2023-004 Improve Internal Controls over the Preparation of the Schedule of Expenditures of Federal Awards (SEFA) Federal Program(s) Information All federal programs Type of Finding Compliance – Other Matters Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement The City is required to prepare a SEFA in accordance with the prescribed guidelines of the Uniform Guidance. Condition and Context The City did not properly report a net impact of $602,322 in expenditures on the SEFA when originally prepared due to lack of controls in place over preparation and review of the SEFA. Net impact on expenditures was computed as follows: Assistance Listing Number Expenditure Adjustment Reasoning 97.044 $554,843 Entry booked to program that was not reflected in client prepared SEFA. 97.036 ($299,215) Expenditures incorrectly carried forward from prior year SEFA. 21.027 ($608,782) Expenditures incorrectly included in FY23 that did not relate to FY23. 14.239 $1,440,635 Add balance of loans with continuing compliance requirements as of the beginning of the audit period. 10.555 ($485,159) Remove non-federal expenditures related to school lunch program. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Cause The City did not have adequate controls in place in order to properly report federal expenditures. Effect or Potential Effect Due to the weakness in internal controls noted above, there is a risk that amounts reported on the SEFA are not complete and accurate. The lack of a complete and accurate SEFA may impact the determination if a single audit is required, as well as major program determination. Misstating expenditures on the SEFA results in the City being out of compliance with the requirements set forth in the underlying grant agreements and the Uniform Guidance. Such finding could impact subsequent federal funding. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This was not a finding in the prior year. Recommendation The City should ensure that adequate procedures and controls are in place to ensure that the SEFA is complete and accurate. This should include controls requiring the reconciliation of federal expenditures to the appropriate supporting documentation (e.g., general ledger, grant reports, etc.) and formal review by a knowledgeable individual following preparation of the SEFA. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2023-005 Update Documented Policies and Procedures Over Federal Awards Federal Program(s) Information All federal programs Type of Finding Compliance – Other Matters Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (UG) requirements stipulate that federal award recipients must document their policies and procedures over certain aspects of financial and program management. Specifically, written policies are required for the following: • Determination of allowable costs • Employee travel SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) • Cash management • Procurement • Conflicts of interest • Subrecipient monitoring and management Condition and Context The City was unable to provide documented policies and procedures as it relates to federal awards. Cause The City has not developed written formal documentation of internal controls to encompass all required areas per the Uniform Guidance. Effect or Potential Effect Due to the weaknesses in internal controls noted above, the City did not comply with the requirements of the Uniform Guidance over documented policies and procedures. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This was not a finding in the prior year. Recommendation The City should address the weakness noted above and create policies and procedures related to federal awards in order to comply with the Uniform Guidance. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2023-006 Improve Segregation of Duties over Expenditure Approvals Federal Program Information Federal Agency: U.S. Department of Education Award Name(s): COVID-19 Education Stabilization Fund Assistance Listing Number(s): 84.425 Award Year: 2023 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Type of Finding Internal Control over Compliance – Significant Deficiency SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Criteria or Specific Requirement Per Uniform Guidance (2 CFR § 200.303) and sound internal control practices, entities are required to establish and maintain effective internal controls over federal awards, including appropriate segregation of duties. This includes ensuring that no individual has sole authority to initiate, approve, and record the same transaction without an independent review or secondary approval. Condition and Context During our testing of the Education Stabilization Fund program, one transaction was identified in which the same individual approved both the purchase order and the related invoice. No additional compensating controls were in place to ensure an independent review or oversight of these transactions. Cause The City did not have compensating controls or procedures in place to prevent or detect the approval of both a purchase order and the corresponding invoice by the same individual. Effect or Potential Effect Allowing a single individual to approve both the purchase order and the invoice without compensating controls increases the risk of errors or unauthorized purchases. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This was not a finding in the prior year. Recommendation The City should implement procedures to ensure that the responsibilities for approving purchase orders and invoices are segregated among different individuals for all transactions. If this is not feasible due to staffing limitations, the City should implement compensating controls, such as independent review of these transactions by management. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2023-007 Improve Controls and Compliance with Procurement Federal Program Information Federal Agency: U.S. Department of Treasury Award Name(s): COVID-19 Coronavirus State and Local Fiscal Recovery Fund Assistance Listing Number(s): 21.027 Award Year: 2023 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Compliance Requirement: Procurement and Suspension and Debarment Type of Finding Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement Per Uniform Guidance (2 CFR § 200.318–200.327), recipients of American Rescue Plan Act (ARPA) State and Local Fiscal Recovery Funds must follow documented procurement procedures and maintain evidence of compliance with applicable requirements, including obtaining fully executed contracts for purchases made with federal funds. Condition and Context As part of testing of two procurement transactions totaling $451,059 in the ARPA program, support was unable to be provided for both selections. There was no evidence of compliance with procurement policies, and no executed contracts were maintained to support the expenditures. Cause The City did not implement effective controls to ensure that all procurement transactions were conducted following requirements in place under the Uniform Guidance, supported by documentation, and executed contracts were in place. Effect or Potential Effect Lack of documentation and executed contracts for federally funded procurements exposes the City to increased risk of unallowable costs, noncompliance, and questioned costs. Questioned Costs Known questioned costs under the program totaling $451,059 were identified. Identification as a Repeat Finding This was not a finding in the prior year. Recommendation The City should strengthen its internal controls over procurement by implementing procedures to ensure that all federally funded purchases are fully documented, including compliance with procurement policies and maintenance of executed contracts. All such documentation should be retained and readily available. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2023-008 Improve Controls and Compliance with Reporting Federal Program Information Federal Agency: U.S. Department of Treasury Award Name(s): COVID-19 Coronavirus State and Local Fiscal Recovery Fund Assistance Listing Number(s): 21.027 Award Year: 2023 Compliance Requirement: Reporting Type of Finding Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement Recipients of American Rescue Plan Act (ARPA) State and Local Fiscal Recovery Funds are required by Uniform Guidance (2 CFR § 200.328–200.329) and program requirements to submit accurate and timely quarterly performance and evaluation reports to the federal awarding agency. The City must maintain documentation supporting the submission and content of required reports as part of effective internal control over compliance. Condition and Context As part of our testing of the ARPA program, the City was unable to provide the requested quarterly performance and evaluation reports as required to be submitted under the program. Cause The City did not have adequate controls in place to ensure the timely preparation, submission, and retention of required quarterly performance and evaluation reports. Effect or Potential Effect Failure to prepare, submit, and retain quarterly performance and evaluation reports results in noncompliance with ARPA program requirements and undermines transparency and accountability for federal funds received. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This was not a finding in the prior year. Recommendation The City should establish and implement formal procedures to ensure all required quarterly performance and evaluation reports are prepared, submitted, and retained in accordance with program requirements. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Management should regularly monitor compliance with reporting deadlines and maintain adequate documentation. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2023-009 Improve Controls and Compliance with Equipment and Real Property Management Federal Program Information Federal Agency: U.S. Department of Housing and Urban Development Award Name(s): CDBG Entitlement Grants Cluster Assistance Listing Number(s): 14.218 Award Year: 2023 Compliance Requirement: Equipment and Real Property Management Type of Finding Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement Per Uniform Guidance (2 CFR § 200.313), recipients of federal funds must maintain property records for equipment acquired with federal funds and conduct a physical inventory of such equipment at least once every two years. Property records should include a description, serial number or other identification, the source of funding, acquisition date and cost, and the location, use, and condition of equipment. Evidence of inventory counts and reconciliations must be retained. Condition and Context The City was unable to provide a listing of equipment purchased with federal funds and could not provide documentation demonstrating that a physical inventory count of federally funded equipment had been performed. In addition, the City could not provide a complete listing of real property either purchased with federal funds or managed under a federal program to assist with the primary objectives of providing housing to low-income residents. Cause The City did not have sufficient controls or procedures in place to track federally funded equipment or to conduct and document required physical inventory counts. Effect or Potential Effect The absence of property records and failure to perform or document physical inventory counts increases the risk that federally funded equipment may be lost, stolen, misused, or otherwise not accounted for properly. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This is a repeat of prior year findings 2022-003 and 2022-006. Recommendation The City should establish and maintain comprehensive property records for all equipment acquired with federal funds. The City should also implement procedures to perform and document physical inventory counts of federally funded equipment at least once every two years, and ensure that records of these inventories are retained. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2023-010 Improve Controls and Compliance with Reporting Federal Program Information Federal Agency: U.S. Department of Housing and Urban Development Award Name(s): CDBG Entitlement Grants Cluster Assistance Listing Number(s): 14.218 Award Year: 2023 Compliance Requirement: Reporting Type of Finding Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement Per Uniform Guidance (2 CFR § 200.328–200.329) and program-specific requirements for Community Development Block Grants/Entitlement Grants, recipients must submit required financial and programmatic reports accurately and timely to the federal awarding agency. Effective internal controls must be in place to ensure compliance with all reporting deadlines. Condition and Context The City did not file required financial and programmatic reports in a timely manner as stipulated under the grant program. Multiple reports were submitted after their respective deadlines, including the Consolidated Annual Performance and Evaluation Report (CAPER) which is required to be submitted 90 days after the close of a jurisdiction’s program year but was actually submitted in October of 2025. