CITY OF ORANGE, CALIFORNIA
JUNE 30, 2021 SINGLE AUDIT REPORT
CITY OF ORANGE, CALIFORNIA
SINGLE AUDIT REPORT
JUNE 30, 2021
CITY OF ORANGE, CALIFORNIA
SINGLE AUDIT REPORT
JUNE 30, 2021
TABLE OF CONTENTS
Page
Number
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 Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance ........................................................................................ 3 Schedule of Expenditures of Federal Awards for the
Fiscal Year Ended June 30, 2021 ........................................................................................................ 6 Notes to the Schedule of Expenditures of Federal Awards .................................................................... 8 Schedule of Findings and Questioned Costs for the
Fiscal Year Ended June 30, 2021 ........................................................................................................ 9 Summary Schedule of Prior Year Findings and Questioned Costs for the Fiscal Year Ended June 30, 2020 ...................................................................................................... 11 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 Honorable Mayor and Members of the City Council
City of Orange, California
We have audited, in accordance with the auditing standards gene rally 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 fin ancial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Orange, 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 Ci t y ’ s b a s i c f i n a n c i a l s t a t e m e n t s , a n d h a v e issued our report thereon dated December 13, 2021.
Internal Control over Financial Reporting
In planning and performing our a udit of the financial statements, we considered the City’s inte rnal control over financial reporting (inter nal control) as a basis for desi gning 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 t hat a material misstatement of the entity’s financial statements will not be prevented or detected and corr ected 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 purpo se described in the first paragraph of this section and was not designed to identify all deficiencies in in ternal control that might be material weaknesses or, significant deficiencies. Given these limitation s, 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 Hou sing Successor’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 wit h which could have a direct and material effect on financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express s uch an opinion. The results of our tests disclosed the following instance of noncompliance or other matt ers that are required to be reported under Government Auditing Standards: 2021-001. This matter is described in the accompanying schedule of findings and questioned costs.
203 N. Brea Blvd., Suite 203
Brea, CA 92821 Lance, Soll & Lunghard, LLP Phone: 714.672.0022 To the
Honorable Mayor and Members of the City Council
City of Orange, California
City’s Response to Findings
The City’s response to the findi ngs identified in our audit 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 p erformed in accordance with Government Auditing Standards in considering the Cit y’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Brea, California
December 13, 2021
2 INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM
AND ON INTERNAL CONTROL OVER COMPLIANCE AND REPORT ON SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE To the Honorable Mayor and Members of the City Council
City of Orange, California
Report on Compliance for Each Major Federal Program
Opinion on Each Major Federal Program
We have audited the City of Orange, California (the “City”)’s compliance wi th 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.
In our opinion, the City, complied, in all material respects, w ith 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.
Basis for Opinion
We conducted our audit of compliance in accordance with auditin g standards generally accepted in the United States of America (GAAS); the standards applicable to fin ancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and t he 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). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control o ver compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the City’s government programs.
203 N. Brea Blvd., Suite 203
Brea, CA 92821 Lance, Soll & Lunghard, LLP Phone: 714.672.0022
To the
Honorable Mayor and Members of the City Council
City of Orange, California
Auditor’s Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above, whether due to fraud or error, and express an opinion on the City’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conduc ted in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance will always detect material noncompl iance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compli ance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements of the government program as a whole.
In performing an audit in accordance with GAAS, Government Auditing Standards , and Uniform Guidance, we:
x Exercise professional judgment and maintain professional skept icism throughout the audit. x Identify and assess the risks of material noncompliance, wheth er due to fraud or error, and design and perform audit procedures responsive to those risks. Such p rocedures include examining, on a test basis, evidence regarding the City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. x Obtain an understanding of the C ity’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumst ances and to test and report on internal control over compliance in accordance with Uniform Gui dance, but not for the purpose of expressing an opinion on the effectiveness of the City’s intern a l c o n t r o l o v e r c o m p l i a n c e.
Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.
