Identification of the Federal Programs: Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: Department of the Treasury Federal Award Number: N/A Federal Award Year: FY 2025 Criteria or Specific Requirements: Non-federal entities must comply with the Suspension and Debarment compliance requirement, which prohibits entering into covered transactions with parties that are suspended, debarred, or otherwise excluded. Covered transactions include procurement contracts for goods and services under nonprocurement transactions (e.g., grants or cooperative agreements) that are expected to equal or exceed $25,000, or as specified in 2 CFR § 180.220. Additionally, all subawards to subrecipients are considered covered transactions, regardless of the award amount, unless exempt per 2 CFR § 180.215. To verify vendor eligibility, non-federal entities must confirm that lower-tier entities are not suspended, debarred, or excluded, as defined in 2 CFR § 180.995. This can be achieved through one of the following methods: 1. Checking the SAM: Use the SAM Exclusions database, managed by the General Services Administration (GSA), at SAM.gov. 2. Collecting a Certification: Obtain a certification directly from the entity confirming their eligibility to participate. 3. Including Contractual Clauses: Add a clause or condition to the transaction that requires the entity to comply with suspension and debarment requirements. Identified Condition: During the audit, the City was unable to provide evidence demonstrating that vendor eligibility was verified prior to contract execution for all eight vendors selected for testing. The absence of such documentation raises concerns regarding compliance with the suspension and debarment requirements and highlights the need for strengthened internal controls over vendor verification processes. Cause: The issue occurred due to significant staff turnover within the department, which resulted in gaps in institutional knowledge and inconsistent application of required vendor verification procedures. As responsibilities transitioned between personnel, key steps in the suspension and debarment verification process were not consistently performed or documented. The lack of continuity and insufficient training for new staff contributed to the failure to maintain adequate supporting documentation demonstrating vendor eligibility prior to contract execution. Effect: The absence of required documentation increases the risk that contracts may have been awarded to ineligible or suspended parties, which could result in questioned costs or other compliance findings. Additionally, the lack of consistent verification practices, exacerbated by staff turnover, indicates weaknesses in internal controls over procurement and vendor management, reducing assurance that Federal funds are being administered in accordance with program requirements. Questioned Costs: None Recommendation: As this issue has been noted in prior audit periods, the City should take steps to remediate deficiencies in its suspension and debarment verification process. The City should implement alternative verification procedures, such as obtaining vendor certifications or including compliance clauses in contracts, when vendors are not listed in SAM. Staff should receive training on suspension and debarment requirements and acceptable verification methods to promote consistent application across departments. The City should also develop formal written policies outlining required verification steps, including procedures for vendors not registered in SAM, and strengthen monitoring and oversight to ensure these procedures are followed. Finally, the City should maintain complete documentation of all verification efforts to demonstrate compliance during audits. These actions will help strengthen internal controls, reduce compliance risks, and support adherence to Federal suspension and debarment requirements. Views of Responsible Officials and Planned Corrective Action Plan: The Finance and Administration Department will create an internal policy requiring a copy of the SAM.gov search results for the vendor, including the date of the search, and store the documentation in the appropriate grant file. Further, the policy will require a sign-off process where the vendor payment cannot be finalized without a "Debarment Check Complete". The Finance and Administration Department will include quality control checks and perform regular internal audits of a sample of vendor files related to grants to check for the presence of the Suspension and Debarment Check. Personnel Responsible for Implementation: Meredith Elguira, Carol Molina, Ralston Turner Position of Responsible Personnel: Interim Community Development Director, Finance and Administration Director, Senior Finance Analyst Expected Date of Implementation: April 30, 2026
Identification of the Federal Programs: Assistance Listing Number: 14.218, 14.239 Assistance Listing Title: Community Development Block Grants (CDBG)/Entitlement Grants, HOME Investment Partnerships Program Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: B24-MC-06-0559, M24-MC060521 Federal Award Year: 7/7/2024 – 9/31/2031, FY2024 – FY2032 Criteria or Specific Requirements: Pursuant to 2 CFR 200.414, Indirect Costs, a non-federal entity may charge indirect costs to federal awards only if it has a federally negotiated indirect cost rate, an approved indirect cost allocation plan as required for state and local governments under Appendix V and VII to 2 CFR Part 200 or has formally elected the 10-percent de minimis rate when eligible. Identified Condition: During our audit, we noted that the City charged indirect costs totaling $223,758 under the Community Development Block Grants (CDBG)/Entitlement Grants and $25,483 under the HOME Investment Partnerships Program without an approved cost allocation plan, a federally negotiated indirect cost rate, or an election to use the 10-percent de minimis rate, based on our review of the applicable grant agreements. Cause: The City did not obtain the required approval from the grantor agency to charge indirect costs to the CDBG and HOME federal awards. In addition, the City had not established an approved cost allocation plan, a federally negotiated indirect