Finding Text
Finding 2022-002 – Allowable Costs/Costs Principles and Period of Performance
Federal Program: Coronavirus State and Local Fiscal Recovery Funds
ALN Number: 21.027
Federal Agency: United States Department of the Treasury
Federal Award Year: 2022
Grant number: CAPP-PN-2022-05, CA 3010001, and 256399-01
Pass-Through Entity: State of California, Department of Community Services & Development and
State Water Resources Control Board
Criteria: The State of California (the State) passed through funding to the City of
Anaheim (the City) for the California Arrearage Payment Program for electric
customers (CAPP) and the California Water and Wastewater Arrearage
Payment Program (CWWAPP).
Both CAPP and CWWAPP have a provision that required the City to allocate
payments to the customer accounts within 60 days of receiving payment from
the State. Specifically, per section B, Program Requirements, of the California
Water and Wastewater arrearage payment program guidelines, there is a
requirement that notes “Water systems that participate in the program must
allocate payments as bill credits to customer accounts within 60 days of
receiving payment .” Per CAPP Program Notice No. 2022-01, there is a
requirement that notes “Within 60 days of receiving CAPP funds, a utility
applicant shall issue CAPP assistance benefits to customers as bill credits and
include a statement that the credits are a result of California’s CAPP funding.”
Additionally, both CAPP and CWWAPP provided for the funds to be utilized for
customers arrearages accrued during the COVID-19 pandemic bill relief period
of March 4, 2020 through June 15, 2021 net of any late fees which are to be
waived. CWWAPP provisions are included in Section B Program Requirements
and Appendix A, Section 1, Eligibility of the California Water and Wastewater
arrearage payment program guidelines. For CAPP the eligibility determinations
are included in the 2022 CAPP Frequently Asked Questions.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal
awards to establish and maintain internal controls designated to reasonably
ensure compliance with Federal laws, regulations and program compliance
requirements. Effective internal controls should include procedures to ensure
federal expenditures are allowable and adhere to the required period of
performance.
Condition and Context: The City made two disbursements under the CWAPP program for water
customers on March 2, 2022 and June 21, 2022. The water funds were received by the City on January 25, 2022. The second disbursement made by
the City on June 21, 2022 in the amount of approximately $102,000 was not
within the 60-day requirement. The CAPP funds were received by the City on
December 16, 2021. The City disbursed the CAPP funds on February 25, 2022
in the amount of approximately $4.7 million which was past the 60-day
requirement.
Additionally, we selected a sample of 60 customers totaling approximately
$53,000 stratified between electric, water, and wastewater services and noted 3
of the samples where the City had credited the customer accounts in amounts
that exceeded the eligible amounts billed during the period net of subsequent
payments and adjustments from March 4, 2020 to June 15, 2021. Two of the
three exceptions were residential water customers with a combined over award
of $40.89 and one exception was for a commercial electric customer with an
over award of $14.60.
Cause and Effect: In discussing the 60-day disbursement condition with the City, management
stated the focus was on disbursing the funds correctly. For the CAPP funds, the
holidays impacted the disbursement timeline. For the CWWAPP funds, the first
disbursement did not utilize all the funds. Therefore, management prepared a
second disbursement to utilize the funds provided by the State which was
87 days outside the 60-day requirement.
All three customer account over awards included partial cash payments and/or
adjustments subsequent to management’s initial determination of delinquent
account balances eligible for bill credits as defined by the grant guidance, but
prior to the credit application date. The timing of the initial credit balance
determinations versus the posting of ongoing adjustments could create
differences in the allowable credit balances. The City’s manual review process
of the adjustments did not identify the discrepancies.
Questioned Costs: $55.49
Whether the sampling was a statistically valid sample: This sample was not intended to be, and was not, a statistically valid sample.
Repeat Finding: No
Recommendation: We recommend the City enhance their internal controls to include a timeline
that would comply with the grant requirements. In the event, such timelines can
not be adhered to, the City should work with the grantor for a time extension.
For accounts with multiple adjustments, a more detailed review of the accounts
should be performed if adjustments or cash payments are made subsequent to
the City’s credit amount determination.
Management’s Response: Management agrees with this finding. In order to ensure adherence to the
stipulated 60-day window for credit applications, we have initiated immediate
testing of bill notices upon receipt of CWWAPP disbursement checks.
Simultaneously, a secondary query has been implemented to validate
consistency between the initial query and the present data. To mitigate the risk
of over awarding eligible customers, a final query will be conducted prior to
disbursement to confirm the accuracy of the awarded amounts for each eligible
account.