Report on 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 manage ment or employees, in the norma l course of performing their assigned functions, to prevent, or detect and correct, noncompliance wit h 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 a combination of deficiencies, in internal control over comp liance, 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 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 t he limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be a material weakness, as defined above. However, material weaknesses or significant deficiencie s in internal control over compliance may exist that have not been identified.
4 To the Honorable Mayor and Members of the City Council City of Orange, California
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.
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 statement s, which collectively comprise the City ’s basic financial statements. We issued our report thereon dated December 13, 2021, which contained unmodified opinions on those financial statements. Our audit wa s conducted for the purpose of forming opinions on the financial statem ents that collectively comprise t h e b a s i c f i n a n c i a l s t a t e m e n t s . T h e 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 financia l statements. The information has been subjected to the auditing procedures applied in the audit of th e 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 tes ting based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Brea, California
December 13, 2021
5 CITY OF ORANGE, CALIFORNIA
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Assistance
Listing Pass-Through Entity Total Federal
Number Identifying Number Expenditures
CDBG - Entitlement Grants Cluster
Department of Housing and Urban Development:
Direct Programs:
Community Development Block Grants/Entitlement Grants 14.218 N/A 1,689,887$ COVID-19 - Community Development Block Grants/Entitlement Grant s 14.218 N/A 405,429 Subtotal - CFDA 14.218 2,095,316
Total Department of Housing and Urban Development Programs in Cluster 2,095,316 Total CDBG - Entitlement Grants Cluster 2,095,316
Highway Planning and Construction Cluster *
Department of Transportation:
Passed through the State of California Department of Transporta tion (CalTrans):
Highway Planning and Construction 20.205 94-900-7744 919,680 Total Department of Transportation Programs in Cluster 919,680 Total Highway Planning and Construction Cluster 919,680 Highway Safety Cluster
Department of Transportation:
Passed through the State of California Office of Traffic Safety:
State and Community Highway Safety 20.600 80-824-4842 98,495 Minimum Penalties for Repeat Offenders for Driving While Intoxi cated 20.608 80-824-4842 185,204 National Priority Safety Programs 20.616 80-824-4842 24,800 Total Department of Transportation Programs in Cluster 308,499 Total Highway Safety Cluster 308,499
Other Programs
Department of Housing and Urban Development:
Direct Programs:
Home Investment Partnerships Program 14.239 N/A 37,390
Total Department of Housing and Urban Development 37,390 Department of Justice:
Direct Programs:
Equitable Sharing Program 16.922 N/A 371,674
Passed through the County of Orange:
COVID-19 - Coronavirus Emergency Supplemental Funding Program 16.034 00-965-7602 28,062 Tobacco Grant Program 16.U01 00-965-7602 31,456
Total Department of Justice 431,192
Department of the Treasury:
Direct Programs:
COVID-19 - Coronavirus State and Local Fiscal Recovery Funds * 21.027 N/A 14,009,094 Passed through the State of California:
COVID-19 - Coronavirus Relief Fund * 21.019 80-748-7608 4,600,498 Passed through the County of Orange:
COVID-19 - Coronavirus Relief Fund * 21.019 00-965-7602 229,811 Subtotal - 21.019 4,830,309
Total Department of Housing and Urban Development Programs 18,839,403 Department of Homeland Security:
Passed through the County of Orange:
Emergency Management Performance Grants 97.042 00-965-7602 809 Total Department of Homeland Security 809
Total Other Programs 19,308,794
Total Expenditures of Federal Awards 22,632,289$
Grantor/Program or Cluster Title
Federal Grantor/Pass-Through
The notes to the schedule of expenditures of federal awards are an integral part of this schedule. 6 CITY OF ORANGE, CALIFORNIA
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Assistance
Listing Total Federal
Number Expenditures
COVID-19 - Community Development Block Grants/Entitlement Grant s 14.218 405,429 $ COVID-19 - Coronavirus Emergency Supplemental Funding Program 16 .034 28,062 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds * 2 1.027 14,009,094 COVID-19 - Coronavirus Relief Fund * 21.019 4,830,309
Total Coronavirus Emergency Acts Funding 19,272,894$
* Major Program
1 There was no federal awards expended in the form of noncas h assistance and insurance in effect during the year. 2 No amounts were passed through to subrecipients during the year.
