2024-004 – Allowable Costs/Cost Principles – Internal Control and Compliance over Payroll Expenditures Identification of the Federal Program: Assistance Listing Number: 14.218 Assistance Listing Title: CDBG - Entitlement/Special Purpose Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Identification Number: B-21-MC-06-0026, B-23-MC-06-0026, B-20-MW-06-0026, Program Income Assistance Listing Number: 14.231 Assistance Listing Title: Emergency Solutions Grant Program Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Identification Number: E-23-MC-06-0026, E-20-MW-06-0026 Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: U.S. Department of the Treasury Pass-Through Entity: N/A Federal Award Identification Number: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Total salaries charged to federal awards (including extra service pay) are subject to the Standards of Documentation as described by 2 CFR §200.430(i). Per this section, salaries and wages charged to Federal awards must be based on records that accurately reflect the work performed. These records must: Be incorporated into the organization’s official records; Reasonably reflect the total activity for which the employee is compensating across all grant related and non-grant related activities (100% effort); Support the distribution of employee salary across multiple activities or cost objectives (for example, effort spent on multiple federal awards, spent on general/or administrative activities, vacation, sick leave, leave without pay, etc.); and Utilize an "after-the-fact" review of the employee’s actual hours worked during the reporting period for identifying and correcting significant changes (as defined by the organization’s written policies). Condition: CDBG - Entitlement/Special Purpose Grants Cluster For two (2) out of forty (40) payroll samples tested, employees’ benefits and compensated leave were charged to the CDBG program for the pay periods selected even though the employees did not have any actual hours charged to the program. Emergency Solutions Grant Program (ESG) For two (2) employees out of the seven (7) tested with ESG and ESG-CV charges, payroll-related costs were charged to the ESG program even though these employees were not included on the official budget allocation file used to support the distribution of payroll costs. The exceptions consisted of benefits and compensated leave and occurred in five (5) of twenty-three (23) total payroll transactions tested. In addition, our review of the disbursement reports during fiscal year 2024 identified three (3) additional employees with ESG or ESG-CV payroll charges who were not included on the official budget allocation file, bringing the total to five (5) employees not included on the official budget allocation file. Coronavirus State and Local Fiscal Recovery Funds (ARPA) Our review of the distribution reports indicated that one (1) employee who did not work on ARPA during the pay period tested had benefit costs allocated to ARPA. In addition, for one (1) out of the forty (40) employees tested, certain benefit amounts were charged twice to the ARPA program, with duplicate lines posted to the same expense account as regular salaries. The City indicated that the duplicate charges were due to a system setup error. Cause: The condition appears to have occurred because the City did not perform sufficient review procedures over payroll allocations to federal programs. Payroll charges were allowed to post based on budget allocation files and system configurations that were not regularly validated to underlying timekeeping records. In addition, system setup issues that resulted in duplicate postings of certain benefits were not identified and corrected in a timely manner. Effect or Potential Effect: As a result of these conditions, payroll and related benefit costs charged to ESG, ARPA, and CDBG was not be fully supported or was allocated properly to the respective federal programs. Federal expenditures reported to the grantor may therefore be misstated, and there is an increased risk that the City could be required to reclassify or refund portions of the costs charged to these awards. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2023-003. Recommendation: We recommend that the City enhance its internal controls over payroll processes by implementing policies and procedures that ensure employee compensation charged to federal programs is supported by contemporaneous or after-the-fact documentation of actual time and effort spent on federal program activities. Views of Responsible Officials: Management concurs with the finding.
