Agenda packet — Audit Committee, February 23, 2022

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www.modestogov.com
AGENDA
City of Modesto

SPECIAL AUDIT COMMITTEE /COUNCIL WORKSHOP
Held Via Teleconference
(To Access Meeting Please See Instructions Below)
Wednesday, February 23, 2022 at 11:00 AM
*Roll Call: Sue Zwahlen, Chair
David Wright, Vice-Chair
Jenny Kenoyer, Member
Alternates: Rosa Escutia-Braaton, Tony Madrigal, Chris Ricci, Bill Zoslocki * Please Note: In order to respond to COVID-19, and pursuant to AB 361, the City will hold this meeting via teleconference and Committee Members will be calling in.

THIS MEETING WILL NOT BE PHYSICALLY OPEN TO THE PUBLIC
In order to minimize the spread of the COVID-19 virus, this meeting will be conducted pursuant to AB 361, which amended the Brown Act’s teleconferencing provisions and will not be physically open to the public. You may observe and participate in the meeting via teleconference as indicated below.

PARTICIPATING IN COMMITTEE MEETINGS IN CONFORMANCE
WITH AB 361
The City of Modesto is providing alternatives to observe and participate in Committee meetings.

If you wish to make either a general public comment or to comment on a specific agenda item, you may use one of the following options:

SUBMITTING COMMENTS BY E-MAIL
Written comments may be submitted via email to: [email protected] (include Agenda Item Number in the subject line). All comments will be shared with the Committee Members and placed in the record, but will not be read aloud during the meeting. Written comments must be received by 10:00 a.m. on the day of the meeting. - 1 -
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VIRTUAL PARTICIPATION BY ZOOM VIDEO

CONFERENCING AND TELEPHONE
Joining the Committee meeting via Zoom
The City of Modesto is now offering the ability to view and participate in Committee meetings via telephonic conferencing via “Zoom” video conferencing computer technology. The meeting may be accessed through the use of Zoom using the following options:
 Enter the following link into an Internet Browser
https://us02web.zoom.us/j/86945970570,
 Enter the following link into an Internet Browser https://zoom.us/ and using the Webinar ID 869 4597 0570
 Passcode 84326
To use Zoom, please visit: https://zoom.us/ and either sign-up for a free Zoom account or continue as a guest. Once you have downloaded the app onto your mobile device, joined from your web browser, or downloaded the Zoom software on your computer you will be ready for the upcoming Committee meeting.

Joining the Committee meeting via Telephone
If you don’t have a smart phone or computer to access the meeting via Zoom, you can participate by phone, by calling 1-877-853-5257 (Toll Free) or 1-888-475-4499 (Toll Free) and enter the Webinar ID 869 4597 0570 Passcode 84326
Providing Public Comment on Zoom and by Telephone
The Committee Chairman will request public comment during the Public Comment periods on the meeting agendas and during each Regular Calendar Item on the Committee Agenda. Once the Chairman has announced the public comment period, please do one of the following.

USING A COMPUTER OR SMART PHONE APP:
 Click on the “Raise Hand” feature in the webinar controls. This will notify City staff that you have raised your hand.
 City staff will unmute your microphone when it is your turn to provide public comment.
 A prompt will appear to confirm you would like to be unmuted and then you will have three minutes to provide public comment.
 Once your public comment has ended, you will be muted again.

USING A REGULAR PHONE (not using a computer or smart phone APP):
 Dial *9 (star 9), this will notify City staff that you have “raised your hand” for public comment.
 City staff will unmute your microphone when it is your turn to provide public comment.
 You will hear “you are unmuted” and then you will have three minutes to provide public comment.
 Once your public comment has ended, you will be muted again. - 2 -
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 If your phone is unmuted, and you are unable to be heard, the host may ask that you Dial *6 to toggle mute on/off in Zoom.

