2022-005 ? Reporting ? Internal Control and Compliance over Reporting Identification of the Federal Program: Assistance Listing Number: 66.958 Assistance Listing Title: Water Infrastructure Finance and Innovation (WIFIA) Federal Agency: United Statements Environmental Protection Agency Pass-Through Entity: N/A Federal Award Identification Number: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to the WIFIA Loan Agreement between the City and the Environmental Protection Agency, Section 16. Reporting Requirement, below reporting are required: (a) Updating Financial Model: The City shall provide to the WIFIA Lender not later than one hundred eighty (180) days after the beginning of each City Fiscal Year, an updated Base Case Financial Model reflecting the then-current and projected conditions. (b) Annual Financial Statements. The City shall deliver to the WIFIA Lender, as soon as available, but no later than one hundred eighty (180) days after the end of each City Fiscal Year. (c) Reserved (d) Construction Reporting. The WIFIA Lender shall have the right in its sole discretion to monitor (or direct its agents to monitor) the development of the Project, including environmental compliance, design, and construction of the Project. The City shall be responsible for administering construction oversight of the Project in accordance with applicable federal, state and local governmental requirements. The City agrees to cooperate in good faith with the WIFIA Lender in the conduct of such monitoring by promptly providing the WIFIA Lender with such reports, documentation or other information as shall be requested by the WIFIA Lender or its agents, including any independent engineer reports, documentation or information. During the period through Substantial Completion of the Project, the City shall furnish to the WIFIA Lender, on a quarterly basis, a report on the status of the Project, substantially in the form of Exhibit K (Form of Quarterly Report). The report shall be executed by the City?s Authorized Representative and, for any quarter, shall be delivered to the WIFIA Lender within thirty (30) days following such quarter (or if such day is not a Business Day, on the next following Business Day). If the then-current projection for the Substantial Completion Date is a date later than the Projected Substantial Completion Date, the City shall provide in such report a description in reasonable detail to the reasonable satisfaction of the WIFIA Lender of the reasons for such projected delay, an estimate of the impact of such delay on the capital and operating costs of the System (if any), and that the new date could not reasonably be expected to result in a Material Adverse Effect. (e) Public Benefits Report. The City shall deliver to the WIFIA Lender a report, in the form of Exhibit L (Form of Public Benefits Report Public Benefits Report later than thirty (30) days prior to the Effective Date, (ii) within ninety (90) days following the Substantial Completion Date and (iii) within ninety (90) days following the fifth (5th) anniversary of the Substantial Completion Date. The City agrees that information described under this Section 16(e) may be made publicly available by the WIFIA Lender at its discretion. (f) Modifications to Total Project Costs. For the period through the Substantial Completion Date, the City shall provide the WIFIA Lender with written notification at least thirty (30) days prior to instituting any increase or decrease to the aggregate Total Project Costs in an amount equal to or greater than five percent (5%), which notification shall set forth the nature of the proposed increase or decrease and an estimate of the impact of such increase or decrease on the capital costs and operating costs of the System. The City s notice shall demonstrate that the proposed increase or decrease is consistent with the provisions of this Agreement, is necessary or beneficial to the Project City ability to comply with its obligations under the Related Documents (including any financial ratios or covenants included therein), and could not reasonably be expected to result in a Material Adverse Effect. (g) Operations and Maintenance. The WIFIA Lender shall have the right, in its sole discretion, to monitor (or direct its agents to monitor) the Project s operations and, as the WIFIA Lender may request from time to time, to receive reporting on the operation and management of the Project, and copies of any contracts relating to the operation and maintenance of the Project. The City agrees to cooperate in good faith with the WIFIA Lender in the conduct of such monitoring by promptly providing the WIFIA Lender with such reports, documentation, or other information requested by the WIFIA Lender. The WIFIA Lender has the right, in its sole discretion, to retain such consultants or advisors, to carry out the provisions of this Section 16(g). On or prior to the Substantial Completion Date, the City shall deliver to the WIFIA Lender an operations and maintenance manual with respect to the Project, in form and substance reasonably acceptable to the WIFIA Lender. (h) Notices. a. The City shall, within fifteen (15) days after the City learns of the occurrence, give the WIFIA Lender notice of any of the following events or receipt of any of the following notices, as applicable, setting forth details of such event: i. Substantial Completion ii. Defaults; Events of Default iii. Litigation iv. Delayed Governmental Approvals v. Environmental Notices vi. Amendments vii. Related Document Defaults viii. Uncontrollable Force ix. Ratings Changes x. 2 C.F.R. ? 180.350 Notices xi. Additional Principal Project Contracts xii. Issuance of System Obligations xiii. Postings on EMMA xiv. Other Adverse Events xv. Draws on WIFIA Reserve Account a. Within thirty (30) calendar days after the City learns of the occurrence of an event specified in clause (i) above (other than sub-clauses (A) (Substantial Completion), (F) (Amendments) or (I) (Ratings Changes) (in the case of a ratings upgrade)), the City s Authorized Representative shall provide a statement to the WIFIA Lender setting forth the actions the City proposes to take with respect thereto. The City shall also provide the WIFIA Lender with any further information reasonably requested by the WIFIA Lender from time to time concerning the matters described in clause (i) above. (i) Requested Information. The City shall, at any time while the WIFIA Loan remains outstanding, promptly deliver to the WIFIA Lender such additional information regarding the business, financial, legal or organizational affairs of the City or regarding the Project or the System Revenues as the WIFIA Lender may from time to time reasonably request. Condition: During the audit, we noted that the City was not aware of the reporting requirements from the loan agreements and only filed the Construction Reporting. Cause: The City was not familiar with the loan agreement reporting requirements. Effect or Potential Effect: Without filing all the required reports by the loan agreement resulted in noncompliance. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommended the City establish internal control procedures to monitor compliance requirements to make sure the required reports are filed properly and timely.Views of Responsible Officials: Management concurs the finding.