1 January 29, 2025
City of Palo Alto
Office of the City Auditor
Grant Management Audit
Contents
Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, operate under an alternative practice structure and are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms.
EXECUTIVE SUMMARY...................................................................................................1 INTRODUCTION ...............................................................................................................4 DETAILED ANALYSIS .....................................................................................................7 AUDIT RESULTS............................................................................................................10 APPENDICES .................................................................................................................18
1 Executive Summary
Purpose of the Audit
Baker Tilly Advisory Group, LP (Baker Tilly), in its capacity serving as the Office of the City Auditor (OCA) for the City of Palo Alto (the City), conducted a Grant Management Audit based on approved Task Order 4.24 as part of the City’s FY24 Audit Plan. The objective of this audit was to:
Determine whether the City has adequate internal controls to manage the grant lifecycle efficiently and effectively.
Report Highlights
Finding 1:
(Page 10)
There is a lack of coordinated oversight of the City’s grant management efforts, resulting in inconsistent management across departments and the potential for non-compliance with grant requirements While the City has a grant policy, it is not consistently implemented and enforced by departments applying for grants.
The OCA noted the following observations regarding grant management practices:
•For 11 out of 15 grants tested, the Grant Application Authorization Checklist was not completed by the project manager prior to grant application as required by the policy. This checklist ensures that management has reviewed the appropriateness of the grant, as well as the financial obligations pertaining to the City upon grant award. Four of the 11 grants did not have a checklist as the City did not have to go through an application process for these awarded grants.
•For all samples tested, copies of acceptance and/or cooperative agreements were not provided to all the relevant sponsoring departments listed in the policy.
Additionally, the grant policy in place was last revised in 2004 and appears to be insufficient to govern the complete grant management process and ensure a consistent process across departments. The City’s policy only addresses grant and funding request applications, leaving a gap in policies and procedures for managing activities throughout the grant lifecycle, including tracking, monitoring, and closing activities. A more comprehensive grant policy to govern the complete grant management process will help ensure a consistent process across departments.
To promote the coordinated oversight of grant management activities, the City recently hired a Grant Analyst position. This position will help improve the grant administration process by implementing a standardized tracking and monitoring system. Additionally, the Grant Analyst can help develop more diverse grants and find new opportunities.
Key Recommendations
2 EXECUTIVE SUMMARY
The City should perform regular reviews and updates of all city policies. We recommend that the City update the grant policy to document how departments should manage activities throughout the grant lifecycle, including tracking, monitoring, and closing activities.
Additionally, the City should ensure that all departments receive the appropriate training and awareness of the updated policy. It should be determined if the policy should be enforced for all grants received or only grants actively applied for by the City1.
Lastly, we recommend that the City utilize the Grant Analyst position to provide centralized oversight of grant administration and management from the application phase to the closing of the grant.
Finding 2:
(Page 12)
While the City is actively pursuing grant opportunities, there is insufficient recordkeeping and internal reporting of active grants, resulting in limited monitoring and visibility of grant performance The OCA noted the following observations:
•There is not a complete, central repository of all active City grants. While the Administrative Services Department (ASD) compiles an annual listing of grants, only Federal grants are validated for completeness and accuracy for the Single Audit, an annual audit designed to meet the requirements of federal grantor agencies.
•Grants do not have formalized internal tracking and reporting, such as project plans and timelines in place. The OCA noted the following observations pertaining to grant tracking and monitoring of grant requirements:
- For 8 out of 15 samples tested, there did not appear to be any formalized internal tracking and reporting, such as project plans and timelines in place.
- For 4 out of 15 samples tested, progress and/or performance reports were not provided within the required timeframe stated in the Grant Agreement.
There were no penalties or consequences for reports submitted after the deadline for these grants.
•Grant milestones are not formally and consistently communicated internally by departments, such as when a grant is awarded or closed out. •There is a lack of reporting and visibility of the pursuit of grants as the City has not formally tracked which grants have been applied for versus awarded.
