Audit 408113

2025-001: Significant Deficiency and Noncompliance: Cut-off Errors in Preparing the SEFA U.S. Department of Transportation Airport Improvement Program, Infrastructure Investment and Jobs Act Programs, and COVID-19 Airports Programs Federal Assistance Listing Number (ALN): 20.106 Federal Award Years: 2023-2025 Criteria: The schedule of expenditures of federal awards (“SEFA”) is required to be prepared on a basis consistent with the financial statements. Expenditures of federal awards are to be reported on the accrual basis of accounting and should be reported on the SEFA when incurred. Condition: The City reported expenditures on the fiscal year 2025 SEFA that were incurred in other fiscal years. For two grants that were closed out and finalized during fiscal year 2025, the City included certain expenditures incurred prior to January 1, 2025 on its 2025 SEFA, representing adjustments of amounts previously reported on the 2023 and 2024 SEFAs to account for the finalized grant numbers. The adjustment amounts on the 2025 SEFA for these two grants do not represent any actual expenditures incurred in 2025. Therefore, they were not reported on the SEFA in a manner consistent with the fiscal year in which they were recognized as expenditures in the financial statements. This resulted in a net effect of $32,815 of allowable costs reported on the fiscal year 2025 SEFA which were incurred in previous fiscal years. Cause: There was an inadequate review of the allocation of the invoices related to the grants to ensure that the proper amounts were disclosed in the 2023 and 2024 SEFAs, therefore requiring a correction on the 2025 SEFA. Effect or potential effect: Inaccurate reporting of expenses can result in actions taken by oversight agencies, which could impact future funding. Inaccurate reporting could also result in material misstatements of the SEFA, the improper identification of major programs for audit, or unallowable costs reported in error. Questioned costs: None. Context: The City reported an adjustment of $47,216 for the Airport Improvement Program - Reconstruct T-Hangar Taxilanes grant to recognize additional expenses that were not previously reported on the 2023 and 2024 SEFAs. The City reported a negative adjustment of $14,401 for the Bipartisan Infrastructure Law (BIL), Airport Infrastructure Grant (AIG) to reduce the expenses previously reported on the 2023 and 2024 SEFAs for this grant. Identification as a repeat finding, if applicable: Not a repeat finding. Recommendation: We recommend the City implement procedures to ensure proper cut-off is achieved in reporting expenditures on the SEFA, and that a detailed reconciliation is performed between the general ledger and expenditures reported to the granting agency. Views of responsible officials: Management agrees with the finding.

2025-003: Significant Deficiency and Noncompliance: Reporting U.S. Department of Transportation Airport Improvement Program, Infrastructure Investment and Jobs Act Programs, and COVID-19 Airports Programs Federal Assistance Listing Number (ALN): 20.106 Federal Award Year: 2025 Criteria: The City’s Airport Improvement Program has reporting requirements that are applicable to the program and that should be submitted to the federal government throughout the project. SF-271 and SF-425 reports are required to be submitted before December 31 each year the grant is open. In addition, form 5370-1 (construction projects) or 5100-400 (non-construction projects) is required to be submitted within 30 days of the end of each quarter. Condition: The City did not submit in a timely manner, all of the required reports stipulated in the grant agreements. Cause: The City did not have processes and controls in place to ensure reporting requirements are met. The City experienced turnover in airport personnel during the end of fiscal year 2025, and did not have processes and controls in place for sufficient cross training of personnel assuming responsibility of these reporting requirements. Effect or potential effect: The City did not comply with the reporting compliance requirement because the required reports were not submitted in the timeframe communicated in the grant agreements. Questioned costs: None. Context: The City submitted two of the four SF-271 reports by the required deadline, as these two grants closed out earlier in the fiscal year. The City subsequently submitted the remaining two SF-271 reports approximately 90 days after the December 31, 2025 deadline. These late reports were for projects that had not commenced and no expenditures had yet been incurred. The City submitted two of the four SF-425 reports by the required deadline, as these grants closed out earlier in the fiscal year. The City subsequently submitted the remaining two SF-425 reports approximately 180 days after the December 31, 2025 deadline. These late reports were for projects that had not commenced and no expenditures had yet been incurred. For four of four quarterly 5370-1 construction projected selected for testing, these were remitted timely and accurately. Identification as a repeat finding, if applicable: Not a repeat finding. Recommendation: We recommend the City implement procedures to ensure there are processes and controls in place to maintain compliance with reporting requirements. We recommend the City maintain documentation that provides guidance on who specifically has responsibility over reports required to be submitted to granting agencies, as well as the due dates of such reports. Views of responsible officials: Management agrees with the finding.

2025-004: Material Weakness and Noncompliance: Special Tests and Provisions (Revenue Diversion) U.S. Department of Transportation Airport Improvement Program, Infrastructure Investment and Jobs Act Programs, and COVID-19 Airports Programs Federal Assistance Listing Number (ALN): 20.106 Federal Award Year: 2025 Criteria: The City’s Airport Improvement Program has special tests and provisions requirements applicable to revenue diversion requirements of the grant. The basic requirement for use of airport revenues is that all revenues generated by a public airport must be expended for the capital or operating costs of the airport, the local airport system, or other local facilities that are owned or operated by the owner or operator of the airport and are directly and substantially related to the actual air transportation of passengers or property. This criteria is defined in the OMB Compliance Supplement, as well as the FAA’s policy from the FAA’s Airports Federal Register Notices page. Condition: The FAA has performed an investigation in response to complaints of potential revenue diversion at the Lawrence Regional Airport. Other matters requiring corrective action were also identified in the investigation. The City is in the process of corrective action items for all matters identified in the FAA’s investigative report. The City is also in the process of investigating and determining if an operator at the airport collected revenue that was not remitted to the airport as required per revenue diversion criteria. The City did not sufficiently monitor the entity with which they had a lease and fixed base operator (FBO) agreement, resulting in potential noncompliance with terms and conditions by the lessee/FBO. Cause: The City did not have processes and controls in place to ensure revenue diversion requirements are met, in addition to other regulatory matters identified by the FAA. The City also did not have sufficient processes and controls in place for monitoring the execution and performance of agreements with lessees and FBO. Effect or potential effect: The FAA has alleged the City is not in compliance with certain FAA Grant Assurance topics. Noncompliance can potentially result in funding being withheld or future grants not being awarded to the City. Questioned costs: None. The City has not completed its internal review to determine potential dollar amount of revenue diversion. Context: Testing was performed over revenue diversion based on operating revenues collected and expended in the financial statements with no errors identified. However, the alleged noncompliance relates to amounts not reflected in the airport financial statements, therefore these revenue amounts (pending the City’s internal review) would not have been subject to testing. The potential error amount is unknown. Identification as a repeat finding, if applicable: Not a repeat finding. Recommendation: We recommend the City implement procedures to ensure there are processes and controls in place to maintain compliance with revenue diversion requirements, as well as all FAA regulations and grant assurances. We also recommend the City implement procedures to ensure agreements with lessees and FBO are effectively monitored for compliance. Views of responsible officials: Management agrees with the finding.