all subawards subject to the requirement, as federal regulations require. City’s Response The City of Bellingham has corrected its oversight in failing to file FFATA reports related to Housing and Services Program federal funding, and all reports are now up to date. In the future, the City will ensure timely reporting with procedures in place for the responsible staff to report regularly and verify reporting is completed via email to the Housing and Services Program Manager. Auditor’s Remarks We appreciate the City’s commitment to resolve this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS). The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.

2022-001 The City did not have adequate internal controls for ensuring compliance with federal reporting requirements. Assistance Listing Number and Title: 14.218 – COVID-19 – Community Development Block Grant/Entitlement Grants 14.218 – Community Development Block Grants/Entitlement Grants Federal Grantor Name: U.S. Department of Housing and Urban Development (HUD) Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The primary objective of the Community Development Block Grants/Entitlement Grants (CDBG) program is to help provide decent and affordable housing, particularly for people with moderate, low and very low incomes. Funds also help recipients implement strategies for achieving an adequate supply of decent housing and providing suitable living environments and expanded economic opportunities for people with low incomes. In 2022, the City spent $1,538,040 for its CDBG program. Of this amount, it passed $1,156,939 through to subrecipients. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring with effectiveness of established controls. The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The City has until the end of the month plus one additional month after obligating a subaward to fulfill this reporting requirement. Description of Condition We found the City’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the City made seven subawards in 2022 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as required. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition City staff said they stopped using the FSRS.gov website when performance reporting systems changed. As a result, the City stopped receiving reminder notifications related to reporting deadlines. While FFATA reporting was included in the award agreements, staff in the responsible department were unaware the requirements still existed. Staff relied on the HUD platform and thought the City would not receive reimbursement if all the reporting requirements had not been met. Effect of Condition Failing to submit the required reports diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The City has since submitted all FFATA reports applicable to the audit period. Below is a summary of the discrepancies we identified. Recommendation We recommend the City strengthen its internal controls to ensure it prepares and submits FFATA reports for all subawards subject to the requirement, as federal regulations require. City’s Response The City of Bellingham has corrected its oversight in failing to file FFATA reports related to Housing and Services Program federal funding, and all reports are now up to date. In the future, the City will ensure timely reporting with procedures in place for the responsible staff to report regularly and verify reporting is completed via email to the Housing and Services Program Manager. Auditor’s Remarks We appreciate the City’s commitment to resolve this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS). The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.

2022-001 The City did not have adequate internal controls for ensuring compliance with federal reporting requirements. Assistance Listing Number and Title: 14.218 – COVID-19 – Community Development Block Grant/Entitlement Grants 14.218 – Community Development Block Grants/Entitlement Grants Federal Grantor Name: U.S. Department of Housing and Urban Development (HUD) Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The primary objective of the Community Development Block Grants/Entitlement Grants (CDBG) program is to help provide decent and affordable housing, particularly for people with moderate, low and very low incomes. Funds also help recipients implement strategies for achieving an adequate supply of decent housing and providing suitable living environments and expanded economic opportunities for people with low incomes. In 2022, the City spent $1,538,040 for its CDBG program. Of this amount, it passed $1,156,939 through to subrecipients. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring with effectiveness of established controls. The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The City has until the end of the month plus one additional month after obligating a subaward to fulfill this reporting requirement. Description of Condition We found the City’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the City made seven subawards in 2022 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as required. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition City staff said they stopped using the FSRS.gov website when performance reporting systems changed. As a result, the City stopped receiving reminder notifications related to reporting deadlines. While FFATA reporting was included in the award agreements, staff in the responsible department were unaware the requirements still existed. Staff relied on the HUD platform and thought the City would not receive reimbursement if all the reporting requirements had not been met. Effect of Condition Failing to submit the required reports diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The City has since submitted all FFATA reports applicable to the audit period. Below is a summary of the discrepancies we identified. Recommendation We recommend the City strengthen its internal controls to ensure it prepares and submits FFATA reports for all subawards subject to the requirement, as federal regulations require. City’s Response The City of Bellingham has corrected its oversight in failing to file FFATA reports related to Housing and Services Program federal funding, and all reports are now up to date. In the future, the City will ensure timely reporting with procedures in place for the responsible staff to report regularly and verify reporting is completed via email to the Housing and Services Program Manager. Auditor’s Remarks We appreciate the City’s commitment to resolve this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS). The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.