Key Recommendations
We recommend that the City consider establishing a complete, central repository of all City grants including such information as how many active grants there are, if they are federal or local, and dollar amount. Additionally, the City should consider whether they can set up a separate account, cost center, or chart string for each grant within the 1 The City receives some grants that do not require the City to formally apply for them. 3 EXECUTIVE SUMMARY
financial system (SAP). This will allow the City to easily pull a complete listing of grants.
For appropriate grants, those that are not awarded by the State on a recurring basis, milestones should be tracked, monitored and noticed to the appropriate departments, such as when a grant has been successfully awarded and/or closed out to enhance recordkeeping of active grants. Lastly, the City should consider utilizing the Grant Analyst position to enhance tracking and reporting of active grants. Formalized tracking will help the City gauge trends and review who is pursuing grants and what was applied for vs. rewarded.
Finding 3:
(Page 14)
The City does not consistently assess and track efforts in pursuit and management of grant opportunities to measure its return on investment The OCA noted the following observations:
•The City does not assess whether or not to pursue potential grant opportunities based on the effort, time and complexity that may be required in the application and administration of the grant.
•While Townsend Public Affairs, Inc., an external consultant providing grant pursuit and management activities for the City, appears to have provided some valuable services to the City, they have not provided some of the deliverables specified in the contract. This may make it difficult for the City to assess their performance.
•The City’s recently hired Grant Analyst indicated they will be working with Townsend to clarify deliverables and incorporate a strategic funding plan and a grant dashboard to improve reporting and tracking of grants.
Key Recommendations
We recommend that the City consider the merits of establishing a system for assessing grant pursuit, application, and administration efforts and determining when to pursue or abandon such opportunities. The City should determine if tracking staff time spent pursuing and managing grants would be beneficial. Establishing a process for assessing efforts would aid in the overall evaluation of grant program performance and its return on investment. In addition, we recommend that the City continue to explore and implement strategies to make the most effective use and reporting of the external contract for grant application, tracking and monitoring services. 4 Introduction
2 https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/financial-reporting/annual-comprehensive-financial-reports- acfr/current-2011-cafrs/city-of-palo-alto-acfr-single-audit-fy2024-final-unsercured.pdf 3 56% of federal award expenditures were granted by the U.S. Department of Transportation, which included the following program(s):
Airport Improvement Program, Highway Planning and Construction, and Safe Streets and Roads for All. 20% of federal award expenditures were granted by the U.S. Department of Homeland Security, which included the following program(s):
Staffing for Adequate Fire and Emergency Response (SAFER) and Disaster Grants – Public Assistance (Presidentially Declared Disasters) 15% of federal award expenditures were granted by the U.S. Department of Health and Human Services, which included the following program(s): Congressional Directives
Objective The objective of this audit was to determine whether the City has adequate internal controls to manage the grant lifecycle efficiently and effectively.
Background The City receives incoming grant funding from various sources to support its services, including federal, state, and local grants. Most of the City’s grant funding comes from federal agencies.
Macias Gini & O’Connell LLP, Certified Public Accounts (MGO) conducts a “Single Audit” designed to meet the requirements of federal grantor agencies.
The standards governing the Single Audit require the independent auditor to report the fair presentation of the financial statements, government internal controls and compliance with legal requirements.
The City’s expenditures of federal grants totaled $8.2 million in FY 20242. The Federal Grantor Agencies included the U.S. Department of Housing and Urban Development, U.S. Department of the Interior, U.S. Department of Justice, U.S.
Department of Transportation, U.S. Department of Treasury, National Endowment for the Humanities, U.S. Department for Health and Human Services, and U.S. Department of Homeland Security.
Table 1: Percentage of FY 2024 Federal Award Expenditures by Federal Grantor Agency3
Table 2: Expenditures of Federal Grants FY 2022 - 2024
Transportation
56%
Homeland Security
20%
Health and Human
Services
15%
Housing and Urban
Development
5%
Treasury
3%
Humanities, Justice, Interior, &
Environmental Protection
1%
5 INTRODUCTION
*Analysis conducted by OCA in November 2024
The City has decreased Federal grant expenditures since FY 2022 due to lower expenditures of COVID 19 grants, such as the COVID-19 Coronavirus Relief Fund which decreased approximately $8M from 2022 to 2024.
