Agenda Item B.5
CPMS CONSENT CALENDAR
Meeting Date: November 15, 2022
TO: Mayor and Councilmembers
FROM: Luke Rioux, Finance Director
SUBJECT: Single Audit Report for the Fiscal Year Ended June 30, 2021
RECOMMENDATION:
Staff recommends the City Council accept the Single Audit Report for the Fiscal Year that ended June 30, 2021.
BACKGROUND:
The Single Audit, previously known as the Office of Management and Budget ( OMB) Circular A-133 audit, is an organization-wide financial statement and federal awards’ audit of an entity that expends $750,000 or more in federal funds in one fiscal year. It is intended to provide assurance to both the Federal and State Government that th e City has adequate internal controls in place, and is generally in compliance with program requirements. Local governments are required to obtain an audit pursuant to the Federal Single Audit Act Amendments of 1996 and prepare a reporting package that is submitted to both the California State Controller’s Office (SCO) which serves as the Single Audit oversight agency for most California local governments, and the Federal Audit Clearinghouse (FAC), which acts as an executive agent for the OMB.
The City’s Single Audit Report is required to be prepared and submitted in compliance with the financial reporting requirement in accordance with Title 2, Code of Federal Regulations (CFR), Part 200 Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). The reporting package is a collection of several documents, which includes the Annual Comprehensive Financial Report (ACFR), associated auditor letters and the Single Audit Report. To comply with this mandate, the City’s annual contract with its independent auditors, Moss, Levy and Hartzheim, LLP (MLH) includes Single Audit services, should it be required for the fiscal year.
DISCUSSION:
The City last had a Single Audit in FY 15/16 and has filed exemption status for FY 16/17, FY 17/18, FY 18/19 and FY 19/20. In FY 20/21 the City had expended $3,255,357 in federal funds and had the required Single Audit performed in conjunction with the City’s 1 Meeting Date: November 15, 2022
annual audit. At the time of reviewing the FY 20/21 annual independent auditor’s report and ACFR in February 2022, staff informed the Finance Committee and City Council that the Single Audit was delayed and would be brought back as a separate item after it was finalized and submitted. Staff has since completed and submitted its Single Audit Report and reporting package before the extended due date of September 30, 2022. The Single Audit Report is normally due March 31 of each year.
The Single Audit Report is provided as Attachment 1 and includes a Report on Internal Controls and Compliance, a Schedule of Expenditures of Federal Awards and Schedule of Audit Findings and Questioned Costs, if any. Generally, findings are areas of improvement for the City when it comes to the internal controls that are designed to manage the risk with which the City’s assets are safeguarded, and its finances are accurately reported which then translates into the proper administration of federal funding.
In summary, the City’s auditors, MLH, reports the following within the Single Audit Report:
Unmodified opinion as it pertains to both the Financial Statements and to Federal Awards.
No material weakness or significant deficiencies in internal controls over financial reporting.
No material weakness in internal controls over major programs and one identified area of improvement related to a significant deficiency in internal controls that was not considered to be a material weakness, but important enough to merit attention.
The identified deficiency in internal control that is not considered to be a material weakness, but important enough to merit attention is noted in its entirety in Finding 2021- 001 in the report (page 9 of Attachment 1 ) and includes a recommendation to staff to strengthen internal controls and requires a City response. Finding 2021-001 was in regard to Equipment and Real Property Management and assuring compliance with 2 CFR Section 200.313 (d)(1), in which property records must be maintained that in clude a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of fede ral participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. During th eir examination of real property purchased with federal funds, the auditors noted that the City did not include the required additional information in the capital asset depreciation schedule nor in any supplemental schedules, which poses an elevated risk o f non -compliance with Federal regulations should the property ever be sold. Finance staff has agreed with the auditors’ recommendation and prepared a response found in the City’s Corrective Action Plan in the report (page 10 of Attachment 1). It should be noted that Finance staff has already implemented the additional required information into the City’s capital asset depreciation schedule as described above to help mitigate future risk if property purchased by federal funds was ever sold.
2 Meeting Date: November 15, 2022
FINANCE AND AUDIT STANDING COMMITTEE REVIEW:
The Finance and Audit Standing Committee met to review the Single Audit Report on November 7, 2022.
FISCAL IMPACTS:
There are no fiscal impacts associated with this item.
ALTERNATIVES:
The City Council could decide not to accept the presented report; however, this is not recommended as the reports have been prepared in conformance with a variety of accounting, federal and state reporting requirements and represent the professional evaluation and analysis by the City’s independent auditors.
