Finding #SA2025-001 Cash Management and Accuracy of Federal Financial Reports Assistance Listing Number: 20.507, 20.526 Assistance Listing Title: COVID-19 – Federal Transit Cluster Name of Federal Agency: Department of Transportation Federal Award Identification Number: CA-2022-083-00, 2020-206, 2020-212 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 2025, the report included expenditures in the amount of $515,988, but the City requested reimbursement in the amount of $110,408, during that same time period. In addition, the reports for the third and fourth quarters of fiscal year 2025 included expenditures of $430,210 and $1,944,112, but the City requested reimbursement in the amounts of $1,898,135 and $744,817, respectively 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 the grants listed above, the City did not file for and receive reimbursement for the associated grant expenditures until four months after the activity took place for the first and third quarters. The grant drawdowns took place as follows: 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. Identification as a Repeat Finding: Yes, see prior year finding 2024-001. 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 #SA2025-002 Unallowable Expenditures Charged to the Grant Assistance Listing Number: 20.507, 20.526 Assistance Listing Title: COVID-19 – Federal Transit Cluster Name of Federal Agency: Department of Transportation Federal Award Identification Number: CA-2022-083-00, 2020-206, 2020-212 Criteria: Any expenditures charged to a grant should be reviewed thoroughly to ensure it is allowable under the terms of the grant agreement and the requirements of the Uniform Guidance. Condition: We selected forty samples of expenditures that were charged to the grant to determine if the expenditures were allowable and properly supported with documentation and noted that one sample included expenditures for special cleaning fees for the transit center in the amount of $575. City staff stated that the special cleaning fees should not have been charged to the grant as they are related to cleaning fees for the rental of the transit center for events and the cleaning fees were covered as part of the rental costs. Cause: We understand that the City meant to deduct the special cleaning costs from the final reimbursement request, but all grant funds had already been spent. Questioned Costs: We question costs of $4,615, which consists of the total amount of special cleaning costs charged to the grant because they were paid for through the cost of the rental of the transit center for the event. Effect: The City is not in compliance with the allowable expenditures under the terms of the grant. Recommendation: The City must develop procedures to ensure that expenditures charged to the grant are allowable prior to requesting reimbursement from the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding #SA2025-003 Citizen Participation Plan Compliance Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Section II, Part E of the City’s grant agreement with San Joaquin County includes requirements that the City has a Citizen Participation Plan in place that includes the following: • Provide citizens with information concerning the amount of CDBG funds expected to be available; and • Provide citizens with the range of activities that may be undertaken with CDBG funds; and • Hold at least one public hearing to obtain citizen views on community needs; and • Publish community-wide, its proposed statement of community development objectives and projected use of CDBG funds so as to afford affected citizens the opportunity to comment. Condition: City staff stated that they did not have a Citizen Participation Plan in place and did not complete the requirements listed above. Effect: The City is not in compliance with the requirements of the grant agreement with the County. Cause: The City was not aware of the requirement in the grant agreement. Recommendation: The City should review the grant agreement with the County to ensure that all compliance requirements are met. In addition, the City should establish a Citizen Participation Plan that complies with the requirements of the agreement. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding #SA2025-004 Reporting Compliance Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Section II, Part H of the City’s grant agreement with San Joaquin County requires the City to submit the following performance and or evaluation reports to the County to facilitate mandated reporting to HUD: • A quarterly calendar report of progress and accomplishments for all funded activities, to include a quantitative list of activity beneficiary type(s); and • An annual equal employment opportunity report (HUD/EE-04) on recipient employment, containing data as of June 30th; and • A semi-annual Minority Business Enterprise Report by March 30th, indicating contract and subcontract activity during the first half of the fiscal year and, by September 30th, a report on such activity during the second half of the year; and • The recipients may be required to submit such other reports and information as HUD determines are necessary to carry out its responsibilities. Condition: City staff stated that they had not completed and submitted any reporting to the County during fiscal year 2025. Effect: The City is not in compliance with the requirements of the grant agreement. Cause: The City was unaware of the reporting requirements of the grant agreement. Recommendation: The City should review the grant agreement with the County in order to ensure that all the requirements of the agreement are understood and that reporting requirements are completed and submitted timely to the County. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding #SA2025-005 Timely Completion of Environmental Reviews Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grants/Entitlement Grants Name of Federal Agency: Department of Housing and Urban Development Pass Through Entity: San Joaquin County Community Development Department Federal Award Identification Number: A-93-916 Criteria: Code of Federal Regulations (CFR) Chapter 24 Section 58.22 states, “Neither a recipient nor any participant in the development process, including public or private nonprofit or for-profit entities or any of their contractors, may commit HUD assistance on an activity or project until HUD or the state has approved the recipient’s Request for Release of Funds (RROF) and the related environmental certification from the responsible entity.” Condition: The City did not obtain the environmental review certification for the Navigation Center until November 16, 2025 which is after work began on the project. Effect: The City is not in compliance with the requirements of CFR Chapter 24, Section 58.22. Cause: City staff stated that there was a prior environmental assessment completed for the Navigation Center, however it was for a different location in the City. Subsequent to that environmental assessment, the City moved where the Navigation Center would be located to a different location. Due to this the new site required a new environmental assessment that was not completed until November 2025 after the work had started on the project. Recommendation: The City should ensure that all environmental assessments are completed prior to the start of any projects to ensure they are in compliance with the requirements of 24 CFR, Section 58.22. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City