Additional Zoom resources/support
Please visit Zoom’s website support page on helpful tips to prepare for the meeting:
https://support.zoom.us/hc/en-us/categories/201146643

PUBLIC COMMENTS
Please refer to special public comment instructions above.

Three minute time limit per speaker
Only interested persons in the audience may present these matters. Under State law, Committee members may respond to matters being presented under this item only as follows:
a. Briefly respond to statements made or questions raised. b. Ask a question for clarification.
c. Provide a reference to staff or other resources for factual information. d. Request staff to report back at a subsequent meeting. e. Finally, a Committee member or the Committee itself may take action to direct staff to place a matter of business on a future agenda.

CONSENT ITEMS – ROLL CALL VOTE REQUIRED:

Information concerning the consent items listed below has been forwarded to each Committee member prior to this meeting for study. Unless some member of the audience or Committee member has a question concerning an item and asks that it be withdrawn from the consent list, the Committee approves the items at one time. The action taken by the Committee in approving consent items is set forth in the explanation of this individual item.

Any and all of the following agenda items are subject to action by the Modesto City Council.

This Agenda is on file at the Modesto-Stanislaus Library Reference Room, 1500 I Street, Modesto, in the City Clerk’s Office, Sixth Floor, 10th Street Place, and is available on the City’s Web site at www.modestogov.com.

In accordance with the requirements of Title II of the Americans with Disabilities Act (“ADA”) of 1990, the Fair Employment & Housing Act (“FEHA”), the Rehabilitation Act of 1973 (as amended), Government Code section 11135 and other applicable codes, the City of Modesto (“City”) will not discriminate against individuals on the basis of disability in the City’s services, programs, or activities. For more information, please visit the City of Modesto website at https://www.modestogov.com/865/Americans-with-Disabilities-Act-ADA In compliance with the Americans with Disabilities Act, if you need special assistance to - 3 -
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participate in this meeting, please contact the City Clerk (209) 577-5396. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting.

NEW BUSINESS

1. Consider approving the Fiscal Year 2020-2021 Single Audit Report for the City of Modesto from external auditors Hudson Henderson & Company, Inc., and forwarding to Council for approval. (Funding Source: Not Applicable) FINANCE DEPARTMENT; Maria Garnica, 209-577-5249,
[email protected]

MATTERS TOO LATE FOR THE AGENDA
These may be presented by members of the Committee and staff upon determination by a majority vote that an emergency exists, as defined by State law, or by a 2/3 vote that (1) there is a need to take immediate action, and (2) that the need for action came to the City’s attention after the agenda was posted.

ADJOURNMENT
Posted pursuant to Government Code Section 54954.2 on the bulletin board at Tenth Street Place on at by
date time signature
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CITY OF MODESTO

AUDIT COMMITTEE REPORT
DATE OF MEETING:

February 23, 2022
Date: January 20, 2022
TO: Audit Committee
Sue Zwahlen, Chair
David Wright, Vice-Chair
Jenny Kenoyer, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: DeAnna Christensen, Director of Finance
SUBJECT: Fiscal Year 2020-2021 Single Audit Report
CONTACT: Maria Garnica, Accounting Manager (209) 577-5249; [email protected]
DESCRIPTION:

Consider approving the Fiscal Year 2020-2021 Single Audit Report for the City of Modesto from external auditors Hudson Henderson & Company, Inc., and forwarding to Council for approval. (Funding Source: Not Applicable)
STRATEGIC PLAN ELEMENT:

This item supports the City of Modesto 2020-2025 Strategic Plan focus of Governance and Service Delivery under Goal H: Achieve Financial Sustainability.

BACKGROUND:

The City of Modesto Single Audit report is federally mandated by the provisions of the Federal Single Audit Act Amendments of 1996 and Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), which requires an audit to be conducted for any non-Federal entity that expends $750,000 or more a year in Federal awards. This audit was conducted by the City’s external auditor, Hudson Henderson & Company, Inc. and the main objectives were to ensure a fair presentation of the basic financial statements and the schedule of expenditures of Federal awards, and to also audit the City's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards expended during the fiscal year.

