Finding Text
2024-02 – Allowable Costs (Significant Deficiency)
Program: Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number
21.027, U.S. Department of Treasury, Passed through the State Water Resources Control Board
Criteria: Grant expenditures should be for costs that are allowable per the grant requirements.
Internal controls over grant expenditures should ensure compliance over the grant
requirements. The State Water Resources Control Board (State) grant allows credits to customer
water and wastewater accounts for unpaid bills from the period July 1, 2021 through December
31, 2022. Additionally, customer accounts should be credited only for bills for services that
remain unpaid as of the date the account credit is applied.
Condition: The City calculated the unpaid bills as of December 2023 when applying for the
grant but did not re-calculate those unpaid amounts as of the date the accounts were received
from the State and credited with the grant funds in April 2024.
Effect: Customers who paid down their liabilities to the City between the date the City applied
for the grant and the date the grant funds were received from the State ended with accounts
that had credit balances, thus pre-paying for future bills. Credits for future bills is not allowable
per the grant.
Questioned Costs: 10 of the 25 credited accounts we tested were over-credited by a total of
$10,467. Some of the other credited accounts tested could have been credited more, resulting in
a net over-credit of $6,921 for the selections as known questioned costs. Likely questioned costs
for the program totaled $116,900, which includes the corresponding allowable administrative
overhead charge of 3%.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend the City read and summarize grant requirements for all
grants that the City participates in, as well as implementing controls over those grant
requirements to prevent errors from occurring.
Management’s Response: The City agrees that the absence of a structured data review and
analysis process sufficient to fulfill reporting requirements creates a risk of noncompliance with
federal statutes, regulations, and terms and conditions of the grant awards. The City will
develop, document, and implement formal grant summary requirements review process and
audit preparedness policy and procedures. The responsibilities, deliverables, and deadlines will
be clearly outlined and communicated to all staff members. The City will remedy the customer
account credit balances by October 2025. Management intends to review and adjust the
customer account balances.