According to the Schedule of Expenditures of Federal Awards (SEFA) listings prepared by the City for the Single Audit, the City had a portfolio of 21 Federal grants, including 5 Federal grants with no expenses incurred/activities, and 8 State and Local Grants in FY 2022; 24 Federal grants, including 2 Federal grants with no expenses incurred/activities, and 11 State Local, or Private grants in FY 2023; and 20 Federal grants and 20 State, Local, or Private grants in FY 2024.
The OCA determined that the City had an approximate population of 82 incoming grant awards from FY 2022 – FY 2024 based on the Schedule of Expenditures of Federal Awards (SEFA) listings and surveying 3 City departments with the highest number of grants.
Scope The OCA obtained grant records from FY 2022 to FY 2024 and assessed grant management activities and internal controls to manage the grant lifecycle across all applicable departments.
Methodology To achieve the audit objectives, the OCA performed the following procedures:
• Interviewed the appropriate individuals to gain an understanding of the organizational structure, processes, and controls related to grant management.
• Analyzed policies and procedures as well as the legislative and regulatory requirements to identify the criteria to be used for evaluation of control design and effectiveness.
• Selected a sample of grants during the audit period, FY 2022 to FY 2024, to assess whether grant performance standards, procurement, and reporting complied with grant requirements, city policies, and best practices. The OCA stratified the population into smaller groupings by $17,754,575
$9,731,531
$8,214,153
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
2022 2023 2024
Total Federal Financial Awards
Expeditures
6 INTRODUCTION
4 Government auditing standards require an external peer review at least once every three (3) years. The last peer review of the Palo Alto Office of the City Auditor was conducted in 2017. The Palo Alto City Council approved a contract with Baker Tilly U.S, LLP for internal audit services for October 2020 through June 2022 with an extension through June 2025. City Council appointed Kate Murdock, Audit Manager in Baker Tilly’s Risk Advisory practice, as City Auditor in May 2024. As a result of transitions in the Audit Office and peer review delays due to the COVID pandemic, an external peer review is targeted for 2025. It should be noted that Baker Tilly’s most recent firmwide peer review was completed in November 2024 with a rating of “Pass”. The scope of that peer review includes projects completed under government auditing standards. A report on the next firmwide peer review should be available later in 2024. department. The OCA selected at least one grant from each department.
If multiple grants were sampled for a department, at least one federal and one state or local grant was selected. The OCA tested a sample of 15 grants across departments. Please see a listing of grant selections in Appendix A.
• Completed audit report of findings, conclusions, and recommendations based on the supporting evidence gathered.
Compliance
Statement
This audit activity was conducted from June 2024 to December 2024 in accordance with generally accepted government auditing standards, except for the requirement of an external peer review4. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings, observations, and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings, observations, and conclusions based on our audit objectives.
Organizational
Strengths
During this audit activity, we noted the professionalism and responsiveness of the following departments: Administrative Services, City Manager’s Office, Public Works, Planning & Development Services, Office of Transportation, Community Services, City of Palo Alto Utilities, Library, Police and Office of Emergency Services. We appreciated the participation of departments in interviews, providing grant documentation for selected samples, and responding to follow-up requests.
The Office of the City Auditor greatly appreciates the support of the departments involved in conducting this audit activity.
Thank you!
7 Detailed Analysis
5 https://www.theiia.org/
6 https://grants.gov/learn-grants/grants-101/
Best Practices:
Grant
Management
Criteria
The Institute of Internal Auditors (IIA) 5 Supplemental Guidance Practice Guide for Auditing Grants in the Public Sector, released in April 2018, provides supplemental guidance for auditing grants in the public sector. This practical guide provides detailed, step-by-step approaches, featuring processes, procedures, tools, and programs, as well as examples of deliverables. Key public sector grant management insights are highlighted here:
“Examples of Grant Usage in the Public Sector
•Address specific policy goals.
•Stimulate an industry or the economy.