DISCUSSION:

As part of the City’s Fiscal Year 2020-2021 Single Audit report, one audit finding was reported for the following program:
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Audit Committee, February 23, 2022
Single Audit Reports for FY 2020-2021

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Emergency Rental Assistance Program, American Rescue Plan Act Per Uniform Guidance Section 200.303, it is the City’s responsibility to establish and maintain effective internal controls over federal awards, that provide reasonable assurance that the City is managing the federal award in compliance with the federal statutes, regulations, and terms and conditions of the federal award. The requirement ensures that only allowable costs are charged to the federal programs. Per audit procedures performed over expenditures charged to the Emergency Rental Assistance Program (ERAP), it was identified that an invoice was incorrectly calculated and charged to the program. Although, the City has sufficient internal control processes over expenditures, including proper review, approval and recording; the overcharge was due to the vendor providing one invoice which combined charges for both federal and state funded programs that was overlooked when the invoice was submitted for payment to the federal program.

As a corrective action plan, the City staff will work with all vendors and sub-recipients to ensure that separate invoices are submitted to process payments with multiple funding sources. The vendors who hold multiple contracts with different funding sources will be required to submit written confirmation that all invoices are associated with the correct funding source. Additionally, all invoices will be reviewed by three entities before processing, program manager, fiscal review, and Community Development Manager. City staff is currently working with the vendor related to this invoice to request a full refund for this overcharge.

FISCAL IMPACT:

While the information contained in these reports discloses the financial performance for the City, there is no direct fiscal impact.

Approved by:

DeAnna Christensen, Director of Finance
Joseph P. Lopez, City Manager
Attachment:

1. City of Modesto Single Audit FY 20-21
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CITY OF MODESTO

SINGLE AUDIT REPORT

FOR THE YEAR ENDED
JUNE 30, 2021
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TABLE OF CONTENTS
Page
Reports:

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...................................................................................................................... 1 Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control over Compliance; and Report on the Schedule of Expenditures of Federal Awards
Required by the Uniform Guidance ................................................................................................................. 3 Financial Schedule:

Schedule of Expenditures of Federal Awards .................................................................................................... 6 Notes to Schedule of Expenditures of Federal Awards ..................................................................................... 10 Findings and Questioned Costs:

Schedule of Findings and Questioned Costs ...................................................................................................... 11 Summary Schedule of Prior Year Findings and Questioned Costs ..................................................................... 13 Corrective Action Plan ....................................................................................................................................... 14 #1..
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7473 N. INGRAM AVE., SUITE 102 FRESNO, CA 93711 _______________________________________________________________________________________________ P (559) 412-7576 F (559) 493-5325 WWW.HHCCPAS.COM
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
To the City Council
City of Modesto, California
We 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, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Modesto, 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 December 10, 2021.

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 considered to be material weaknesses.

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 an instance of noncompliance or other matters that are required to be reported under Government Auditing Standards which is described in the accompanying schedule of findings and questioned costs as item 2021-001. #1..
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2 City’s Response to Findings
The City’s response to the finding 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 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 City’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 City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

HUDSON HENDERSON & COMPANY, INC.

Fresno, California
December 10, 2021
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7473 N. INGRAM AVE., SUITE 102 FRESNO, CA 93711 _______________________________________________________________________________________________ P (559) 412-7576 F (559) 493-5325 WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY

THE UNIFORM GUIDANCE
To the City Council
City of Modesto, California
Report on Compliance for Each Major Federal Program
We have audited the City of Modesto, 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 auditors’ 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 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.

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 an instance of noncompliance which is required to be reported in accordance with the Uniform Guidance and which is described in the accompanying schedule of findings and questioned costs as item 2021-001. Our opinion on each major federal program is not modified with respect to this matter.

