Audit 381038

2024-009 Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Financial Assistance Listing Number: 21.027 Federal Grantor: U.S. Department of Treasury Award No. and Year: 2021 Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds passed-through the State Water Resources Control Board Federal Financial Assistance Listing Number: 21.027 Federal Grantor: U.S. Department of Treasury Award No. and Year: A00059, 2024 Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control and Instance of Non-Compliance Criteria: Title 2 CFR Section 200.302(b)(7) of the Uniform Guidance requires all non-Federal entities establish written procedures to implement the requirements for determining the allowability of costs in accordance with Subpart E – Cost Principles or the conditions of the Federal award. Condition: The City has not established written procedures for determining allowability of costs in accordance with Subpart E – Cost Principles or the conditions of the Federal award. Cause: The City’s procedures did not ensure the required written procedures were developed and implemented in accordance with the Uniform Guidance. Effect: The City has not compiled with Title 2 CFR Section 200.302(b)(7) regarding establishing written procedures for determining the allowability of costs. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: The condition above was identified during our procedures related to allowable costs and no sampling was used. Repeat Finding from Prior Year: Yes, prior year finding 2023-007 Recommendation: We recommend the City establish policies and formalize written procedures related to allowable costs in accordance with Subpart E – Cost Principles. Views of Responsible Officials: Management agrees with the finding. See separate corrective action plan.

2024-010 Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds passed-through the State Water Resources Control Board Federal Financial Assistance Listing Number: 21.027 Federal Grantor: U.S. Department of Treasury Award No. and Year: A00059, 2024 Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control Criteria: 2 CFR Section 200.303(a), Internal Controls, states that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: During testing of the City’s compliance with activities allowed or unallowed and allowable costs/cost principles requirements, it was noted that the City did not obtain proper Council approval to charge the overall arrearage expenditures to the ARPA Program. Cause: The City did not have internal controls in place to ensure that the expenditures charged to the ARPA Program were properly approved. Effect: The City charged arrearage expenditures for reimbursement that had not been previously reviewed or approved by Council. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: A nonstatistical sample of 23 transactions out of 98 total transactions were selected for testing, which accounted for $2,474,044 of $3,095,657 federal program expenditures. The error applied to 1 transaction and totaled $413,431. Repeat Finding from Prior Year: No Recommendation: We recommend the City implement internal controls to ensure all costs charged to the program are properly reviewed and approved prior to being charged to the program. Views of Responsible Officials: Management agrees with the finding. See separate corrective action plan.