Audit 407460

Finding No. SA 2025-001 – Noncompliance with FFATA Subaward Reporting Requirements Federal Assistance Listing Number: 14.218 Federal Program Title: Community Development Block Grants/ Entitlement Grants Federal Agency: U.S. Department of Housing and Urban Development Award Period: Fiscal year 2025 Type of Finding: Material Weakness in Internal Control over Compliance Criteria: Per OMB Compliance Supplement and the requirements of the Federal Funding Accountability and Transparency Act (FFATA), direct recipients of grants and cooperative agreements are required to report first-tier subawards of $30,000 or more to the System for Award Management (SAM) within the prescribed reporting timeframe. Condition: The City did not report required first‑tier subawards of $30,000 or more to the System for Award Management (SAM) in accordance with FFATA reporting requirements. Cause: The City did not establish formalized policies and procedures to identify programs subject to FFATA reporting requirements and to ensure timely collection, review, and submission of first‑tier subaward data to SAM. In addition, responsibilities for FFATA compliance were not clearly assigned, and there was no monitoring control in place to verify that required subaward information was reported accurately and within the prescribed reporting timelines. Effect: Failure to timely submit FFATA subaward reports constitutes noncompliance with federal transparency and reporting requirements and may result in sanctions, including fines and penalties, as well as the suspension or termination of federal awards. Questioned Costs: None. Repeat Finding: Yes. See Summary Schedule or Prior Year Audit Findings (SA 2024-001). Recommendation: We recommend that the City establish and implement formal policies and procedures to ensure compliance with FFATA reporting requirements, including timely identification and reporting of first‑tier subawards to the System for Award Management (SAM). Views of responsible officials and planned corrective actions: The Housing Manager and Management Analyst/Grant Writer are collaboratively working to ensure FFATA reports are completed prior to disbursing funds to subawardees. Personnel responsible for implementation Vanessa Sedano, Housing Manager Completion Date: June 30, 2026

Finding No. SA 2025-002 – Noncompliance with CSLFRF Period of Performance Requirements Federal Assistance Listing Number: 21.027 Federal Program Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: U.S. Department of Treasury Award Period: Fiscal year 2025 Type of Finding: Material Weakness in Internal Control over Compliance Criteria: Per OMB Compliance Supplement and Compliance and Reporting Guidelines issued by the U.S. Department of Treasury for Coronavirus State and Local Fiscal Recovery Funds, no new obligations or costs may be incurred during the period beginning January 1, 2025 and ending on December 31, 2026. During this two-year period from January 1, 2025, through December 31, 2026, recipients are only permitted to expend funds to satisfy obligations incurred or CSLFRF funds obligated by December 31, 2024. Condition: The City incurred and reported expenditures totaling $10,764 during the period from January 1, 2025 through June 30, 2025, which were not related to CSLFRF funds obligated on or before December 31, 2024. Cause: The City did not have adequate internal controls, policies, and procedures in place to monitor compliance with the CSLFRF period of performance requirements. Effect: Expenditures incurred after the allowable obligation period constitute noncompliance with CSLFRF program requirements and may result in questioned costs, repayment of funds, or other sanctions, including fines, penalties, or the suspension or termination of federal awards. Questioned Costs: $10,764 Repeat finding: No. Recommendation: We recommend that the City strengthen controls over monitoring the period of performance for CSLFRF funds to ensure that expenditures are incurred only in accordance with U.S. Department of the Treasury requirements. Views of responsible officials and planned corrective actions: The Finance Department staff will review all items prior to completing the report. Personnel responsible for implementation: Carmen Tsui, Grant Accountant Completion Date: June 30, 2026

