Audit 406822

Information of the Federal Programs: Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grants - Entitlement Grants Federal Agency: U.S. Department of Housing and Urban Development (“HUD”) Federal Award Number and Award Year: B-21-MC-06-0536, B-22-MC-06-0536, B-23-MC-06-0536, and B-20-MW-06-0536 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to the Guidance on Cash on Hand Quarterly Report (replaced the Federal Financial Report, SF-425) and financial reporting requirements in the cooperative agreement provisions, and 2 CFR 200.327: Quarterly reports: Program award recipients must submit Cash on Hand Quarterly Report reports to HUD quarterly, 30 days after the reporting period end date. Each report must cover all expenditures on the cooperative agreement from the start date of the reporting period to the reporting period end date. The following federal fiscal year quarter reporting period will be used for all quarterly reports, are due to HUD 30 days after the period end dates noted below: Reporting Period - Due Date of Report Quarter 1: 10/1-12/31 - January 30 Quarter 2: 1/1-3/31 - April 30 Quarter 3: 4/1-6/30 - July 30 Quarter 4:7/1-9/30 - October 30 Condition: The City did not submit the required Cash on Hand Quarterly Report in a timely manner. The Quarter 2 and Quarter 3 reports were both submitted on August 1, 2024. Cause: During the period the City was migrating to a new Enterprise Resource Planning software (ERP). The grant accountant missed the deadline due to the ERP migration deadlines. Effect or Potential Effect: Delay in filing the reports resulted in noncompliance with the compliance requirements. Questioned Costs: None. Context: See condition above for context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommend that the City update policies and procedures to strengthen the report submission process to ensure all required reports are properly reviewed and approved and submitted timely. 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. View of Responsible Officials: Management concurs the finding.

Information of the Federal Programs: Assistance Listing Number: 66.958 Assistance Listing Title: Water Infrastructure Finance and Innovation (WIFIA) Federal Agency: U.S. Environmental Protection Agency Federal Award Number and Award Year: WIFIA – N20179CA, WIFIA – N20108CA Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): In accordance with 2024 OMB Compliance Supplement – 2 CFR Part 200 Appendix XI, Part 3 – Compliance Requirements – Cash Management, non-federal entities must comply with applicable program requirements for payment under loans, loan guarantees, interest subsidies, and insurance. Pursuant to the WIFIA Credit Agreement, Article II, Section 4. (a), “WIFIA Credit Facility proceeds shall be disbursed solely in respect of Wastewater/Water System Eligible Project Costs paid or incurred and approved for payment by or on behalf of the City. If the City intends to utilize the WIFIA Credit Facility proceeds to make progress payments for Project construction work performed under the Construction Contracts, the City shall demonstrate to the satisfaction of the WIFIA Credit Provider that such progress payments are commensurate with the cost of the work that has been completed.” Condition: The City’s Ventura Pure Project is funded through multiple funding sources including WIFIA loans, Title XVI Water Reclamation and Reuse Program (the “Title XVI Program”), and funds accumulated through charges to rate payers. On September 18, 2023, the City received funding amendment no. 3 for another federal program, the Title XVI program, amending the award and allowing the City to claim expenditures incurred as far back as March 2022 for certain design, construction, and program management costs. Due to the funding amendment and reclassification of expenditures from WIFIA program to Title XVI program, WIFIA loans were over-drawn by $4,989,112 and $4,194,295 for Wastewater System and Water System, respectively, as of June 30, 2024. Cause: There was inadequate planning and grant management to properly identify the eligible costs for reimbursement in a timely matter. Although the amendment document was shared between the Water and Finance Department, there was ineffective communication between the departments related to the reimbursement and drawdown requests when there were changes in scope of work, period of performance, and reallocation of funding resources. Effect or Potential Effect: WIFIA loans were over drawn by $4,989,112 and $4,194,295 for Wastewater and Water System, respectively. Questioned Costs: None. Context: See condition above for context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommend the City update its policies and procedures for the reimbursement/drawdown process for projects funded with multiple funding sources and improve its communication between the departments to prevent duplicating reimbursement and drawdown requests. View of Responsible Officials: The City concurs with the finding. The City is committed to updating its policies and procedures for the reimbursement/drawdown process for projects funded with multiple funding sources and is committed to improving its communication between departments to prevent duplicating reimbursement and drawdown requests.