CITY OF MARYSVILLE, CALIFORNIA
COMPLIANCE REPORTS
June 30, 2021
CITY OF MARYSVILLE, CALIFORNIA
COMPLIANCE REPORTS
June 30, 2021
TABLE OF CONTENTS
Independent Auditor’s 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 .................................................................................................................................................. 1 Independent Auditor’s Report on Compliance for Each Major Program, Internal Control Over Compliance and Schedule of Expenditures of Federal Awards Required by the Uniform Guidance ................................................................................ 3 Schedule of Findings and Questioned Costs ................................................................................................. 6 Summary Schedule of Prior Audit Findings ................................................................................................. 9 Schedule of Expenditures of Federal Awards ............................................................................................. 10 Notes to Schedule of Expenditures of Federal Awards .............................................................................. 11 Corrective Action Plan ................................................................................................................................ 12 550 Howe Avenue, Suite 210
Sacramento, California 95825
Telephone: (916) 564-8727
FAX: (916) 564-8728
1 INDEPENDENT AUDITOR’S 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
To the City Council
Marysville, California
We have audited, in accordance with 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, the business-type activities, each major fund and the aggregate remaining fund information of the City of Marysville, California (the City) as of and for the 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 March 28, 2022.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the City’s internal control over financial reporting (internal control) as a basis for designing 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 and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify certain deficiencies in internal control described in the accompanying schedule of findings as Findings 2021-001 and 2021-002 that we consider to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free of 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 To the Board of Directors
City of Marysville, California
2 financial statements. 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.
City of Marysville’s Response to Findings
City of Marysville’s response to the findings identified in our audit is described in the accompanying schedule of findings. City of Marysville’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
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.
March 28, 2022
550 Howe Avenue, Suite 210
Sacramento, California 95825
Telephone: (916) 564-8727
FAX: (916) 564-8728
3 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR
EACH MAJOR PROGRAM, INTERNAL CONTROL OVER
COMPLIANCE AND SCHEDULE OF EXPENDITURES OF
FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE
City Council
City of Marysville, California
Marysville, California
Report on Compliance for Each Major Federal Program
We have audited the City of Marysville, California’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 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.
Auditor’s 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 of America; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements 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.
To the Board of Directors
City of Marysville, California
4 Opinion on Each Major Federal Program
In our opinion, the City 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 year ended June 30, 2021.
Other Matters
The results of our auditing procedures disclosed instances of noncompliance which are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying schedule of findings and questioned costs as item 2021-003. Our opinion on each major federal program is not modified with respect to these matters.
The City’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
Report on Internal Control Over Compliance
Management of the City 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 the 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.
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 deficiency 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 and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify certain deficiencies in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as items 2021-003, that we consider to be material weaknesses.
The City’s response to the internal control over compliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
To the Board of Directors
City of Marysville, California
5 Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City, as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City's basic financial statements. We issued our report thereon dated March 28, 2022, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by 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 to 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.
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.
March 28, 2022
CITY OF MARYSVILLE, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
For the Year Ended June 30, 2021
6 A.
1. Unmodified
2. a. Yes
b.
None noted
3. No
1. a. Yes
b.
None noted
2. Unmodified
3. Yes
4. AL Number Name of Federal Program
14.228 Community Development Block Grants
5. $750,000
6. No
Significant deficiencies identified not
considered to be material weaknesses?
SUMMARY OF AUDITOR'S RESULTS
Financial Statements
Type of auditor’s report issued:
Internal control over financial reporting:
Material weaknesses identified?
Auditee qualified as a low-risk auditee under 2 CFR, Section 200.516(a)? Noncompliance material to financial statements noted?
Identification of major programs:
Dollar Threshold used to distinguish between Type A and Type B programs?
Internal control over major programs:
Federal Awards
Type of auditor’s report issued on compliance for major programs:
Any audit findings disclosed that are required to be reported in accordance with 2 CFR, Section 200.516(a)?
Material weaknesses identified?
Significant deficiencies identified not
considered to be material weaknesses?
CITY OF MARYSVILLE, CALIFORNIA
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
For the Year Ended June 30, 2021
7 B. CURRENT YEAR FINDINGS – FINANCIAL STATEMENT AUDIT
Finding 2021-001 – Internal Controls over Financial Reporting and Year-End Closing Procedures – Material Weakness
Condition: The design and implementation of internal controls is crucial to the effective operation of city government and for accurate financial reporting. Turnover in personnel, the shortage of qualified support staff and resources dedicated to the close-out of the general ledger and preparing for the audit has resulted in 60 adjustments being identified during the audit process and has delayed completion of the audit.
Criteria: Internal controls over financial reporting should be in place to ensure the City has the ability to initiate, record, process and report financial data consistent with the assertions of management in the financial statements. Due to turnover in accounting staff assigned to closing the books and the lack of a complete closing checklist, the Finance Department staff did not identify and record all year-end closing entries prior to the start of the audit.
Cause: The City has had turnover in the accounting staff and did not have sufficient qualified resources to properly reconcile general ledger accounts and close the City’s books.
