Audit 403247

Finding #SA2024-001: Suspension and Debarment Documentation for Contracts and Subcontracts Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Pass Through Entity: County of San Mateo Federal Award Identification Number: SFLRP0201 Criteria: The City’s agreements with the grantor for the Opportunity Coastside Center (Exhibit E) and Affordable Housing Projects (Exhibit C) require the City to comply with 2 C.F.R. Part 180, subpart C, which requires the City to check SAM exclusions, or collect a certification, or add a clause or condition before entering into a covered transaction. Exhibits E and C also include the requirement that the City include “a requirement to comply with these [suspension and debarment] regulations in any lower tier covered transactions it enters into.” Condition: We selected four contracts related to the Opportunity Coastside Center project and the subgrant agreement under the Affordable Housing project to test compliance with the suspension and debarment contract provisions and noted that none of the five contracts/agreements included the provisions required by the grant agreements and the City did not have documentation that it had checked for SAM exclusions. We did note that as of June 23, 2025, none of the five entities was included on the exclusions list on SAM.gov. Effect: The City is not in compliance with the suspension and debarment provisions of the grant award agreements. Cause: We understand City staff checks the SAM.gov for exclusions at the time of contract execution, but documentation is not retained. In addition, we understand the contracts did not include the required suspension and debarment provisions in the contracts due to staff oversight. Recommendation: The City should develop procedures to retain documentation of the check for SAM exclusions prior to entering into contracts, and the City should ensure that all contracts funded by the grants include the requirement that the vendor/subrecipient comply with the suspension and debarment regulations. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2024-002: Subrecipient Monitoring and Subgrant Reporting on Schedule of Expenditures of Federal Awards Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Pass Through Entity: County of San Mateo Federal Award Identification Number: SFLRP0201 Criteria: 2 C.F.R. Part 200.332 of the Uniform Guidance requires that the City evaluate the risk of noncompliance for its subrecipients and perform monitoring procedures based upon identified risks. Subrecipient monitoring provides reasonable assurance that the subrecipient used the subaward for authorized purposes in compliance with federal statutes, regulations, and the terms and conditions of the subaward. In addition, 2 C.F.R. Part 200.510 (b)(4) of the Uniform Guidance requires that the schedule of expenditures of federal awards include the total amount provided to subrecipients from each Federal program. Condition: The City had identified one subrecipient under the COVID-19 – Coronavirus State and Local Fiscal Recovery Funds grant and we understand the City does not have policies and procedures related to the monitoring of subrecipients. Although City staff did obtain a copy of the subrecipient’s most recent single audit report, we understand that was obtained after we asked about the monitoring procedures. In addition, after the grantor performed the Performance Audit of ARPA Subrecipient Monitoring discussed in finding #SA2024-005, City staff determined that three additional vendors should have been treated as subrecipients, including monitoring the activities and reporting the current year expenditures totaling $367,946 as subgrants in the schedule of expenditures of federal awards. Effect: The City is not in compliance with the subrecipient monitoring and reporting requirements of the Uniform Guidance. Cause: We understand City staff was not aware of the subrecipient monitoring requirements of the Uniform Guidance and had not identified three vendors as subrecipients. Recommendation: The City should develop policies and procedures related to subrecipient monitoring in compliance with the provisions of 2 C.F.R. Part 200.332 and reporting in compliance with the provisions of 2 C.F.R. Part 200.510 (b)(4). View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2024-003: Procurement Documentation Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Pass Through Entity: County of San Mateo Federal Award Identification Number: SFLRP0201 Criteria: Procurements must “provided full and open competition” as required by 2 CFR section 200.319 and 48 CFR section 52.244-5 of the Uniform Guidance. In the event the procurement is noncompetitive, it can only be awarded if five specific circumstances apply, such as the item or service only being available from a single source. For purchases that meet the criteria to use the “Simplified Purchase Procedures” method under the Uniform Guidance procurement standards, “price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity.” Condition: We selected two of the thirteen vendors used for the Opportunity Center of the Coastside project during fiscal year 2024 for testing of compliance with the procurement standards of the Uniform Guidance. Both contracts appear to meet the criteria under the Simplified Purchase Procedures method, however we noted the following: • American Energy Society contract in the amount of $200,000 – The City Council authorized the development and release of an a RFQ to identify and retain a qualified entity to launch and operate an incubator to be located at the Opportunity Center of the Coastside for an amount not to exceed $200,000. We understand American Energy Society was the only response and City staff did not return to City Council to approve the sole-source contract. • William Duff Architects contract in the amount of $75,000 – We understand the City did not obtain price quotations from multiple sources and only approached William Duff Architects. The City awarded the contract under a sole-source purchase, however, the information related to the sole source documentation was only included in the staff report to the City Council. The Resolution approving the award of the contract did not include any information related to the award being a sole-source purchase and that it met one of the five criteria under the noncompetitive procurement requirements. Effect: The City is not in compliance with the Simplified Purchase Procedures or the Noncompetitive Procurement requirements of the Uniform Guidance. Cause: We understand the failure to complete the required documentation was due to staff oversight. Recommendation: The City should develop procedures to ensure compliance with the procurement standards under the Uniform Guidance for all contracts funded by federal awards. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2024-004: Timely Quarterly Reporting Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Pass Through Entity: County of San Mateo Federal Award Identification Number: SFLRP0201 Criteria: Section 6, Reporting Requirements, of the City’s grant award agreements for both the Opportunity Center of the Coastside and Mercy Housing California project requires “written quarterly reports, submitted electronically on Grantee’s official letterhead…within seven (7) days after the end of each quarter.” Condition: We selected the December 2023 and June 2024 quarterly reports for both projects for testing of timely filing and compliance with the content requirements of Section 6 of the grant award agreement. Since the Opportunity Center of the Coastside project started in early 2024, there was no December 2023 report. As for the June 2024 report for the Opportunity Center of the Coastside project, City staff did provide invoice documentation to the County in August 2024, but City staff could not provide documentation that the required written quarterly report had been filed with the County. Effect: The City is not in compliance with the timely reporting requirements of the grant award agreement. Cause: We understand the report was not filed due to staff oversight. Recommendation: The City should develop procedures to ensure timely quarterly reporting to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Finding #SA2024-005: Performance Audit Deficiencies Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Pass Through Entity: County of San Mateo Federal Award Identification Number: SFLRP0201 Criteria: The City went through a performance audit of the Opportunity Coastside Center grant by the County of San Mateo for the period January 31, 2023 through September 30, 2025 in May 2026. Condition: During the performance audit, the County found several issues and had seven findings. Of those findings, six were related to activities during the year ended June 30, 2024. Those six findings included the areas of internal controls over federal compliance, suspension and debarment noncompliance, subrecipient monitoring procedures not established, unsupported and potentially unallowable participant stipend costs of $926, inadequate review of subrecipient payroll and time allocation documentation, and approval of ARPA funded activities not aligned with federal program requirements. Effect: The City is not in compliance with key compliance areas including procurement, suspension and debarment verification, subrecipient monitoring, documentation of participant stipends, review of subrecipient invoices, and evaluation of allowable uses were not adequately designed or implemented. Cause: We understand the noncompliance issues were due to staff oversight and City staff not being aware of the subrecipient monitoring requirements of the Uniform Guidance. In addition, City staff had not identified three vendors as subrecipients. Recommendation: The City must implement policies and procedures to comply with the requirements of the Uniform Guidance as well as the agreement with the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.