The City’s response to the noncompliance finding 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. #1..
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4 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 consider the deficiency in internal control over compliance described in the accompanying schedule of findings and questioned costs as item 2021-001 to be a significant deficiency.

The City’s response to the internal control over compliance finding 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 it.

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 December 10, 2021, 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 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 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.
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5 Purpose of Report
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.

HUDSON HENDERSON & COMPANY, INC.

Fresno, California
February 4, 2022
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CITY OF MODESTO

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE YEAR ENDED JUNE 30, 2021
The accompanying notes are an integral part of the Schedule of Expenditures of Federal Awards. 6 PassThrough to
Federal Grant Sub- Federal
CFDA No. Number recipients Expenditures
Federal Grantor/ Pass-through
Grantor/ Program or Cluster Title
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENTDirect Programs CDBG - Entitlement Grants Clus ter
Community Development Block Grants (CDBG)/Entitlement Program 14.218 B-14-MC-060002 - $ 782 $ Community Development Block Grants (CDBG)/Entitlement Program 14.218 B-17-MC-060002 - 155Community Development Block Grants (CDBG)/Entitlement Program 14.218 B-18-MC-060002 - 157,131Community Development Block Grants (CDBG)/Entitlement Program 14.218 B-19-MC-060002 - 324,403Community Development Block Grants (CDBG)/Entitlement Program 14.218 B-20-MC-060002 447,114 1,185,253