•Support activities including research and capital projects. •Deliver public services, such as health care and education. •Produce goods, such as medicines; intellectual property, such as patents; and infrastructure, such as highways, schools, homes, and hospitals.” “A grant program follows a linear life cycle that includes creating the funding opportunity, applying, making award decisions, and successfully implementing the award. The specific actions along the life cycle are grouped into three phases6:
•Pre-award phase.
•Award phase.
•Post-award phase.
The above infographic was obtained from pg. 6 of IIA Supplemental Guidance Practice Guide for Auditing Grants in the Public Sector.
“Grant administration is a broader concept that involves all administrative, financial, and operational activities required to implement, execute, and monitor a grants program (from phase one to phase three).”
8 DETAILED ANALYSIS
Grants management has a very specific starting point, and the scope is limited to activities in phases two and three. The management process starts when the grantee signs an agreement with the grantor and aid in the form of funds are disbursed or resources transferred.”
Grant Administration and Management Controls
The Practice Guide provides a Risk and Control Matrix for Grants Administration and Management for a grantee. See full Risk & Control Matrix visual in Appendix B. Control examples for each phase of the grant life cycle include the following:
Phase: Program Objective/Purpose
•Implement policies and procedures for application development. •Identify eligibility limitations.
•Understand the community needs and how they can be addressed. •Establish a process to research potential grantors to better understand their selection process.
Phase: Identifying Sources of Grants
•Dedicate resources to research potential sources of grants. •Implement controls that ensure potential grants match the organization’s objectives.
Phase: Applying for Grants
•Implement a robust grant application process.
•Implement a continuous improvement process to ensure the application process meets new regulations or operating procedures.
•Implement controls that ensure completeness/accuracy/validity of information submitted.
•Secure regulatory approval, or at a minimum, determine if it can be obtained if needed.
Phase: Managing Grant Resources
•Adequate/effective internal controls over expenditures. •Implement audit trail of resources.
•Adequate segregation of duties or dual controls for approval. •Periodic account reconciliation.
•Monitoring progress of substantive work during the life of the grant.
Phase: Accountability Reporting
•Adequate/effective internal controls to account for use of resources in accordance with terms and conditions.
•Complete/accurate/valid/timely reporting.
9 DETAILED ANALYSIS
Phase: Program Evaluation and Closing
•Completeness and accuracy of accountability reports.
•Ensuring project managers have measures in place to demonstrate that objectives and/or performance standards were met.
•Include steps to evaluate if the program was effective in the program closing process.
10 AUDIT RESULTS
Audit Results
Finding 1:
There is a lack of
coordinated
oversight of the
City’s grant
management
efforts, resulting
in inconsistent
management
across
departments and
the potential for
non-compliance
with grant
requirements
Grant management activities are dispersed among several departments that use grant funding for City projects and programs. These include Administrative Services, the City Manager's Office, Public Works, Office of Transportation, Planning & Development Services, Community Services, Utilities, Library, Police, and Emergency Services.
Individual departments are responsible for submitting the grant application, preparing a council resolution if required, complying with applicable grant laws and regulations, establishing and maintaining effective internal controls for compliance with grant requirements, and tracking grant expenses and revenues.
While the City has a grant policy, it is not consistently followed by departments applying for grants.
The City has a Grant and Funding Request Applications Policy that establishes uniform procedures for grant applications and other funding requests. This policy requires:
•Completion of a Grant Application and Authorization Checklist prior to applying for grant funds.
•Department Head review of the Grant Application Authorization Checklist at the time a grant funding application is made. •When grants are funded, the sponsoring department must notify and provide copies of the acceptance or cooperative agreement to:
a. The City Manager
b. The Director of Administrative Services
c. The City Auditor
d. The City Attorney
The OCA tested a sample of 15 grants across 10 departments. The OCA selected at least one grant from each department to see how grant management is approached across the City. If multiple grants were sampled for a department, the auditor selected at least one federal and one state or local grant.
The grant application and acceptance process does not appear to be consistently followed in accordance with the policy adopted by the City.
Per the policy, it is essential that grants be reviewed carefully for impact on the City's resources and consistency with City policy and procedures.