Reviewed By: Approved By:
___________________ _________________
Kristine Schmidt Robert Nisbet
Assistant City Manager City Manager
ATTACHMENTS:
1. Single Audit Report for the Fiscal Year Ended June 30, 2021 3 ATTACHMENT 1
Single Audit Report for the Fiscal Year Ended June 30, 2021
4 ~IT~ OF GOLET~ ►
SINGLE AUDIT REPORT
For the Fiscal Year Ended
June 30, 2021
Attachment 1
5 ~~~ I ~~ ~T~~L~~
~~~~~ ~~ ~~~~~~~~
For the Fiscal ~ear ~nded June 3 {}, ~~}~ 1
ISLE ,~TJP►IT REPORT
Independent Audït©rs' R.eporí on Internal +~antr©l Over Fïnancïal I~epc~rting and fln ~ ©mplïance and Other Matters Based on an Audït of Financïal Statements Performed ïn Accordance wïth
Qve~nrnent Auditing ;tan~la~~s .................................................................................................................................................... l Schedule of Expendïtures of Federal Awards .......................................................................................................................................3 1~©te to the Schedule of Expendïtures of Federal Awards ....................................... ............................................................................. 4 Independent Audït©rs' P.eport on Cloplance fc~r F,ach Major Program and on Internal ~ontr ©l fiver ~+~mpliance Requïred
bythe LJnïform uïdance ...............................................................................................................................................................5 FIl`~I~II AID RE~I ►1iiV1EI~TI.~ATI~i~+1
Schedule of Audït Fïndïngs and C~uestïaned ~©sts ............................................................................................................................... 7 Summary of Prïc~r Fiscal dear Audit Fïndïngs and ~uestïflned ~©sts ...................................................................... . ........................... l l 6 M:ass, ~evy & Hartzheim L:LP
C;eri i.f.~i~d .PtllillC A~Co uiltants
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER
MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS City Council
City of Goleta
Goleta, California
VVe have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of City of Goleta (the City), as of and for the fïscal year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated February 24, 2022.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts.
However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 2400 Professional Parkway, Suite 205 Santa Maria, CA 93455 Tel 805.925.2579 Fax 805.925.2147 mlhcpas.com BEVERLY HILLS • CULVER CITY •SANTA MARIA
7 Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 7ifa~a, ~. 6 .~~:~, .c,tP
Santa Maria, California
February 24, 2022
8 CITY ~~ ~.~rQ LETA
SCHEDULE OF E~PENDITIJR~S C)F FEDERAL A~vARDs
FISCAL YEAR ENDED JLTNE 3fl, 2fl21 ~
Federal
Catalog Identifying
Number Number Amount
U,_S. Department of Housing and Community Development
Direct Assistance:
Community Development Block Grant
Total CDBG - Entitlement Grants
Total U.S. Department of Housing and Community Development U,S. Department of Transportation
Passed through the State of California Department of Transportation:
Highway Planning and Construction
Hi~hways and Bride Proiects ~` a✓ « v .~
Federal-Aid Highway Program
Total Highway Planning and Construction ~
Surface Transportation
Transportation Investment Generating Economic Recovery
Total Surface Transportation
Total passed through the California Department of T'ransporation Passed through the State of California Office of Traffic Safety:
State and Community Highway Safety Planning Grant
Total passed through the California Office of Traffic Safety Total U.S. Department of Transportation
U.S. Department of the Treasury
Passed through the State of California:
Coronavirus Relief Fund -CARES Act
Total passed through the State of California
Total U.S. Department of the Treasury
Total Expenditures of Federal Awards
14.218 B-~?~-MC-fl6-fl597 ~ 294,381
~n~ ~~,
__ 294,381
2fl.2fl5 BPI~PI ✓-54R1 (flfl~il 2,335,868
2fl.2fl5 HSIPL-5481 {fl 19} 195,269
2,531,137
2fl.932 T+~R2 5481 ~fl18) 27,645
2fl.6flfl PS21fl45 4,332
4,332
2,563,114
21.019 Nat available 397,862
397,862
~~~3,~ ~ ~,3~ —
~` Denotes major program
The Hate to the schedule of expenditures of federal awards is an integral part of this statement. 3 9
CITY OF GOLETA
NOTE TO THE SCHEDULE OF EXPENDIT~tJRES OF FEDERAL AWARDS For the Fiscal Year Ended June 30, 2021
NOTE 1—BASIS OF PRESENTATION
The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Goleta and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of the Title 2 U.S.
Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. The City has not elected to use the ten percent de minimus cost rate as covered in Section 200.414 Indirect (F&A) costs of the Uniform Guidance.
4 10
M:o ss, Levy 8~ ~Iartzhei m LLP
~,~C'l~:lf,lt'(:~ 1~11~~IC ~CCOL1I1taI1tS
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND
ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Clty COunCll
City of Goleta
Goleta, California
Report on Compliance for Each Major Federal Program
We have audited City of Goleta's (the City} compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the fiscal year ended June 30, 2021. The City's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.
Management's Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.
Auditors' Responsibility
Our responsibility is to express an opinion on compliance for each of the City's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code ofFederal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and AuditRequirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City's compliance.
Opinion on Each Major Federal Program
In our opinion, the City of Goleta, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the fiscal year ended June 30, 2021.
Report on Internal Control Over Compliance
Management of the City of Goleta is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance.
2400 Professional Parkway, Suite 205 Santa Maria, CA 93455 Tel 805.925.2579 Fax 805.925.2147 mlhcpas.com BEVERLY HILLS • CULVER CITY •SANTA MARIA
11 A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant de, f iciency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify one significant defïciency in internal controls over compliance as noted in Finding 2021-001.
