CITY OF ORANGE, CALIFORIA
JUNE 30, 2022 SINGLE AUDIT REPORT
CITY OF ORANGE, CALIFORNIA
SINGLE AUDIT REPORT
JUNE 30, 2022
CITY OF ORANGE, CALIFORNIA
SINGLE AUDIT REPORT
JUNE 30, 2022
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, 2022 ........................................................................................................ 6
Notes to the Schedule of Expenditures of Federal Awards .................................................................... 8
Schedule of Findings and Questioned Costs for the
Fiscal Year Ended June 30, 2022 ........................................................................................................ 9
Summary Schedule of Prior Year Findings and Questioned Costs for the Fiscal Year Ended June 30, 2021 ...................................................................................................... 11
203 N. Brea Blvd., Suite 203
Brea, CA 92821 Lance, Soll & Lunghard, LLP Phone: 714.672.0022
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 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 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, 2022, and the related notes to the financial statements, which collectively comprise the Ci ty’s basic financial statements, and have issued our report thereon dated December 16, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statement s, we considered the City’s internal control over financial reporting (internal 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 ther e is a reasonable possibility t hat a material misstatement of the entity’s financial statements will not be prevented, or detected and cor rected, on a timely basis. A significant deficiency is a deficiency, or a combinati on 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 c ontrol was for the limited purpo se described in the first paragraph of this section and was not designed to i dentify all deficiencies in internal control that might be material weaknesses or, significant defic iencies. 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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Cit y’s financial statements are free from material misstatement, we performed tests of its compliance wit h certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on complian ce 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 instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as item 2022-001.
To the Honorable Mayor and Members of the City Council
City of Orange, California
City of Orange, California’s Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the City ’s response to the findings identified in our audit and described in the accompanying schedule of findings and responses. The City’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response.
Purpose of this Report
The purpose of this report is solely to describe the scope of o ur 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 i s 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.
Brea, California
December 16, 2022
2 203 N. Brea Blvd., Suite 203
Brea, CA 92821 Lance, Soll & Lunghard, LLP Phone: 714.672.0022
INDEPENDE
NT 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 Oran ge, California (the “City”)’s c ompliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs fo r the year ended June 30, 2022. 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, with the types of compliance requirements referred to above that could have a direct and material effect on each o f its major federal programs for the year ended June 30, 2022.
Basis for Opinion on Each Major Federal Program
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). Our respon sibilities 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 that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinio n on compliance for each major federal program. Our audit does not provide a legal determination of th e 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 federal programs.
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 occurred, 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 conducted in accordance with generally accepted auditing standards, Government Auditing Standards , and the Uniform Guidance will always detect material noncompliance w hen it exists. The risk of not d etecting material noncompliance resulting from fraud is higher than for that resulting from error, as fra ud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal cont rol. Noncompliance with the compliance 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 rea sonable user of the report on compliance about the City’s compliance with the requirements of each major federal program as a whole.
In performing an audit in accordance with GAAS, Government Auditing Standards , and the Uniform Guidance, we:
Exercise professional judgment and maintain professional skept icism throughout the audit.
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.
Obtain an understanding of the City’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances 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 the City’s int ernal control over compliance.
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 management 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 cont rol over compliance was for t he limited purpose described in the Auditor’s Responsibilities for t he 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.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over complia nce 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.
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 rema ining fund information of the City, as of and for the year ended June 30, 2022, 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 16, 2022, which contained unmodified opinions on those financial statements. Our audit was performed for the purpose of forming opinions on the financial statement s 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 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.
Brea, California
December 16, 2022
5 CITY OF ORANGE, CALIFORNIA
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
Assistance
Listing Pass-Through Entity Total Federal
Number Unique Entity ID Expenditures
CDBG - Entitlement Grants Cluster
Department of Housing and Urban Development:
Direct Programs:
Community Development Block Grants/Entitlement Grants 14.218 N/A 1,603,194$ COVID-19 - Community Development Block Grants/Entitlement Grants 14.218 N/A 20,000 Subtotal - Assistance Listing 14.218 1,623,194
Total Department of Housing and Urban Development Programs in Cluster 1,623,194 Total CDBG - Entitlement Grants Cluster 1,623,194
Highway Planning and Construction Cluster
Department of Transportation:
Passed through the State of California Department of Transportation (CalTrans):
Highway Planning and Construction 20.205 D2C8ARJZKDJ7 798,802 Total Department of Transportation Programs in Cluster 798,802 Total Highway Planning and Construction Cluster 798,802 Highway Safety Cluster
Department of Transportation:
Passed through the State of California Office of Traffic Safety:
State and Community Highway Safety 20.600 XCA4E3XL2KY7 90,309 Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 XCA4E3XL2KY7 188,766 National Priority Safety Programs 20.616 XCA4E3XL2KY7 6,147 Total Department of Transportation Programs in Cluster 285,222 Total Highway Safety Cluster 285,222
Other Programs
Department of Housing and Urban Development:
Direct Programs:
Home Investment Partnerships Program * 14.239 N/A 1,281,165 Total Department of Housing and Urban Development 1,281,165 Department of Justice:
Direct Programs:
Equitable Sharing Program 16.922 N/A 266,241
Justice Assistance Grant 16.738 N/A 30,808
Passed through the County of Orange:
COVID-19 - Coronavirus Emergency Supplemental Funding Program 16.034 GFFMCW9XDA53 17,772 Tobacco Grant Program 16.U01 GFFMCW9XDA53 64,719
Total Department of Justice 379,540
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 County of Orange:
COVID-19 - Coronavirus Relief Fund 21.019 GFFMCW9XDA53 459,659 Subtotal - Assistance Listing 21.019 459,659
Total Department of Housing and Urban Development Programs 14,468,753 Department of Homeland Security:
Passed through the County of Orange:
Emergency Management Performance Grants 97.042 GFFMCW9XDA53 20,708 Total Department of Homeland Security 20,708
Total Other Programs 16,150,166
Total Expenditures of Federal Awards 18,857,384$
* Major Program
1 There was no federal awards expended in the form of noncash assistance and insurance in effect during the year. 2 No amounts were passed through to subrecipients during the year.