Additionally, there appears to be a lack of regular training and awareness of the grant application and acceptance process. When inquiring with staff, some staff were unaware of the policy itself or unaware of the necessary requirements to adhere to the policy.
11 AUDIT RESULTS
The OCA noted the following observations pertaining to the Grant and Funding Request Applications Policy:
•For 11 out of 15 grants tested, the Grant Application Authorization Checklist was not completed by the project manager prior to grant application as required by the policy. This checklist ensures that management has reviewed the appropriateness of the grant, as well as the financial obligations pertaining to the City upon grant award. Four of the 11 grants did not have a checklist as the City did not have to go through an application process for these awarded grants.
•For all samples tested, copies of acceptance and/or cooperative agreements were not provided to all the relevant sponsoring departments listed in the policy.
A more comprehensive grant policy to govern the complete grant management process will help ensure a consistent process across departments.
The City lacks policies and/or procedures to govern activities performed during the duration of the grant lifecycle. The City’s policy, last revised in 2004, only addresses grant and funding request applications, leaving a gap in policies and procedures for managing activities throughout the grant lifecycle, including tracking, monitoring, and closing activities.
Although grant requirements vary based on the grant agreement, there should be a standardized policy establishing grant internal controls during the grant lifecycle. The City should perform a regular review of the policy to ensure it is still applicable and appropriate in coordinating grant applications across departments.
The City is hiring a Grant Analyst position to provide coordinated oversight of grant management activities.
The City recently hired a Grant Analyst. This position can help improve the grant administration process by implementing a standardized tracking and monitoring system. Additionally, staff stated that the Grant Analyst can help develop more diverse grants, find new opportunities, and will be working on compliance and training issues with departments.
Recommendation We recommend that the City update the grant policy to document how departments should manage activities throughout the grant lifecycle, including tracking, monitoring, and closing activities.
Additionally, the City should ensure that all departments receive training on the updated policy and grant management procedures. It should be determined if the policy should be enforced for all grants received or only grants actively applied for by the City.
12 AUDIT RESULTS
Lastly, we recommend that the City utilize the Grant Analyst position to provide coordinated oversight of grant administration and management from the application phase to the closing of the grant.
Management
Response
Responsible Department(s): ASD
Concurrence: Agree
Target Date: August 30, 2025
Action Plan:
Department staff have been able to manage and monitor their grant activities, however with increased volume and complexity staff recognizes that the grant policy should be updated with a more comprehensive view of the grant lifecycle. Prior to FY 2017, complex grants awarded to the City consisted of recurring Housing and Urban Development and Department of Transportation grants. Staff has begun the update of the City’s grant policy and procedures, using best practices Government Finance Officers Association and agencies with similar grant portfolios.
The revised grant policy will include guidelines for managing activities throughout the grant lifecycle, from pre-award to post-award and is expected to be complete spring/summer 2025.
Staff concurs that a training plan should be developed for all departments on the updated procedures and continual training be a focus. Staff is targeting the first round of training to be done in spring/summer 2025 to coincide with the release of the updated Grants Policy. Additional training modules will be developed and conducted on an ongoing and as needed basis. Staff expects to release a comprehensive training calendar in late summer 2025.
The Grant Analyst position to oversee this coordination, utilizing the City’s grant consultant as a resource, in addition to overall grant administration and management. The Grant Analyst was hired in November 2024.
Finding 2:
While the City is
actively pursuing
grant opportunities,
there is insufficient
recordkeeping and
internal reporting of
active grants,
resulting in limited
monitoring and
visibility of grant
performance
The City completes an annual Schedule of Expenditures of Federal Awards (SEFA) as required by the Single Audit, which is required for non-Federal entities that expend $750,000 or more of Federal awards during the fiscal year. ASD prepares the SEFA using data reported by departments in the Single Audit questionnaire. Departments provide information about State, Local, and Private grants in the Single Audit questionnaire.
There is not a complete, central repository of all active City grants.
While ASD compiles an annual listing of grants, only Federal grants are validated for completeness and accuracy for the Single Audit.