2024-005 - Procurement and Suspension, and Debarment – Internal Control and Compliance over Procurement and Verification Against the System for Award Management (“SAM”) Identification of the Federal Program: Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: U.S. Department of the Treasury Pass-Through Entity: N/A Federal Award Identification Number: N/A Assistance Listing Number: 97.044 Assistance Listing Title: Assistance to Firefighters Grant Federal Agency: Department of Homeland Security Pass-Through Entity: N/A Federal Award Identification Number: EMW-2020-FG-15445, EMW-2021-FG-00268 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Suspension and Debarment, Non-Federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include those procurement contracts for goods and services awarded under a nonprocurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. All nonprocurement transactions entered into by a recipient (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR section 180.215. When a non-Federal entity enters into a covered transaction with an entity at a lower tier, the non-Federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA) and available at https://www.sam.gov/portal/public/SAM/ (Note: The OMB guidance at 2 CFR part 180 and agency implementing regulations still refer to the SAM Exclusions as the Excluded Parties List System (EPLS)), (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). Pursuant to 2 CFR 200.318 of the Uniform Guidance, the City is required to comply with the procurement standards, when using federal funds. These standards require non‑federal entities to maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in 2 CFR 200.317 through 2 CFR 200.327. The City’s purchasing policies require that all purchases charged to the City have an authorized Purchase Order (PO) in place before an order is placed or goods are received. The policy states that if an individual attempts to make a purchase without a City PO number, the vendor must request an authorized PO number and the name and department of the individual. The purchase order number is essential for conducting business with the City and ensures proper authorization, documentation, and payment. Therefore, all transactions including orders of goods or materials regardless of cost or type must be supported by a valid, approved PO prior to purchase activity. Condition: Coronavirus State and Local Fiscal Recovery Funds (ARPA) During our audit, we noted that eleven (11) out of thirty seven (37) suspension and debarment samples tested, the City did not have documentation on verifying the vendors against the SAM to ensure that they were not suspended or debarred from federally funded purchases. We also noted that thirty one (31) out of thirty seven (37) procurement samples tested, the City didn’t have purchase orders for these samples. Assistance to Firefighters Grant During our audit, we noted that two (2) out of two (2) procurement samples tested, the City did not have documentation on verifying the vendors against the SAM to ensure that they were not suspended or debarred from federally funded purchases. Cause: The City did not have a consistent process in place to ensure that the procurement process have been followed and maintained, and to require staff maintain the proof of verification performed on checking the suspension or debarment over vendors that the City makes contracts with federally-funded projects. Effect or Potential Effect: The lack of purchase orders limits transparency into procurement process, approval, and authorization, and weakens internal controls over spending. Without verifying whether vendors are suspended or debarred from working on federally-funded projects, the City could be contracting with vendors that are prohibited from working on federally-funded projects. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommended the City establish internal control procedures to monitor compliance requirements to ensure the procurement process is implemented and monitored, and vendors are not suspended or debarred from federallyfunded purchases. Views of Responsible Officials: Management concurs with the finding.
2024-006 – Reporting – Internal Control and Compliance over Reporting Information of the Federal Program(s): Assistance Listing Number: 14.218 Assistance Listing Title: CDBG - Entitlement/Special Purpose Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Identification Number: B-20-MW-06-0026 Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: U.S. Department of the Treasury Pass-Through Entity: N/A Federal Award Identification Number: N/A Assistance Listing Number: 66.958 Assistance Listing Title: Water Infrastructure Finance and Innovation Federal Agency: U.S. Environmental Protection Agency Pass-Through Entity: N/A Federal Award Identification Number: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): The OMB Compliance Supplement requires that reports submitted to the Federal awarding agency include all activity of the reporting period, are supported by underlying accounting information and are presented in accordance with program requirements. Community Development Block Grants-Entitlement Grants Cluster Pursuant to Guidance on Section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding submit, not later than 10 days after the end of each calendar quarter, a report containing: information regarding the amount of funds received; the amount of funds obligated or expended for each project or activity; a detailed list of all such projects or activities, including a description of the project or activity; and detailed information on any subcontracts or subgrants awarded by the recipient. This report is limited to Community Development Block Grants/Entitlement Grants Cluster - COVID-19 funding and does not include other Community Development Block Grants/Entitlement Grants Cluster funds that may be used to address coronavirus. Grantees and subrecipients have reported data meeting the Section 15011 requirements at usaspending.gov. The Pandemic Response Accountability Committee (PRAC), an independent oversight committee within the Council of the Inspectors General on Integrity and Efficiency, has determined that the data reported in usaspending.gov has fulfilled these reporting requests. (“Section 15011 Report”). Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation) (Continued): Coronavirus State and Local Fiscal Recovery Funds Quarterly Project and Expenditure Reports (QP&E) – All metropolitan cities and counties with a population that exceeds 250,000 residents that receive Coronavirus State and Local Fiscal Recovery Funds (“SLFRF”) are required to submit Project and Expenditure Reports. For these recipients, a quarterly Project and Expenditure Report must be submitted to U.S. Department of the Treasury by the last day of the month following the end of the period covered. The due dates of each quarterly reports is noted below: Reporting Period Grantee QP&E Covered Submission Deadlines July 1 - September 31, 2023 October 31, 2023 October 1 - December 31, 2023 January 31, 2024 January 1 - March 31, 2024 April 30, 2024 April 1 - June 30, 2024 July 31, 2024 The recipients are also required to disclose all current period obligations, cumulative obligations, current period expenditures, and cumulative expenditures in Quarterly Project and Expenditure Reports, as a part of the obligations and expenditures requirement. Water Infrastructure Finance and Innovation In accordance with Section 16, Annual Financial Statements, of the WIFIA Loan Agreement, the City is required to deliver to the WIFIA Lender, as soon as available but no later than one hundred eighty (180) days after the end of each City Fiscal Year, a copy of the audited income statement and balance sheet of the City, along with related audited statements of operations and cash flows for the fiscal year. Condition: CDBG - Entitlement/Special Purpose Grants Cluster (CDBG) We noted that the City did not submit any of the four (4) quarterly Section 15011 Reports for the year ended June 30, 2024. Coronavirus State and Local Fiscal Recovery Funds (ARPA) During testing of the City’s reporting under the ARPA Revenue Loss category, we noted that the City recorded $3,570,000 in expenditures related to revenue loss that were not reported in the quarterly Project and Expenditure (P&E) reports. Additionally, the April–June 2024 P&E report, which is also included in the annual performance report, incorrectly recorded an amount in 2023 revenue loss that duplicated the same amounts reported for 2022, resulting in a change to the reported revenue loss from the previous quarter. We also noted that two out of four quarterly P&E reports required for the year ended June 30, 2024 were submitted after the required due dates as follows: Grant / Project Period Covered Due Date Submitted SLT-3028-P&E Report-Q3 2023 July- Sept 2023 10/31/2023 11/5/2023 SLT-3028-P&E Report-Q1 2024 Jan- March 2024 4/30/2024 5/1/2024 Furthermore, the P&E report covering April–June 2024 did not include current period expenditure amounts for all projects. During our audit, we found that the City reported only $11,867,558 in the P&E reports instead of the actual $15,225,289 in expenditures incurred during year ended June 30, 2024. Water Infrastructure Finance and Innovation (WIFIA) During testing, we noted that the Annual Comprehensive Financial Report for year ending June 30, 2024 was dated on September 17, 2025, which was after the 180 days submission deadline (December 27, 2024). Cause: The City was not aware of the Section 15011 CARES reporting. Lack of monitoring to ensure the timely submission of the required reports with appropriate support. The delay in financial reporting also led to the incompliance with the WIFIA reporting requirement. Effect or Potential Effect: Delay in filing and not filing the reports resulted in noncompliance with the compliance requirements, and the errors had led to potential misstatements on the SEFA. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2023-005. Recommendation: We recommend that the City conduct thorough research on the reports needed to be submitted and contact the grantor if there is any confusion. When a report cannot be submitted by the due date, the City should request an extension from the funding agency and maintain a record of the approval. Views of Responsible Officials: Management concurs with the finding.
2024-007 – Special Tests and Provisions – Internal Control over Environmental Reviews Information of the Federal Program(s): Assistance Listing Number: 14.218 Assistance Listing Title: CDBG - Entitlement/Special Purpose Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Identification Number: B-23-MC-06-0026 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): The OMB Compliance Supplement requires that recipients must perform environmental reviews in accordance with 24 CFR Part 58. The responsible entity must prepare and maintain an Environmental Review Record (ERR) that documents the environmental review and the decision-making process. Projects must have an environmental review unless they meet criteria specified in the regulations that would exempt or exclude them from RROF and environmental certification requirements (24 CFR sections 58.1, 58.22, 58.34, 58.35, and 570.604). Pursuant CDBG Grants Management Manual, Chapter 3, Environmental review, The environmental certifying officer “ECO” accepts full responsibility for the completeness and accuracy of the review and compliance with applicable laws and regulations. Local officials should review the municipal liability and indemnification statutes as well as the status and coverage of local liability insurance policies when accepting responsibility under environmental laws. The responsibilities of the ECO include making findings and signing required certifications. Condition: During testing of environmental review records, one (1) of twenty one (21) environmental review records tested did not include a signature from the responsible official. Although the environmental review documentation and supporting analysis were present, the ERR lacked the required signature from the certifying official, as required by HUD regulations. Cause: Lack of internal control over the ERR to ensure the forms were properly signed and reviewed prior to approving the project activities. Effect or Potential Effect: Without a signed Environmental Review Record, the City cannot demonstrate it is in compliance with the environmental review and certification requirements under 24 CFR Part 58. This omission could potentially place the City at risk of noncompliance with federal environmental requirements and jeopardize the eligibility of the related project funded by Community Development Block Grants/Entitlement Grants (“CDBG”). Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommend that the City strengthen its internal controls over environmental review documentation to ensure that all Environmental Review Records are fully completed, including the signature of the certifying official prior to project approval or commitment of CDBG funds. Views of Responsible Officials: Management concurs with the finding.