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Cause The City lacked adequate internal controls and procedures to ensure timely preparation, review, and submission of required reports to the federal awarding agency. Effect or Potential Effect Failure to file financial and programmatic reports on time constitutes noncompliance with federal program requirements and reduces transparency and accountability regarding the use of federal funds. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This is a repeat of prior year finding 2022-005. Recommendation The City should establish and implement formal procedures and controls to monitor reporting deadlines, ensure timely completion and submission of required financial and programmatic reports, and maintain documentation evidencing compliance with all reporting requirements. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2023-011 Improve Controls and Compliance with Approval of Allowable Costs Federal Program Information Federal Agency: U.S. Department of Housing and Urban Development Award Name(s): CDBG Entitlement Grants Cluster Assistance Listing Number(s): 14.218 Award Year: 2023 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Type of Finding Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement Per Uniform Guidance (2 CFR § 200.403, 200.405), recipients of federal funds must ensure that costs charged to federal awards are allowable, properly approved, and supported by adequate documentation. Effective internal controls should be in place to verify that all expenditures, including vendor invoices, are reviewed and approved prior to payment and charging to federal grants. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Condition and Context During testing of 34 vendor invoices charged to the Community Development Block Grants/Entitlement Grants program, 2 invoices were identified that had not been approved prior to payment or being charged to the grant. Cause The City did not consistently enforce controls requiring the review and approval of all invoices before they were processed as federal expenditures. Effect or Potential Effect The lack of proper invoice approval increases the risk of unauthorized, erroneous, or unallowable costs being charged to the federal program. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This was not a finding in the prior year. Recommendation The City should strengthen its internal controls by requiring documented approval for all invoices prior to payment and charging to federal programs, and perform periodic reviews to ensure ongoing compliance with allowable cost procedures. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2023-012 Recordkeeping and Documentation for the HOME Investment Partnerships Program Federal Program Information Federal Agency: U.S. Department of Housing and Urban Development Award Name(s): HOME Investment Partnerships Program Assistance Listing Number(s): 14.239 Award Year: 2023 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility, Program Income, Special Tests and Provisions Type of Finding Compliance Internal Control over Compliance – Material Weakness SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Criteria or Specific Requirement Auditor performed inquiries with City management who confirmed finding 2022-002 was still in place in 2023. Finding has been carried forward from fiscal year 2022 single audit report. • Records demonstrating that each project meets the property standards of §92.251 and the lead-based paint requirements of §92.355. (§92.508 (a)(3)(iv)) • Records demonstrating that each family is income eligible in accordance with §92.203. (§92.508 (a)(3)(v)) • Records demonstrating that each rental housing project meets the affordability and income targeting requirements of §92.252 for the required period. Records must be kept for each family assisted. (§92.508 (a)(3)(vii)) • Records demonstrating that each homeownership project meets the affordability requirements of §92.254 for the required period. (§92.508 (a)(3)(xi)) Condition and Context Sufficient records were not maintained to support projects assisted with HOME funds in accordance with 24 CFR §92.508 Recordkeeping. The City does not maintain a complete schedule of all HOME assisted projects including the necessary information in order to comply with continuing compliance requirements on outstanding loans. In prior year, several loans were not listed on either the HOME Rehab or Homebuyer Down Payment Assistance schedules or loans were listed on the incorrect schedule. Home Rehab loans and Homebuyer Down Payment Assistance loans have different continuing compliance requirements. Properties listed on the schedules were missing information (for example: IDIS #, forgivable loan amount, deferred loan amount). The loan amounts are necessary for reporting the total amount of outstanding loans with continuing compliance requirements on the SEFA. Eligibility: Documentation to support eligibility determinations for new loans issued is incomplete. Special Tests - Continuing Compliance Requirements: Housing Quality Standards Reviews, Income Reverifications, Proof of Residency Verifications, and other Continuing Compliance monitoring requirements were not completed during fiscal year 2023. Cause 1) Documentation required to support eligibility determinations is not maintained in applicant files. 2) The City does not maintain a complete listing of all HOME assisted projects including the information necessary to support that eligibility determinations were completed according to compliance requirements and to ensure continuing compliance requirements are met during the period of affordability for outstanding loans. 3) Housing quality inspections, income reverifications, and other continuing compliance requirement monitoring were not completed during FY23 due to recent staff turnover. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Effect or Potential Effect The City was unable to identify the projects completed during the fiscal year which can lead to noncompliance with recordkeeping regulations (24 CFR §92.508), eligibility requirements (24 CFR §92.2, §92.1, & §92.203), and other continuing compliance requirements throughout the period of affordability as noted above. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This is a repeat of prior year finding 2022-002. Recommendation The City should establish and maintain sufficient records in accordance with 24 CFR §92.508 as well as maintain a complete listing of all HOME assisted projects to also include the program each project received funding through (Homebuyer Down Payment Assistance and Home Rehab Assistance), the period of affordability and due dates of required verifications or inspections, indication of whether the continuing compliance requirements were met, and any other information or data that would be useful to ensure sufficient tracking of funds provided through the HOME program and compliance with related requirements mentioned above. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2023-013 Eligibility Determinations for the HOME Program Federal Program Information Federal Agency: U.S. Department of Housing and Urban Development Award Name(s): HOME Investment Partnerships Program Assistance Listing Number(s): 14.239 Award Year: 2023 Compliance Requirement: Eligibility Type of Finding Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement Auditor performed inquiries with City management who confirmed finding 2022-007 was still in place in 2023. Finding has been carried forward from fiscal year 2022 single audit report. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Per the Homeowner Rehabilitation Program Application and Compliance Manual “Written Agreement” section, the following was noted: “Before the City provides HOME funds to support homeowner rehabilitation projects, the homeowner(s) must sign a written agreement that meets the requirements of 24 CFR 92.504(c). For homeowners accessing HOME funds for rehabilitation projects, this written agreement will include the following: • The estimated value of the property, after rehabilitation, will not exceed 95 percent of the median purchase price for the area • The housing unit will be used as the principal residence of the owner whose family qualifies as a low-income family at the time HOME funds are committed to the project • The amount and form of HOME assistance • The rehabilitation work that will be undertaken • The date for completion • And the property standards to be met • The City’s Recapture Policy” The Manual also lists several specific requirements in order for households and individuals to be considered an eligible beneficiary, including income eligibility (25 CFR 5.609). Completed income certifications require review and approval by the City’s HOME Program Compliance Officer. Condition and Context In prior year, the City issued loans to applicants through the SAFE AT HOME Repair Cost Assistance Program, without completing the eligibility determination process including obtaining the required documentation to support the City’s eligibility determination and performing sufficient reviews and approvals for each project. Management confirmed this was not remediated in current year. Cause Required eligibility determinations were not completed (including obtaining required documentation, verifications, reviews and approvals) before providing funding to homeowners. Effect or Potential Effect • Noncompliance with eligibility compliance requirements per Uniform Guidance and HUD. • Providing funding to households or individuals that do not meet the eligibility requirements. • Potential loss or deduction of federal funding in the future due to noncompliance. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This is a repeat of prior year finding 2022-007. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Recommendation The City should implement a quality control process to ensure that controls are in place and effective and that they help to lower the risk of noncompliance with eligibility requirements per Uniform Guidance and HUD requirements. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.
2023-014 Housing Quality Standards Inspections for the HOME Program Federal Program Information Federal Agency: U.S. Department of Housing and Urban Development Award Name(s): HOME Investment Partnerships Program Assistance Listing Number(s): 14.239 Award Year: 2023 Compliance Requirement: Special Tests and Provisions Type of Finding Compliance Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement Auditor performed inquiries with City management who confirmed finding 2022-008 was still in place in 2023. Finding has been carried forward from fiscal year 2022 single audit report. Per the HOME Program Compliance Supplement: During the period of affordability (i.e., the period for which the nonfederal entity must maintain subsidized housing) for HOME assisted rental housing, the participating jurisdiction must perform on-site inspections to determine compliance with property standards and verify the information submitted by the owners no less than (a) every three years for projects containing one to four units, (b) every two years for projects containing five to 25 units, and (c) every year for projects containing 26 or more units. The participating jurisdiction must perform on-site inspections of rental housing occupied by tenants receiving HOME/HOME-ARP-assisted tenant-based rental assistance to determine compliance with housing quality standards (24 CFR sections 92.209(i), 92.251(f), and 92.504(d)). Condition and Context In prior year testing of the program, it was noted that no inspections or reviews were performed during fiscal year 2022 for properties which received HOME funds and were within the period of affordability. Management confirmed this was not remediated in fiscal year 2023. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (CONTINUED) Cause Required inspections were not completed during the fiscal year for properties within the period of affordability. Effect or Potential Effect • Noncompliance with Housing Quality Standards requirements per Uniform Guidance and HUD. • Providing funding to households or individuals that do not meet the continuing compliance requirements. • Potential loss or reduction of federal funding in the future due to noncompliance. Questioned Costs No questioned costs are reported. Identification as a Repeat Finding This is a repeat of prior year finding 2022-008. Recommendation The City should implement a system to track required inspections on all properties that are within the period of affordability to ensure continuing compliance requirements are met. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.