Effect: A number of audit adjustments needed to be posted to properly report balances in the City’s financial statements. The volume of entries also increases the risk of error in preparing the financial statements.
Recommendation: We recommend that the City develop internal control procedures to create a responsible structure for accurate financial reporting. Procedures should be in place to prepare the required reconciliations at year-end and throughout the year and post entries needed to close the books prior to the start of the audit. We believe that the year-end closing process could proceed more quickly and smoothly by developing a comprehensive closing procedures checklist. The City needs to ensure that all balance sheet accounts are reviewed and reconciled to supporting schedules prior to the beginning of the audit.
City’s Response: See Corrective Action Plan.
Finding 2021-002 – Capital Asset Accounting – Material Weakness Condition: A number of items were noted in our audit of the City’s capital assets. The three properties acquired from the Redevelopment Agency need to be recorded at their fair value at the acquisition date. These properties are currently reflected with a zero value. The City has recorded land with a value of $4.5 million in the general ledger that is not listed on the capital asset list, so it is not clear what parcels of land the City owns that makes up this amount.
City Hall is reported as acquired in 1939 for a cost of $1.2 million, which appears high. Any remodel work should be shown on a separate line item and depreciated starting with the date the remodel was completed over the estimated life of the improvements.
Criteria: An accurate list of capital assets needs to be maintained to support amounts reported in the financial statements.
CITY OF MARYSVILLE, CALIFORNIA
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
For the Year Ended June 30, 2021
8 Cause: A capital asset inventory has not been completed until recently and compared to the listing of capital assets.
Effect: The capital assets, net of accumulated depreciation, reflected in the City’s general ledger is likely misstated.
Recommendation: Procedures need to be established to ensure the capital asset list is up-to-date.
Periodic inspections of assets need to be performed to ensure that recorded assets exist. Reconciliations of the subsidiary ledger to the general ledger need to be performed on a periodic basis.
City’s Response: See Corrective Action Plan.
C. CURRENT YEAR FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD
PROGRAM
INTERNAL CONTROL OVER COMPLIANCE
Finding 2021-003 – Tracking of Equipment – Material Weakness Program: Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii
AL No.: 14.228
Federal Grantor: U.S. Department of Housing and Urban Development Passed-through: State of California, Department of Housing and Community Development Award No.: 20-CDBG-12085
Compliance Requirement: Equipment/ Real Property Management Condition: The City was unable to produce a list of equipment and real property purchased with federal funds. A physical inventory has also not been performed for federally purchased equipment and real property.
Criteria: A list of equipment and real property purchased with federal funds should be maintained for tracking purposes as there are specific federal guidelines and requirements regarding these purchases and dispositions.
Cause: The City did not have procedures in place to ensure all compliance requirements for this program are met. This is largely due to material weakness finding on capital assets in Finding 2021-002, which was caused by the City not having completed an inventory count for a few years.
Effect: The City may not be in compliance with the Uniform Guidance if federally acquired equipment have been sold and the proceeds were either not reimbursed to the Federal awarding agency or set aside to be used towards the purchase of a similar equipment.
Context: The program requires that for dispositions of equipment acquired under grants with a current per-unit fair market value of $5,000 or more, the Federal awarding agency is to be reimbursed for the Federal portion of the current market value or sales proceeds.
CITY OF MARYSVILLE, CALIFORNIA
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
For the Year Ended June 30, 2021
9 Recommendation: After a full inventory is performed, the City should review all equipment and real property on hand and add an indication of which items are purchased with federal funds or create a separate listing of the ones that were acquired or had improvements made using federal funds.
City’s Response: See Corrective Action Plan.
D. STATUS OF PRIOR YEAR FINDINGS - FINANCIAL STATEMENT AUDIT Finding 2020-001 – Internal Controls over Financial Reporting and Year-End Closing Procedures – Material Weakness
See Finding 2021-001 for current status.
Finding 2020-002 – Capital Asset Accounting – Material Weakness See Finding 2021-002 for current status.
E. STATUS OF PRIOR YEAR FINDINGS - MAJOR FEDERAL AWARD PROGRAM
INTERNAL CONTROL OVER COMPLIANCE
Finding 2019-004 – Compliance with Citizen Participation Requirements – Significant Deficiency Program: Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii
AL No.: 14.228
Federal Grantor: U.S. Department of Housing and Urban Development Passed-through: State of California, Department of Housing and Community Development Award No.: 15-CDBG-10562
Compliance Requirement: Special Tests and Provisions – Citizen Participation Condition: The City was unable to locate any evidence of a citizen participation plan relating to this grant program. This is also the first fiscal year in which federal funds for this program were requested for and received.
Status: The City implemented a citizen participation plan in the current year prior to submission of the grant application.