14.218 B-20-MW-060002 769,512 907,957
Total CDBG - Entitlement Grants Cl us ter 1,216,626 2,575,681 Emergency Solutions Grant Program 14.231 E-19-MC-060002 11,795 11,795 Emergency Solutions Grant Program 14.231 E-20-MC-060002 84,501 104,417Emergency Solutions Grant Program - CARES Act 14.231 E-20-MW-060002 1,034,928 1,393,294 Total Emergency Solutions Grant Program 1,131,224 1,509,506 Home Investment Partners hips Program 14.239 M-15-MC-060207 - 3,715Home Investment Partners hips Program 14.239 M-16-MC-060207 - 315,041Home Investment Partners hips Program 14.239 M-17-MC-060207 - 315,748Home Investment Partners hips Program 14.239 M-18-MC-060207 - 860,023Home Investment Partners hips Program 14.239 M-19-MC-060207 - 16,258 Home Investment Partners hips Program 14.239 M-20-MC-060207 - 138,134 Total Home Investment Partners hips Program - 1,648,919 ARRA - Neighborhood Stabilization Program (Recovery Act Funded) 14.256 B-09-LN-CA-0053 - 13,414 Continuum of Care Program 14.267 CA1754L9T101800 84,778 84,778 TOTAL U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 2,432,628 5,832,298U.S. DEPARTMENT OF JUSTICE Direct Programs
Coronavirus Emergency Suppl emental Funding 16.034 2020VDBX0954 - 103,315 Public Safety Partners hip and Community Policing Grants 16.710 2016ULWX0021 - 19,647 Community Development Block Grants (CDBG)/Entitlement Program - CARES Act #1..
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CITY OF MODESTO
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (continued)
FOR THE YEAR ENDED JUNE 30, 2021
The accompanying notes are an integral part of the Schedule of Expenditures of Federal Awards. 7 PassThrough to
Federal Grant Sub- Federal
CFDA No. Number recipients Expenditures
Federal Grantor/ Pass-through
Grantor/ Program or Cluster Title
Pass ed through the County of Stanis laus
Edward Byrne Memorial Justice As sis tance Grant 16.738 2017-DJ-BX-0939 - $ 134,043 $ Edward Byrne Memorial Justice As sis tance Grant 16.738 2018-DJ-BX-0826 - 102,711 Edward Byrne Memorial Justice As sis tance Grant 16.738 2019-DJ-BX-0693 - 11,024 Edward Byrne Memorial Justice As sis tance Grant 16.738 2020-DJ-BX-0226 - 26,827 Total Edward Byrne Memorial Justice As sistance Grant - 274,605 TOTAL U.S. DEPARTMENT OF JUSTICE - 397,567U.S. DEPARTMENT OF TRANSPORTATION Direct Programs
Airport Improvement Program 20.106 AIP-041 - 2,165
Airport Improvement Program - CARES Act 20.106 AIP-042 - 69,000 Total Airport Improvement Program - 71,165
Federal Transit Clus ter
Federal Trans it - Capital Inves tment Grants 20.500 CA-04-0198 - 824,667 Federal Trans it - Formul a Grants 20.507 CA-2017-010-00 - 515,408Federal Trans it - Formul a Grants 20.507 CA-2017-054-00 - 1,100,000Federal Trans it - Formul a Grants 20.507 CA-2017-157-00 - 105,561Federal Trans it - Formul a Grants 20.507 CA-2019-001 - 2,058,393Federal Trans it - Formul a Grants 20.507 CA-2020-021-00 713,075 2,063,795Federal Trans it - Formul a Grants 20.507 CA-2020-073-00 2,185,035 11,467,476 Total Federal Trans it - Formula Grants 2,898,110 17,310,633 Bus and Bus Faciliti es Formula & Dis cretionary Program 20.526 CA-2017-062-00 - 1,076,373 Total Federal Trans it Clus ter 2,898,110 19,211,673
Pass ed through the California Department of Trans portation Highway Planning and Cons truction Cluster
Highway Planning and Construction 20.205 BRLS-5938(167) - 52,095 Highway Planning and Construction 20.205 TGHPLUL-5059(230) - 4,767,806Highway Planning and Construction 20.205 CML-5059(186) - 563,045Highway Planning and Construction 20.205 CML-5059(185) - 386,881Highway Planning and Construction 20.205 CML-5059(198) - 7,118Highway Planning and Construction 20.205 STPL-5059(205) - 1,412,477 #1..
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CITY OF MODESTO
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (continued)
FOR THE YEAR ENDED JUNE 30, 2021
The accompanying notes are an integral part of the Schedule of Expenditures of Federal Awards. 8 PassThrough to
Federal Grant Sub- Federal
CFDA No. Number recipients Expenditures
Federal Grantor/ Pass-through
Grantor/ Program or Cluster Title
Pass ed through the California Department of Trans portation (continued) Highway Planning and Cons truction Cluster (continued)
Highway Planning and Construction 20.205 STPL- 5059 (208) - $ 41,689 $ Highway Planning and Construction 20.205 CML-5059(217) - 1,407 Highway Planning and Construction 20.205 CML-5059(219) - 32,959 Highway Planning and Construction 20.205 STPL-5059(220) - 1,635,761Highway Planning and Construction 20.205 CML-5059(222) - 10,718Highway Planning and Construction 20.205 CML-5059(223) - 383,778 Highway Planning and Construction 20.205 ATPL-5059(233) - 73,897 Highway Planning and Construction 20.205 NH-P099(647) - 111,131 Highway Planning and Construction 20.205 HSIPL-5059(227) - 9,095Highway Planning and Construction 20.205 CML-5059(229) - 3,672Highway Planning and Construction 20.205 STPL-5059(234) - 14,255 Highway Planning and Construction 20.205 CML-5059(236) - 8,845 Highway Planning and Construction 20.205 HSIPL-5059(237) - 1,001Highway Planning and Construction 20.205 HSIPL-5059(238) - 18,448 Highway Planning and Construction 20.205 STPL-5059(242) - 12,067Highway Planning and Construction 20.205 CML-5059(245) - 458Highway Planning and Construction 20.205 CML-5059(246) - 369Highway Planning and Construction 20.205 CML-5059-(228) - 12,840Highway Planning and Construction 20.205 CML-5059-(235) - 21,870Highway Planning and Construction 20.205 CML-5059-(240) - 15,057 Total Highway Planning and Construction Clus ter - 9,598,739 Pass ed through the California Office of Traffic Safety Highway Safety Clus ter
State and Community Highway Safety 20.600 PT20083 - 60,935 State and Community Highway Safety 20.600 PS20013 - 11,977State and Community Highway Safety 20.600 PT21110 - 50,352State and Community Highway Safety 20.600 PS21034 - 17,501 Total State and Community Highway Safety - 140,765
Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 PT20083 - 78,408 Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 PT21110 - 142,846 Total Minimum Penalties for Repeat Offenders for Driving While Intoxicated - 221,254 #1..
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CITY OF MODESTO

