Finding #SA2024-001 Cash Management and Accuracy of Federal Financial Reports Assistance Listing Number: 20.507 Assistance Listing Title: COVID-19 – Federal Transit Formula Grants (Urbanized Area Formula Program) – Federal Transit Cluster Name of Federal Agency: Department of Transportation Federal Award Identification Number: CA-2022-083-00 Criteria: The 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Related to these requirements, the City should submit drawdown requests to the Department of Transportation throughout the fiscal year as costs are incurred and Federal Financial Reports should agree with those drawdown requests and supporting accounting records. 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 Department of Transportation unless specifically authorized by the grantor, and costs included in the Federal Financial Reports should be the same as those included in requests for reimbursement. Condition: During our review of the Federal Financial Reports related to grant CA-2022-083-00, we noted that for the first quarter of fiscal year 2024, the report included expenditures in the amount of $364,837, but the City only requested reimbursement in the amount of $265,281 during that same time period. In addition to our review of the Federal Financial Reports, we also reviewed the timing of expenditures in relation to the associated reimbursement requests and noted that for both of the grants listed above, the City did not file for and receive reimbursement for the associated grant expenditures until four to over eight months after the activity took place. The grant drawdowns took place as follows: Period of Federal Expenditures Date of Filing for Reimbursement July 1, 2023 to September 30, 2023 May 20, 2024 October 1, 2023 to December 31, 2023 May 20, 2024 January 1, 2024 to March 31, 2024 September 9, 2024 April 1, 2024 to June 30, 2024 November 25, 2024 Cause: We understand that the City fell behind on drawing down grant funds on a timely basis due to employee turnover and this in turn caused the inaccuracies in the Federal Financial Reports. Effect: The City is not in compliance with the internal control requirements of 2 CFR Section 200.303. The City is not matching expenditures with associated grant revenues throughout the fiscal year by filing timely reimbursement requests as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the grant. In addition, the late filing of reimbursement requests resulted in inaccurate Federal Financial Reporting to the grantor. Recommendation: The City must develop procedures to ensure grant reports are accurate and agree with supporting accounting records prior to being submitted to the grantor. The City must also 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. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding #SA2024-002 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: A-00216-01 Criteria: The California Extended Water and Wastewater Arrearage Payment Program Guidelines include the following requirements: • Section F.2.1, Notification to Customers requires that the City must make best efforts to notify customers that they have applied for arrearage assistance from the State Water Board, and that this funding may be applied to customer debt accrued during the COVID-19 pandemic relief period, or the modified COVID-19 pandemic relief period, whichever is appropriate. Best efforts include notices on internet webpages, notices on social media sites, and signage at offices or payment centers. The modified COVID-19 pandemic relief period is the period beginning with the first billing period on or after June 16, 2021, that does not contain June 15, 2021, to December 31, 2022, inclusive, and includes any customer billing period that includes these dates. Condition: We selected forty customer credits (water and wastewater) for testing of the documentation of the date the credit was calculated. Although we understand the City calculated the customer arrearages and credits to be applied based on the total amount due from June 16, 2021 through December 31, 2022, 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. 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. Questioned Costs: We question costs of $660,387, 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 June 16, 2021 through December 31, 2022 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 #SA2024-003 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: A-00216-01 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 Q4 2023 (October–December 2023) and Q2 2024 (April–June 2024) Project and Expenditure Reports for testing of timely filing. Although we noted the Q2 2024 report was filed timely on July 31, 2024, the Q4 2023 report was filed on March 4, 2024, which was not timely. 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 #SA2024-004 Compliance with Procurement 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: A-00216-01 Criteria: Section I, Procurement and Suspension and Debarment, of the May 2024 OMB Compliance Supplement includes the following: In July 2022, Treasury released Final Rule FAQ 13.15, which explains that only a subset of the requirements in Subparts D and E of the Uniform Guidance apply to recipients’ use of award funds under the revenue loss eligible use category. The requirements of 2 CFR sections 200.318 through 200.327 are not included in the list of requirements applicable to such funds. The FAQ 13.15 referenced indicates “In general, these requirements provide that recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient’s own funds.” Condition: We selected seven services and supplies transactions under the revenue loss category to test for allowability under the program and compliance with the City’s procurement policies and noted two vehicle purchases in the amounts of $60,762 and $54,383 were accompanied by sole source purchase documentation, in lieu of formal bidding, but the sole source forms were not signed as approved by the Department Director. Cause: We understand City staff could not locate the authorized forms for the two vehicle purchases. Effect: The City is not in compliance with the procurement requirements of the CSLFRF program. Recommendation: The City must develop procedures to ensure that the procurement files contain documentation to demonstrate compliance with the bidding/quote, contract and sole source requirements, as well as City Council approval requirements, to ensure compliance not only with its own policies, but with the procurement requirements of the CSLFRF grant. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.