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
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2022
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, 2022. 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 Schedule 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.
7 CITY OF ORANGE, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
SECTION I - SUMMARY OF AUDITORS' RESULTS
Financial Statements
Type of auditors' report issued: Unmodified Opinion
Internal control over financial reporting:
Material weaknesses identified? yes X no
Significant deficiencies identified? yes X none r eported
Noncompliance material to financial
statements noted? X yes no
Federal Awards
Internal control over major programs:
Significant deficiencies identified? yes X no
Material weaknesses identified? yes X none report ed
Type of auditors' 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
Identification of major programs:
Assistance Listing Number(s) Name of Federal Program or Cluster
21.027 Coronavirus State and L ocal Fiscal Recovery Funds
14.239 Home Investment Partnership Program
Dollar threshold used to distinguish
between type A and type B program $750,000
Auditee qualified as low-risk auditee? X yes no 8 CITY OF ORANGE, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED)
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
SECTION II - FINANCIAL STATEMENT FINDINGS
Reference Number: 2022-001
Evaluation of Finding:
Noncompliance
Condition:
As part of our standard audit procedures, we examined the City’ s compliance with laws, regulations, grant agreements, contracts, and bond covenants. It was identified as part of this examination that the City did not submit its audited financial statement for the fiscal year ende d June 30, 2021 to the Electronic Municipal Market Access (EMMA) website by the deadline prescribed by the Bond Official Statement, which is a required continuing disclosure for the 2021 Taxable Pension Obligation Bonds.
Criteria:
Securities and Exchanges Commission (SEC) Rule 15c2-12 requires dealers, when underwriting certain types of municipal securities, to ensure that the state or local government issuing the bonds enters into an agreement to provide certain information to the Municipal Secur ities Rulemaking Board (MSRB) about the securities on an ongoing basis. These disclosures are made avai lable to investors and the public on the MSRB’s EMMA website. Continuing disclosures provide updated financial or operating information about the state or local government that issued the bond, such as audited financial statements.
Pursuant to the Bond Official Statement for the 2021 Taxable Pension Obligation Bonds, the City has agreed to provide certain financial and operating data relating to the City by no later than March 31 of each year commencing March 31, 2022 to the MSRB’s EMMA website.
Cause of Condition:
The City has contracted with a third-party consultant to submit continuing disclosures for the 2021 Taxable Pension Obligation Bond, and consultant staff failed to submit the audited financial statements for the fiscal year ended June 30, 2021 to MSRB’s EMMA website when received from the City for submission. The City also did not have a review mechanism or procedure in place to verify that the consultant had completed the submission in a timely manner.
Effect or Potential Effect of Condition:
The City was not in compliance with the terms and conditions and covenants of the 2021 Taxable Pension Obligation Bond indenture and SEC Rule 15c2-12. However, as per the indenture, a failure by the City to comply with the provisions of the continuing disclosure requirement does not constitute an event of default.
Recommendation:
We recommend that the City develop procedures or a review mechanism to verify that continuing disclosures are submitted by the consultant in the manner prescribed by SEC Rule 15c2-12 and the 2021 Taxable Pension Obligation Bond’s Official Statement, including verifyi ng through a search of the MSRB’s EMMA website after the audited financial statements have been issued but before the due date of March 31 that the continuing disclosure has been submitted by the consultant.
Management’s Response and Corrective Action:
The City will develop procedures or a review mechanism to verify that continuing disclosures are submitted by the consultant in the manner prescribed by SEC Rule 15c2-12 and the 2021 Pension Obligation Bond’s Official Statement including verifying through a search of the MSRB’s EMMA website after the audited financial statements have been issued but before the due date of March 31st, that the continuing disclosure has been submitted by the consultant.
9 CITY OF ORANGE, CALIFORNIA
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED)
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
10 CITY OF ORANGE
}-INANCE DIRECTOR (714J 7 4+2235 www.cityoforange.org FAXt (714) 714.2z5
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS ANO QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30,2021
Finding: 2021-001 : Description
Appropiiate corrective actions were taken; this finding is considered resolved and is not repeated in the fiscal year ended June 30, 2022.
ORANGE CIVIC CENTER
:. .lffiDON AECYtrO F^PEF
3OO E. CHAPMAN AVENUE oRANGE. CA 92866-',!508
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