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
10 NOTE 1 – GENERAL
The accompanying Schedule of Expenditures of Federal Awards presents all the activity of all the federal award programs of the City of Modesto (the City) for the year ended June 30, 2021. The City reporting entity is defined in Note 1 to the City’s basic financial statements. Federal awards received directly from federal agencies as well as federal awards passed through other government agencies are included on the schedule.

NOTE 2 – BASIS OF ACCOUNTING & PRESENTATION
Consistent with the City’s method of filing federal financial reports, the accompanying Schedule of Expenditures of Federal Awards is prepared using the accrual basis method of accounting. 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, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

Therefore, some of the amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the basic financial statements. The amounts reported in the accompanying Schedule of Expenditures of Federal Awards agree, in all material respects, to amounts reported within the City’s financial statements.

NOTE 3 – RELATIONSHIP TO FEDERAL FINANCIAL REPORTS
Amounts reported in the accompanying schedule agree with the amounts reported in the related periodic federal financial reports.

NOTE 4 – CATALOG OF FEDERAL DOMESTIC ASSISTANCE (CFDA)
The CFDA numbers included in the accompanying Schedule of Expenditures of Federal Awards were determined based on the program name, review of the grant or contract information and the Office of Management and Budget’s Catalog of Federal Domestic Assistance.

NOTE 5 – PASS-THROUGH ENTITY IDENTIFYING NUMBERS
When Federal awards were received from a pass-through entity, the Schedule of Expenditures of Federal Awards show, if available, the identifying number assigned by the pass-through entity. When no identifying number is shown, the City has either determined that no identifying number is assigned for the program or the City was unable to obtain an identifying number from the pass-through entity.

NOTE 6 – INDIRECT COST RATE LIMITATION
The City does not use the 10 percent de minimis indirect cost rate. #1..
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CITY OF MODESTO

SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE YEAR ENDED JUNE 30, 2021
11 SECTION I – SUMMARY OF AUDITORS’ RESULTS
Financial Statements
Type of auditors' report issed: Unmodified
Internal control over financial reporting
● Material weakness identified? Yes X No
● Significant deficiency(ies) identified that are not
considered to be material weaknesses? Yes X No
Noncompliance material to financial statements noted? Yes X No Federal Awards
Internal control over major federal programs:
● Material weakness identified? Yes X No
● Significant deficiency(ies) identified that are not
considered to be material weaknesses? X Yes No
Noncompliance material to federal awards? X Yes No
X Yes No
Type of auditors' report issued on compliance for major Federal programs: Unmodified
Identification of major programs:

Name of Federal Program or Cluster
Emergency Solutions Grant Program
Home Investment Partnerships Program
Edward Byrne Memorial Justice Assistance Grant
Highway Planning and Construction Cluster
Disaster Grants - Public Assistance Grant
Dollar threshold used to distinguish
Between Type A and B programs: $750,000
Auditee qualified as a low risk auditee? Yes X No
CFDA Number:

14.218

97.036
Any audit findings disclosed that are required to be reported in accordance with 2CRF section 200.516(a).

21.023

20.205

14.231

14.239

16.738
CDBG - Entitlement Grants Cluster
Emergency Rental Assistance Program - American
Rescue Plan Act
#1..
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CITY OF MODESTO
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (continued)
FOR THE YEAR ENDED JUNE 30, 2021
12 SECTION II – FINANCIAL STATEMENT FINDINGS
There are no financial statement findings to be reported in accordance with Governmental Auditing Standards.