City of Goleta's response to the internal control over compliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. City of Goleta's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Report on Schedule of Expenditure of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the City of Goleta, as of and for the fiscal year ended June 30, 2021, and the related notes to the financial statements which collectively comprise the City of Goleta' basic financial statements. We issued our report thereon February 24, 2022, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.
iijasa, ~ ~ ~~a~.r~~:x,,.c~Gp
Santa Maria, California
February 24, 2022
12 ~ ~ ~ • ~ _ ~ ~ ~.
13 CITY OF GOLETA
SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS
For the Fiscal Year Ended June 30, 2021
Section I —Summary of Auditors' Results
Financial Statements
Type of auditors' report issued
Internal control over financial reporting:
Material weaknesses identified?
Significant deficiencies identified not considered
to be material weaknesses?
Noncompliance material to financial statements noted?
Federal Awards
Internal control over major programs:
Material weaknesses identified?
Significant deficiencies identified not considered
to be material weaknesses?
Type of auditors' report issued on compliance for major programs:
Any audit findings disclosed that are required to be
reported in accordance with the Uniform Guidance,
Section 200.516?
Identification of major programs:
CFDA Numbers)
20.205
Dollar threshold used to distinguish between Type A
and Type B programs:
Auditee qualify as low-risk auditee:
Unmodified
Yes X No
Yes X None reported
Yes X No
Yes X No
X Yes None reported
Y~es X N~o
Name of Federal Pro ram
Highway Planning and Construction Grant
$ 750,000
Yes X No
~~
14 ~ ~ `
~ ~ ~` ~ ~ ~ ~ % ~ ~ ~ ~
! . . !'~ ~ ~
Financial Statement Findings:
There were nc~ financial statement findings.
15 CITY OF GOLETA
SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS
For the Fiscal Year Ended June 30, 2021
Federal Award Findings and Questioned Costs:
FINDING 2021-001
HIGHWAY PLANNING AND CONSTRUCTION (CFDA #20.205)
EQUIPMENT AND REAL PROPERTY MANAGEMENT
Criteria:
Per 2 CFR section 200.313(d)(1), property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property.
Condition:
During our examination of real property purchased with the federal funds, we noted that the City did not include the required information in the capital asset depreciation schedule nor in any supplemental schedules.
Effect:
Without tracking the property records as required in the criteria listed above, the risk of non-compliance with Federal regulations is elevated if the property is later sold.
Cause:
The City did not have a procedure established to track the property records for equipment or real property purchased with Federal funding.
Identification as a Repeat Finding, if Applicable:
Not a repeat fïnding.
Recommendation:
The City should establish a formal procedure to either on the depreciation schedule or on another supplement schedule list and track the property records. The listing of the property records including the federally funded portion of the property must be clearly recorded and noted on the City's formal depreciation schedules so that if the property was even sold, the appropriate portion of net property sales could be returned to the federal agency.
City's Corrective Action Plan:
See City response on the following page.
16 August 26, 2022
CITY COUNCIL
Adam Guise
Paula Perotte Moss, Levy, Hartzheim LLP
Mayor 24(1(1 Professi onal Park~~~ày, Ste 2(15
Santa Maria, CA 93455
Stuart Kasdin
Mayor Pro Tem~ore
RE: FY 2020/21 Single Audit Corrective Action Plan
Roger S. Aceves
Councilmember Dear Mr. Guise ,
dames Kyriaco FINDING 2021-001
Councilmember
K le Richards Management's or Department's Response:
y We concur. Councilmember
Views of Responsible officials and Corrective Action Plan:
CITY MANAGER The City agrees that the absence of a procedure established in the capital asset Michelle Greene schedule to track ro ert records fore ui ment o r real ro ert urchased p p y q p p p yp with federal funding poses an elevated risk of non-compliance with federal regulations if the property is later sold. The City will update its formal procedures and include the additional information in the City's capital asset schedule for both current property and future property. The additional information for the property records will include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, cost of the property, location and use of the property, condition of the property and the percentage of the federally funded portion of the property.
Planned Implementation Date: October 31, 2022
Name of Responsible Persons: Brenda Robinson, Accountant, Tony Gonzalez, Accounting Manager and Luke Rioux, Finance Director Sincerely,
Luke Rioux
Finance Director
10 130 Cremona Drive, Suite B, Goleta, CA 93 117 P 805.961.7500 F 805.685.2635 www.cityofgo(eta.org 17 CITY OF GOLETA
SUMMARY OF PRIOR FISCAL YEAR AUDIT FINDINGS AND QUESTIONED COSTS For the Fiscal Year Ended June 30, 2021
Financial Statement Findings:
There were no prior fiscal year financial statement ~ndn~,s. ~
18 CITY OF GOLETA
SUMMARY OF PRIOR FISCAL YEAR AUDIT FINDINGS AND QUESTIONED COSTS For the Fiscal Year Ended June 30, 2021
Federal Award Findings and Quesioned fasts:
There were no prier fiscal year federal award fïndings or questioned casts. 12 19