The OCA was unable to obtain a complete population of grants for our testing. Upon surveying 3 City departments, the OCA identified some State and Local grants that were not included in the City's single audit listing. The City uses the annual Single Audit process as an opportunity 13 AUDIT RESULTS
to ask departments about all grant funding received. However, it appears that this process does not ensure a complete list of all Federal, State, and Local grants.
Although the SEFA listing appeared to include a complete inventory of all Federal grants, it did not have complete information such as a unique identifier or grant number for each grant.
Due to incomplete recordkeeping, it was difficult for the OCA to obtain a complete inventory of how many Federal, State, and Local grants have been received by the City. As a result, the City does not have visibility into the population of all grants.
Staff stated that it is difficult to obtain federal grant identification numbers, but they are still able to track these grants within the ERP system.
Additionally, it was noted that recently the Federal Government changed their numbering system from the name Catalogue of Federal Domestic Assistance to Assistance Listing Number in June 2023. Staff stated that they will explore assigning grants an internal tracking number that will better enable annual and multi-year grant reconciliation.
Grants do not have formalized internal tracking and reporting, such as project plans and timelines in place.
According to the IIA Supplemental Guidance Practice Guide for Auditing Grants in the Public Sector, internal controls should be implemented to effectively monitor substantive progress during the life of the grant. In addition, effective internal controls should be in place around accountability reporting to account for use of resources in accordance with terms and conditions of the grant agreement and complete, accurate, and timely reporting.
The OCA tested a sample of 15 grants to see if internal tracking and reporting was in place and if progress and/or performance reports were submitted timely and accurately within the deadline outlined in the grant agreement.
The OCA noted the following observations pertaining to grant tracking and monitoring of grant requirements:
•For 8 out of 15 samples tested, there did not appear to be any formalized internal tracking and reporting, such as project plans and timelines in place.
•For 4 out of 15 samples tested, progress and/or performance reports were not provided within the required timeframe stated in the Grant Agreement. There were no penalties or consequences for reports submitted after the deadline for these grants.
Not all departments have adopted an internal tracking and reporting process, resulting in limited visibility in the progress of meeting project goals and timelines. Since program managers track grants differently and projects/programs are monitored individually, there is no consistent, formal tracking system in place.
Additionally, many City grants require the submission of financial and/or performance reporting within a required deadline. The OCA noted that 14 AUDIT RESULTS
some of the required reports were not submitted within the required deadline, however, there were no penalties or consequences for reports submitted after the deadline.
The OCA also validated that for all completed grants tested, the grant funds were fully expended timely as all grant funds were received.
Grant milestones are not formally and consistently communicated by departments.
Departments do not formally and consistently communicate with ASD when grant milestones are completed such as when a grant is awarded or closed out. There are no formal close-out procedures performed to internally notify the City that a grant is officially closed out or to evaluate its effectiveness during the closing process.
There is a lack of reporting and visibility of the pursuit of grants as the City has not formally tracked which grants have been applied for vs. awarded.
There is not a formal, complete list of grants applied for vs. awarded. The OCA obtained a Grant Tracker document from ASD which included an informal list of grants, awarded amount, and the award status, however, it was indicated that this was not a precise or formal list. Staff noted that the primary purpose of the list is to provide information to the external auditors for the purposes of the Single Audit and is not the full list of all grants, regardless of granting agency.
The City reports expenditure data in the annual SEFA (see Table 2- Expenditures of Federal Grants FY 2022 - 2024 located in the Background section of the report). However, they do not appear to track or report the annual grant funding awarded to the City.
As a result, the City does not have visibility of its performance of pursuing and winning grants. This leads to difficulty in reporting and monitoring how the City is performing.
Recommendation We recommend that the City consider establishing a complete, central repository of all City grants including such information as how many active grants there are, if they are federal or local, and dollar amount.
Additionally, the City should consider whether they can set up a separate account, cost center, or chart string for each grant within the financial system (SAP). This will allow the City to easily pull a complete listing of grants.
For appropriate grants, milestones should be tracked, monitored and noticed to the appropriate departments, such as when a grant has been successfully awarded and/or closed out to enhance recordkeeping of active grants.