CORONAVIRUS EMERGENCY ACTS FUNDING RECONCILIATION
Program or Cluster Title
The notes to the schedule of expenditures of federal awards are an integral part of this schedule. 7 CITY OF ORANGE, CALIFORNIA
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2021
Note 1:
Basis of Presentation
The accompanying Schedule of Expenditures of Federal Awards (th e Schedule) includes the federal award activity of the City of Orange (the City) under programs of the federal government as well as federal financial assistance passed through other government agencies for the year ended June 30, 2021. The information in this Schedule is presen ted 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).
Because the Schedule presents only a selected portion of the op erations of the City, it is not intended to and does not present the financial statements of the City. The City’s reporting entity is defined in Note 1 of the notes to the City’s financial statements.
Note 2: Summary of Significant Accounting Policies
Expenditures reported on the Sch edule are reported using the mo dified accrual basis of accounting for governmental funds and the accrual basis for pro prietary funds, which is described in Note 1 of the notes to the City’s financial statem ents. Such expenditures are recognized following the cost principles contained in the Unifo rm Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement.
Note 3: Indirect Cost Rate
The City has elected not to use the 10% de minimis indirect cos t rate allowed under the Uniform Guidance.
Note 4: Contingencies
Under the terms of federal and state grants, additional audits may be requested by the grantor agencies and certain costs may be questioned as not being appropriate expenditures under the terms of the grants. Such audits could lead to a request for re imbursement to the grantor agencies.
8 CITY OF ORANGE, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
SECTION I - SUMMARY OF AUDITORS' RESULTS
Financial Statements
Type of a
uditors' report issued: Unmodified Opinion
Internal control over financial reporting:
x Material weaknesses identified? yes X no x
Significant deficiencies identified? yes X none r eported Noncom
pliance material to financial
statements noted? X yes no
Federa
l Awards
Interna
l control over major programs:
x Significant deficiencies identified? yes X no x
Material weaknesses identified? yes X none reported Type of a
uditors' report issued on compliance for major programs: Unmodified Opinion Any audit findings disclosed that are required to be
reported in accordance with Title 2 U.S. Code of
Federal Regulations (CFR) Part 200, Uniform
Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards (Uniform
Guidance)? yes X no
Ident
ification of major programs:
Assistance Listing Number(s) Name of Federal Program or Cluster
20.2 05 Highway Planning and Construction Cluster
21.027 Coronavirus State and Local Fiscal Recovery Funds
21.019 Coronavirus Relief Fund
Dollar threshold used to distinguish
between type A and type B program $750,000
Auditee qualified as low-risk auditee? X yes no 9 CITY OF ORANGE, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
SECTION II - FINANCIAL STATEMENT FINDINGS
Reference Number: 2021-001
Evaluation of Finding:
Noncompliance
Criteria:
Senate Bill 341 (SB 341) requires all successor housing entities to comply with annual report requirements.
One requirement is for the City to report housing financial and activity information by including specified information with the Annual Progress Report (APR) required to b e annually submitted to the Department of Housing and Community Development (HCD) by April 1 of the subsequent year pursuant to the State of California housing law in reporting progress in implementing the housing element.
Condition:
As part of our audit procedures, we noted that the APR for the fiscal year ended June 30, 2020, was submitted to HCD on May 18, 2021.
Cause of Condition:
The City’s ability to submit the APR timely, was due to the Cit y’ efforts to pass an additional dwelling unit ordinance during the first quarter of the year, and the conside rable amount of staff time required in those efforts. There were also staffing shortages in the City’s Community Development Department.
Effect or Potential Effect of Condition:
The effect is unknown.
Recommendation:
The City should implement policies and procedures to ensure timely reporting of the APR to HCD by April first of the subsequent year.
Management’s Response and Corrective Action:
The City has assigned a specific staff member to this report, with the deadline scheduled for the responsible department. Based on available staff resources, the filing will remain an action item and the intent is to submit it by the deadline.
SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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