Finding No. SA 2025-003 – Untimely Submission of Project and Expenditure Report Federal Assistance Listing Number: 21.027 Federal Program Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: U.S. Department of Treasury Award Period: Fiscal year 2025 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: Per OMB Compliance Supplement and Compliance and Reporting Guidelines issued by the U.S. Department of Treasury for the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) program, the Project and Expenditure Reports should be submitted on the last day of the month after the end of each quarter. Condition: The City did not submit the Project and Expenditure Report within the required reporting timeframe for the following quarter: Quarter Months Deadline Date Submitted Lag in Days 2024-3 July 1 - September 30, 2025 10/31/2024 11/1/2024 1 Cause: Due to the transition of the City’s Finance Director, the Accounting Manager did not have timely access to the CSLFRF reporting portal and was working with program administrators to obtain the required access, resulting in a delay in report submission. Effect: Late submission of the Project and Expenditure Report constitutes noncompliance with CSLFRF reporting requirements and may result in sanctions imposed by the U.S. Department of the Treasury, including fines, penalties, or the suspension or termination of federal award funding. Questioned Costs: None. Repeat finding: Yes. See Summary Schedule of Prior Year Audit Findings (SA 2024-003). Recommendation: We recommend that the City strengthen procedures to ensure continuity of reporting access and strictly adhere to reporting deadlines established by the U.S. Department of the Treasury. Views of responsible officials and planned corrective actions: The Accounting Manager assumed responsibility for the quarterly Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) reporting process following the unexpected departure of the former Finance Director. Due to the abrupt transition and issues associated with obtaining access to the portal, the entity experienced a delay in submitting the Q1 2025 Project and Expenditure Report by the required deadline. Views of responsible officials and planned corrective actions (Continued): Management acknowledges the importance of timely compliance with federal reporting requirements. Since access to the Treasury reporting portal was established, all subsequent Project and Expenditure Reports have been submitted timely. Personnel responsible for implementation: Veronica Alvarez, Deputy Finance Director Completion Date: June 30, 2026

Finding No. SA 2025-004 – Inaccurate and Unreconciled Reporting of Project and Expenditure Reports Federal Assistance Listing Number: 21.027 Federal Program Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: U.S. Department of Treasury Award Period: Fiscal year 2025 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: Pursuant to 2 CFR §200.1, internal controls for non Federal entities are defined as processes designed and implemented to provide reasonable assurance regarding the achievement of objectives in the following categories: (1) effectiveness and efficiency of operations, (2) reliability of reporting for internal and external use, and (3) compliance with applicable laws and regulations. The Accounting Manager is responsible for reviewing the completeness and accuracy of the quarterly Project and Expenditure Reports (PERs) submitted to the U.S. Department of the Treasury and ensuring that reported amounts agree with the City’s financial records, including the Schedule of Expenditures of Federal Awards (SEFA). Condition: During our review of the quarterly reports, we identified unreconciled differences totaling $1,865 between amounts reported on the Schedule of Expenditures of Federal Awards (SEFA) and the quarterly Project and Expenditure Reports submitted to the U.S. Department of the Treasury. Cause: Incorrect adjustments were recorded during the preparation of the quarterly reports, and reconciliation procedures were not sufficient to identify and resolve these differences prior to submission. Effect: The Project and Expenditure Reports submitted to the U.S. Department of the Treasury were not fully accurate or complete. Inaccurate reporting may result in noncompliance with federal requirements and could lead to fines, penalties, or the suspension or termination of federal awards. Questioned Costs: $1,865 Repeat finding: No Recommendation: We recommend that the City enhance review and reconciliation procedures over the preparation of Project and Expenditure Reports to ensure amounts reported are accurate, complete, and fully reconciled to the City’s financial records, including the SEFA, prior to submission. Views of responsible officials and planned corrective actions: The Finance Staff will perform quarterly reconciliations of expenditures to ensure accurate reporting of amounts. Personnel responsible for implementation: Carmen Tsui, Grant Accountant Completion Date: June 30, 2026

Finding No. SA 2025-005 – Inclusion of Anticipated Equitable Sharing Funds in the Adopted Budget Federal Assistance Listing Number: 16.922 Federal Program Title: Equitable Sharing Program Federal Agency: U.S. Department of Justice Award Period: Fiscal year 2025 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: Per the OMB Compliance Supplement and guidance issued by the U.S. Department of Justice for the Equitable Sharing Program, agencies are permitted to earmark in their budgets only Equitable Sharing funds that have been awarded and received and are currently on hand. Agencies may not budget or commit anticipated or future Equitable Sharing funds that have not yet been awarded or received. Condition: The City’s adopted budget included anticipated Equitable Sharing funds that had not yet been awarded or received. Cause: The City did not have adequate procedures in place to ensure that only awarded and received Equitable Sharing funds were included in the adopted budget. Effect: Including anticipated funds in the adopted budget may result in noncompliance with Equitable Sharing Program requirements and could lead to sanctions such as suspension or permanent exclusion from the program, denial or extinguishment of future sharing requests, or the requirement to return previously disbursed funds. Questioned Costs: None. Repeat finding: No. Recommendation: We recommend that management strengthen procedures over budget preparation related to the Equitable Sharing Program to ensure that only Equitable Sharing funds that have been awarded and received are included in the adopted budget. Views of responsible officials and planned corrective actions: The Finance Staff will collaborate with Police Department Staff during the budgeting process to ensure that revenue is not inappropriately budgeted. Personnel responsible for implementation: Carmen Tsui, Grant Accountant Completion Date: June 30, 2026