cost rate, or elected to use the 10-percent de minimis rate. Effect: As a result of charging indirect costs without an approved cost allocation plan, a federally negotiated indirect cost rate, or an election to use the 10-percent de minimis rate, the City charged $223,758 to the CDBG program and $25,483 to the HOME program in a manner that does not comply with federal grant requirements. These unapproved charges increase the risk that program expenditures may be questioned or deemed unallowable by the grantor agency, potentially requiring repayment of funds. However, the City has since identified and allocated other eligible expenditures to appropriately replace the $223,758 for CDBG. Questioned Costs: $25,483 for the HOME program. Recommendation: We recommend that the City establish procedures to ensure that indirect costs are charged to Federal awards only after confirming that such costs are allowable under the specific grant and that all regulatory requirements have been met. This includes determining whether the grant permits indirect cost recovery and ensuring the City has an approved indirect cost methodology in place—either a federally negotiated indirect cost rate, an approved cost allocation plan, or a formal election of the 10-percent de minimis rate when eligible. The City should also obtain grantor approval when required and maintain documentation supporting the basis for any indirect cost charges. In addition, the City should provide staff training on Federal indirect cost requirements, grant allowability rules, and internal procedures to ensure consistent and compliant application. View of Responsible Officials and Corrective Action Plan: The City will implement a policy directing City staff that, if allowed, grant applications should include the option to charge indirect costs for the execution of the grant work. Upon grant application submissions, the department submitting the grant will coordinate with the Senior Finance Analyst to provide indirect cost rates and/or charges. As it relates to CDBG and HOME Program Grants, the Finance and Administration Department, in conjunction with the Community Development Director, will conduct a year-end review to ensure allowable indirect costs are appropriately charged. Personnel Responsible for Implementation: Meredith Elguira, Carol Molina, Ralston Turner Position of Responsible Personnel: Interim Community Development Director, Interim Finance and Administration Director, Senior Finance Analyst Expected Date of Implementation: April 30, 2026
Identification of the Federal Programs: Assistance Listing Number: 14.239 Assistance Listing Title: Home Investment Partnerships Program Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: M24-MC060521 Federal Award Year: FY2024 – FY2032 Criteria or Specific Requirements: Federal regulations require recipients of federal housing rehabilitation and loan program funds to maintain complete, accurate, and reliable documentation demonstrating compliance with all program terms and conditions. Under 2 CFR 200.303, Internal controls, recipients must establish and maintain effective internal controls over Federal awards to ensure proper stewardship of program funds. In addition, 2 CFR 200.334, Record retention requirements, requires recipients to retain records that document compliance with Federal program requirements and make such records available for audit or review. Identified Condition: During the audit, the City was unable to provide the required supporting documentation for several sampled properties. Specifically, documentation was not available to support: • proof of current homeowner’s insurance and verification of updated property tax payments for thirteen sampled properties; • evidence of owner occupancy for the required loan term for the twelve sampled properties; • executed home loan agreements for two sampled properties; and • proof supporting the number of residential units for one sampled commercial property. Because the required documents were not available, we were unable to test compliance with program eligibility requirements. Cause: The condition occurred due to insufficient internal controls over record retention and documentation management within the housing rehabilitation and loan programs. Staff turnover and transitions in program responsibilities contributed to gaps in institutional knowledge and inconsistent maintenance of required records. Effect: The lack of complete and accessible records limits the City’s ability to demonstrate compliance with Federal requirements. These documentation gaps also indicate weaknesses in internal controls over record retention and program oversight, which may affect the reliability of program administration and future audit results. Questioned Costs: None. Recommendation: The City should strengthen its internal controls over record retention and documentation management to ensure all required program records are complete, accurate, and readily accessible for audit. This includes establishing clear procedures for maintaining documentation supporting property eligibility, loan terms, and compliance requirements, as well as implementing a centralized and organized record‑keeping system. The City should also provide training to staff responsible for administering the housing rehabilitation and loan programs to promote a consistent understanding of Federal documentation and retention requirements. Additionally, periodic internal reviews should be conducted to verify that required records are being properly maintained. Views of Responsible Officials and Planned Corrective Action Plan: Management acknowledges the auditors’ review of HUD HOME eligibility testing. We believe our current processes generally comply with HUD requirements; however, we recognize the opportunity to strengthen controls. To address the auditors’ comments, we will enhance our eligibility verification procedures, improve documentation consistency, and provide additional staff training. These corrective actions will help ensure ongoing compliance and accuracy in eligibility determinations. Personnel Responsible for Implementation: Meredith Elguira Position of Responsible Personnel: Community Development Director Expected Date of Implementation: April 30, 2026