2024-008 – Special Tests and Provisions – Internal Control and Compliance over Obligation, Expenditure, Payment Requirements Identification of the Federal Program: Assistance Listing Number: 14.231 Assistance Listing Title: Emergency Solutions Grant Program Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Identification Number: E-21-MC-06-0026, E-22-MC-06-0026 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to May 2024 Compliance Supplement, Special Tests and Provisions – Obligation, Expenditures and Payment Requirements: Obligation-ESG funds allocated to metropolitan cities, urban counties, and territories. Within 180 days after the date that HUD signs the grant agreement (or a grant amendment for reallocation of funds) with a metropolitan city, urban county, or territory, the recipient must obligate all of the grant amount, except the amount for its administrative costs. ESG-CV funds must be obligated by the recipient in accordance with 24 CFR 576.203(a)(1) and (2), except as provided below. The applicable period for obligating ESG-CV funds begins on the date HUD signed the recipient’s grant agreement for the first allocation of ESG-CV funds. The obligation deadlines below apply to both the first and second allocations of ESG-CV funds. HUD is also providing further flexibility for recipients (including states and non-states) by allowing additional time to identify entities that have the capacity and expertise to mitigate the impacts of coronavirus, including entities that have not previously or recently received ESG funding. a. Recipients that are metropolitan cities, urban counties, or territories may have up to 240 days from the date HUD signs the grant agreement to obligate ESG-CV funds. Recipients must maintain in their program records a description of any changes the recipient implemented to identify and select new subrecipients. Payments to Subrecipients. The recipient must pay each subrecipient for allowable costs within 30 days after receiving the subrecipient’s complete payment request. This requirement also applies to each subrecipient that is a unit of general-purpose local government (24 CFR section 576.203). Condition: During our audit, we noted that for four (4) out of five (5) total sub-recipients tested this year, the ESG Grant Fund obligated to sub-recipients under obligation testing were outside of the obligation timeframe of 180 days in case of ESG and 240 days in case of ESG CV without further justifications. In addition, we noted two (2) out of third (3) samples selected for payment requirements testing were outside of 30 days window without further justifications. Cause: The City does not have formal policies and procedures in place to obligate the funds within the required timeframe nor complete the subrecipient’s payment request within 30 days. In addition, the City did not have procedures in place to timely request grantor extensions and/or document exceptions that are outside of uniform guidance. Effect or Potential Effect: The exceptions noted resulted in noncompliance. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2023-006. Recommendation: We recommended the City establish internal control procedures to monitor compliance requirements to ensure the subrecipient’s payment requests are processed timely. Views of Responsible Officials: Management concurs with the finding.
2024-009 – Special Tests and Provisions – Internal Control and Compliance over Housing Quality Standards Assistance Listing Number: 14.239 Assistance Listing Title: HOME Investment Partnerships Program Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Identification Number: M-17-MC-06-0221, M-21-MC-06-0221, M-22-MC-06-0221, M-21- MP-06-0221 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to 24 CFR 92.209(i), 92.251(f), and 92.504(d), 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/HOMEARP- assisted tenant-based rental assistance to determine compliance with housing quality standards. Condition: During our audit, we noted that the City has not performed any housing inspections required under the HOME Investment Partnerships Program since 2019, citing staff shortages as the reason for nonperformance. Cause: The City did not perform housing inspections due to staffing issues and lack of adequate resources allocated to the compliance function. Effect or Potential Effect: Failure to conduct required housing inspections increases the risk that HOME-assisted units do not meet federal property standards, potentially resulting in noncompliance with program requirements and exposure to questioned costs or repayment obligations. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: The City should implement procedures to ensure timely housing inspections in accordance with HOME Program requirements. This includes allocating sufficient staff resources, establishing a monitoring schedule, and documenting all inspections performed. If staffing limitations persist, the City should consider temporary contracting or interdepartmental support to meet compliance obligations. Views of Responsible Officials: Management concurs with the finding.