SECTION III – FEDERAL AWARD FINDINGS
Reference: 2021-001
Type of Finding: Significant Deficiency
Category of Finding: Allowable Costs/Cost Principles
Federal Program Title(s) & CFDA Number(s): 21.023 – Emergency Rental Assistance Program – American Rescue Plan Act
Federal Agency: United States Department of the Treasury Passed-Through: State of California - Department of Finance Award Number: N/A
Award Year: Fiscal Year 2020/21
Criteria:

Per Uniform Guidance Section 200.303, it is the City’s responsibility to establish and maintain effective internal controls over Federal awards that provide reasonable assurance that the City is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. The requirement ensures that only allowable costs are charged to federal programs.

Condition:

Per audit procedures performed over expenditures charged to the Emergency Rental Assistance Program (the Program), we noted an invoice that was incorrectly calculated and charged to the program. The service charge was calculated on a combined federal and state program total, which resulted in the City’s Program being overcharged.

The overcharge included costs that should have been allocated to the State funding programs as opposed to the federal program, resulting in questioned costs to the Program.

Cause:

Although the City has sufficient internal control processes over expenditures, including proper review, approval and recording; the overcharge was due to the vendor providing one invoice which combined charges for both federal and state funded programs that was overlooked when the invoice was submitted for payment to the federal program.

Effect:

The City is out-of-compliance with the allowable costs/cost principles requirement of the Program in that the federal program was overcharged for the fiscal year ended June 30, 2021.

Questioned Costs:
$68,738
Recommendations:

We recommend that management require vendors to split charges and/or implement additional reviews when processing payments for invoices with multiple funding sources.

Views of Responsible Officials and Planned Corrective Actions:

Pending
#1..
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CITY OF MODESTO

SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2020
13 SECTION II – FINANCIAL STATEMENT FINDINGS
Finding 2020-001 – Significant Deficiency
Accounts Payable
Criteria:

In accordance with accounting principles generally accepted in the United States of America, adequate internal controls should be implemented to ensure that all liabilities incurred by the City be recorded/accrued as of the fiscal reporting date and in the correct accounting reporting period.

Condition:

During our testing of accounts payable, we noted invoices for goods/services incurred prior to the end of the fiscal year were not accrued in the financial statements resulting in a material adjustment.

Cause of Condition:

Although the City’s accrual process resulted in the vast majority of the accruals being correctly accrued, the City unfortunately missed two material invoices which resulted in the material adjustment.

Effect of Condition:

The City’s financial statements required a material adjustment to ensure presentation in accordance with accounting principles generally accepted in the United States of America.

Recommendation:

We recommend that City put an additional level of review over the accrual process and implement additional testing over possible missed expenses and liabilities to ensure that the City captures and accrues all necessary invoices as of year-end.

Management’s Response:

Accounting Manager will meet with Accounts Payable staff on a bi-weekly basis after June 30th through the completion of the draft financials to identify invoices that should be accrued to the prior fiscal year. Accounts Payable staff will inform Accounting Manager of any large dollar invoices dated prior to the end of the fiscal year by a defined date to ensure Accounting Manager accrues the invoices properly. Additionally, prior to the start of the preparation of the financial reports, further review of all invoices processed subsequent to the end of the fiscal year will be completed to ensure the City captures and accrues all necessary invoices as of year-end.

Current Year Status:

Implemented.

SECTION III – FEDERAL AWARD FINDINGS
There were no federal award findings to be reported in accordance with the Uniform Guidance in the prior year. #1..
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Audit CommitteeFebruary 23, 2022

Audit Committee
February 23, 2022