CITY OF MARYSVILLE, CALIFORNIA
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the Year Ended June 30, 2021
10 Federal
Assistance Pass-Through
Listing (AL) Grantors’
Federal Grantor/Pass-through Grantor/ Program Title Number Number Expenditures
MAJOR PROGRAMS
U.S. Department of Housing and Urban Development:
Passed through California Department of Housing and
Community Development
Community Development Block Grants/State's
program and Non-Entitlement Grants in Hawaii 14.228 20-CDBG-12085 375,876 $ TOTAL MAJOR PROGRAMS 375,876
NON-MAJOR PROGRAMS
U.S. Department of Agriculture:
Passed through California Department of Forestry and
Fire Protection
Cooperative Forestry Assistance 10.664 7FG20070 9,800
U.S. Department of Transportation:
Passed through California State Transportation Agency,
Department of Transportation
Highway Planning and Construction 20.205 STPL-5009(030) 70,207 Passed through the State of California Office of Traffic Safety
State and Community Highway Safety 20.600 EM21009 76,735 State and Community Highway Safety 20.600 PT20078 4,221 State and Community Highway Safety 20.600 PT21158 19,498 Minimum Penalties for Repeat Offenders for Driving
While Intoxicated 20.608 PT20078 15,710
Minimum Penalties for Repeat Offenders for Driving
While Intoxicated 20.608 PT21158 9,905
U.S. Department of Homeland Security, Federal Emergency Management Agency (FEMA):
Staffing for Adequate Fire and Emergency Response 97.083 EMW-2018-FF-00463 168,823 Assistance to Firefighters Grant 97.083 EMW-2019-FG-04532 40,679 Staffing for Adequate Fire and Emergency Response 97.083 EMW-2018-FF-00350 40,575 TOTAL NON-MAJOR PROGRAMS 456,153
TOTAL FEDERAL AWARDS 832,029 $
See accompanying notes to schedule of expenditures of federal awards.
CITY OF MARYSVILLE, CALIFORNIA
NOTES TO SCHEDULE OF EXPENDIRTURES OF FEDERAL AWARDS
For the Year Ended June 30, 2021
11 NOTE A – BASIS OF PRESENTATION
The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal grant activity of the City of Marysville, California (the City) under programs of the federal government for year ended June 30, 2021. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the City’s operations, it is not intended to be and does not present the financial position, changes in financial position, or cash flows of the City.
NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Expenses reported on the Schedule are reported on the modified accrual basis of accounting. Such expenses/expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenses are not allowable or are limited as to reimbursement.
NOTE C – PROGRAM COSTS/MATCHING CONTRIBUTIONS
The amounts shown as current year expenses represent only the federal grant portion of the program costs. Entire program costs, including the City’s portion, may be more than shown.
NOTE D – INDIRECT COST ALLOCATION PLAN
The City did not charge indirect costs to federal programs during the year ended June 30, 2021.
NOTE E – LOAN PROGRAMS
The outstanding balances of loan programs were as follows:
Federal Program
Federal AL
Number
Outstanding Loan
Balance
Community Development Block Grants/Entitlement Grants 14.218 1,35 $ 9,924 Home Investment Partnerships Program 14.239 958,009
NOTE F – SUBRECIPIENTS
There were no subrecipients of the City’s federal programs during the year ended June 30, 2021.
NOTE G – CLUSTERS OF PROGRAMS
There were no clusters of the City’s federal programs during the year ended June 30, 2021. 12 FINANCE DEPARTMENT
526 C STREET
MARYSVILLE, CALIFORNIA
95901
TELEPHONE
(530) 749‐3903
FACSIMILE
(530) 749‐3992
CITY OF MARYSVILLE
City of Marysville
Schedule of Finding Responses – Corrective Action Plan
June 30, 2021
Finding 2021‐001 – Internal Controls over Financial Reporting and Year‐End Closing Procedures – Material Weakness
The City of Marysville concurs with this finding. We will be using these recommendations/comments to develop an internal control procedure structure and to create a year‐end closing process to insure quick and smooth progress to the audit and throughout the year. This will be done by merging a current template that the City has created, and a template created by the auditors to create a comprehensive process. This work will be done by the Finance Department with services as needed from outside consultants to produce, develop, and implement the necessary changes. The bulk of this development will be during the 4th quarter of FY 2021‐22 and anticipated to be mostly completed by the end of the 1st quarter of FY 2022‐23. We have also established that we will have our books closed by the end of October thus allowing for an additional month to implement and review before the trial balance is submitted to the auditors to begin review.
Finding 2021‐002 – Capital Asset Accounting – Material Weakness Again, the City of Marysville concurs with this finding. The three conditions listed will take some time to research through records to find the timeline and backup as City records are not in electronic form at this time and the items go back several years. Some of this research was completed in FY 2021‐22 but addition records need to still be found. All our assets have been added to the City’s financial system and have been compared to the asset listing provided to the auditors and the numbers in the audit. A part of the year end process will include adding assets to the financial system for tracking and making sure that assets are being depreciated according to our Capital Asset Policy.
Finding 2021-003 – Tracking of Equipment – Material Weakness The City of Marysville concurs with this finding. We will develop polices and procedures to add additional information columns within our capital asset workbooks to identify all capital assets acquired through federal funds. Staff will be trained on these new policies and procedures. The anticipated completion date is 10/31/2022. City staff will also perform a physical inventory of equipment and real property on hand throughout FY 2022-2023 and identify which items have been purchased with federal funds.