Lastly, the City should consider utilizing the Grant Analyst position to enhance tracking and reporting of active grants. Formalized tracking will help the City gauge trends and review who is pursuing grants and what was applied for versus rewarded.
15 AUDIT RESULTS
Management
Response
Responsible Department(s): ASD
Concurrence: Agree
Target Date: March 31, 2025
Action Plan:
Staff has completed a comprehensive list and repository of all City grants that will formalize grant tracking and be used by ASD and the grant consultant to track and report out on grants throughout the grant life cycle.
The City’s SEFA listing is a complete list of grants that were communicated to ASD or of grants that received revenue during the reporting period. The SEFA list contains known information; unique identifiers are not assigned to all grants by the granting agency.
Staff will assess whether changes to SAP accounts, cost centers, and/or chart strings for each grant or a grant module/software need to be made to more effectively support grant management and tracking.
Finding 3:
The City does not
consistently assess
and track efforts in
pursuit and
management of grant
opportunities to
measure its return on
investment
Currently, the City does not assess whether or not to pursue potential grant opportunities based on the effort, time and complexity that may be required in the application and administration of the grant.. In addition to internal grant pursuit efforts, the City has a contract with an external consultant, Townsend Public Affairs, Inc. (Townsend) to provide grant pursuit and management activities but does not appear to receive all the tracking and monitoring deliverables noted in the contract that would help the City to assess the value obtained from these services.
The City does not assess efforts expended in the pursuit, application for, and administration of potential grant opportunities.
Currently, the City does not have a process for assessing the time and effort a grant opportunity may require and criteria for determining when to pursue vs. abandon opportunities due to lack of return on investment.
Also, the City does not appear to capture data related to these activities.
Tracking such information could help the City to determine when it is worthwhile to pursue a grant opportunity versus when the effort and investment may not be justified.
While Townsend appears to have provided some valuable services to the City, they have not provided some of the deliverables specified in the contract. This may make it difficult for the City to assess their performance.
Townsend supports the City in identifying grant funding opportunities, completing applications, and communicating with funding agencies.
Although Townsend holds a monthly meeting to report progress to the City and provides a monthly memo detailing current and upcoming 16 AUDIT RESULTS
opportunities, some deliverables have not been provided that would aid the City in monitoring grants and the contractor’s performance.
According to the Townsend contract with the City, there are several grant application, management and tracking deliverables they are required to provide to the City. These deliverables include a:
•Strategic Funding Plan
•Grant Matrix of Funding Programs
•Overview of application requirement for grants with project background and details
•Monthly status reports of grants in progress, submitted and awarded
•Monthly report detailing compliance activities and current and upcoming state and/or federal legislative advocacy work/support.
It does not appear that these documents are currently being provided.
The City’s recently hired Grant Analyst communicated that the City will be working with Townsend to clarify deliverables, how tasks are being accomplished and what may need to be done moving forward. In addition, the City's new Grant Analyst said they will be working with Townsend on a strategic funding plan, a grant calendar and eventually a grant writing manual and working to develop a grant dashboard to show the status of grants in Monday.com, an online project management and reporting system.
As of the date of this report, Townsend reports helping the City pursue a total of approximately $14 million in grant opportunities with one grant awarded in the amount of $5,176,812 and approximately $8 million in grant opportunities still pending a funding decision.
Recommendation We recommend that the City consider the merits of establishing a system for assessing grant pursuit, application, and administration efforts and determining when to pursue or abandon such opportunities. The City should determine if tracking staff time spent pursuing and managing grants would be beneficial. Establishing a process for assessing efforts would aid in the overall evaluation of grant program performance and its return on investment.
In addition, we recommend that City continue to explore and implement strategies to make the most effective use and reporting of the external contract for grant application, tracking and monitoring services.
Management
Response
Responsible Department(s): ASD
Concurrence: Agree
Target Date: June 30, 2025
Action Plan:
17 AUDIT RESULTS
Staff agrees that a formal system to assess grant pursuit, application, and administration efforts to determine when to pursue or abandon grant opportunities would be beneficial to support grant strategic planning.
These conversations are currently informal and while the discussion between the grant consultant and City staff is sufficient to guide decision making of whether to pursue a grant. City staff and the grant consultant meet monthly to assess whether available grant opportunities are worth pursuing, from a priority aspect and staff time spent to manage the grant.
A more formal workplan with the grant consultant is under development that includes the deliverables listed in the contract, included in these findings.
Staff will assess whether establishing a system to track staff time for grant management activities, including pursuing or abandoning opportunities, is a value adding activity and will engage with its grant consultant to strategically focus time spent. In 2024, five grants were awarded, totaling $44.5 million.
18 Appendices
19 Appendix A: Grant Testing Selections
The OCA determined that there was a population of 82 grants from FY 2022 – FY 2024 based on the SEFA listings and surveying 3 City departments with the highest number of grants. A sample of 15 grants was selected for testing. The population was stratified based on City department. The auditor selected a sample of grants from the following 10 departments: Administrative Services (ASD), the City Manager's Office (CMO), Public Works (PWD), Office of Transportation (OOT), Planning & Development Services (PDS), Community Services (CSD), Utilities (UTL), Library (LIB), Police (PD), and Emergency Services (OES).
Sample
# Year Grant Type Total Grant
Amount ($)
Program/Project
Name:
Name of
Grantor
Name of
Pass-
through
Entity, if
any
Auditor
determined
Department
1 FY
2023 Federal
$135,185.01
Severe Winter
Storms, Flooding,
Landslides, and
Mudslides
FEMA-4683-DR-
CA
U.S.
Department
of Homeland
Security’s
Federal
Emergency
Managemen
t Agency
California
Governor's
Office of
Emergency
Services
CalOES
ASD
2 FY
2022 Federal
$150,194.00
Institute of
Museum &
Library
Serv/Museums
for
America/museum
s Empowered-
Working
Together
IMLS
Palo Alto
Art Center
Foundation
CSD
3 FY
2024
State/Local/
Private $182,448.00
Historical
Heritage Grant
Program
(windows)
County of
Santa Clara ASD
4 FY
2023 Federal $6,000.00
California State
Library - Library
Services &
Technology Act
(LSTA)
Inspiration Grant
National
Endowment
for the
Humanities
(NEH)
California
State
Library
LIB
5 FY
2022 Federal
$3,657,685.00
Staffing for
Adequate Fire
and Emergency
Response
(SAFER)
Department
of Homeland
Security
FEMA
OES
6 FY
2022 Federal
$3,863,677.27
Section 130
Grade Crossing
Improvement
Program
Caltrans OOT
7 FY
2023 State
$92,640.00
Transportation
Development Act
Metropolitan
Transportati
on
Commission
(MTC)
OOT
20 8 FY
2024
State/Local/
Private
$5,176,812.00
BSCC Organized
Retail Theft
(ORT) Grant
Board of
State and
Community
Corrections
- California
PD
9 FY
2023 Federal
$800,000.00
PDA Planning
and Technical
Assistance Grant
U.S
Department
of Housing
and Urban
Developmen
t
MTC
(Metropolit
an
Transportat
ion
Commissio
n)
PDS
10 FY
2023 State
$310,000.00
SB2 (Housing
Element)
California
Department
of Housing
and
Community
Developmen
t
PDS
11 FY
2022 Federal
$237,396.18 CWWAPP ARPA
State
Water
Resource
Control
Board
UTL
12 FY
2023 Federal
$1,216,351.00
US EPA SF Bay
Area Water
Quality
Improvement
Fund
U.S.
Environment
al Protection
Agency
PWD
13 FY
2024 Federal
$156,841.00
Airport
Improvement
Program
U.S
Department
of
Transportati
on
PWD
14 FY
2024
State/Local/
Private
$175,000.00 EV Charges
Bay Area Air
Quality
Managemen
t District
PWD
15 FY
2023 Federal
$2,000,000.00
Consolidated
Appropriation
Act, 2022
US
Department
of Health
and Human
Services/Su
bstance
Abuse and
Mental
Health
Services
(SAMHSA)
CMO
21 Appendix B: Risk and Control Matrix for Grants Administration and Management – Grantee7
7 https://www.theiia.org/
22