Richmond, California
Single Audit Report
For the year ended June 30, 2021
City of Richmond
Single Audit Report
Table of Contents
Page
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 Report on Compliance for Each Major Federal Program and on Internal Control over Compliance in Accordance with the Uniform Guidance And on the Schedule of Expenditures of Federal Awards ............................................................................ 3 Schedule of Expenditures of Federal Awards .......................................................................................................... 7 Notes to Schedule of Expenditures of Federal Awards......................................................................................... 11 Schedule of Findings and Questioned Costs .......................................................................................................... 12 This page intentionally left blank.
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
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of City Council
of the City of Richmond
Richmond, California
We have audited, in accordance with the auditing st andards 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 City of Richmond, California (City), as of and for the year ended June 30, 2021, and the related notes to the financial statements. We were engaged to audit the financial statements of the discretely presented component units as of and for the year ended June 30, 2021. These financial statements collectively comprise the City’s basic financial statements, and have issued our report thereon dated December 31, 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 determ ine 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.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies an d therefore, material weaknesses or significant deficiencies may exist that have not been identified . However, as described in the accompanying schedule of findings and questioned costs, we did identify certai n deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.
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 poss ibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying schedule of findings and questioned costs as items 2020-001 to be material weaknesses.
2 To the Honorable Mayor and Members of City Council
of the City of Richmond
Richmond, California
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. We consider the deficiencies described in the accompanying schedule of findings and questioned costs as items 2020-002 to be significant deficiencies.
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 compli ance with 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 opinio n on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
City Response to Findings
The City’s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integr al part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Badawi & Associates, CPAs
Berkeley, California
May 9, 2022
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON
INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM
GUIDANCE AND ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of City Council
of the City of Richmond
Richmond, California
Report on Compliance for Each Major Federal Program
We have audited the City of Richmond, California (City)’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have direct and material effect on each of the City’s major federal programs for the ye ar ended June 30, 2021. City’s major federal programs are identified in the summary of auditor’s results se ction of the accompanying sc hedule of findings and questioned costs.
The City’s basic financial statements include the operations of the Richmond Housing Authority, the federal awards expenses of which is not included in the City’s schedule of expenditures of federal awards during the year ended June 30, 2021. Our audit, described below, did not include the operations of Richmond Housing Authority because the federal awards expended by this entity are subject to a separate Single Audit.
Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.
Auditor’s Responsibility
Our responsibility is to express an opinion on compli ance 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 genera lly 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 Pr inciples, 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 dire ct and material effect on a major federal program occurred. An audit includes examining, on a test basi s, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City’s compliance.
To the Honorable Mayor and Members of City Council
of the City of Richmond
Richmond, California
4 Basis for Qualified Opinion on ALN 97.036-Disaster Grants-Public Assistance As described in the accompanying schedule of findings and questioned costs, the City did not comply with requirements regarding ALN 97.036 Disaster Grants-P ublic Assistance as described in finding numbers SA2021-001 for Reporting. Compliance with such requirem ents is necessary, in our opinion, for the City to comply with the requirements applicable to that program.
Qualified Opinion on ALN 97.036-Disaster Grants-Public Assistance In our opinion, except for the noncompliance describe d in the Basis for Qualified Opinion paragraph, the City complied, in all material respects, with the ty pes of compliance requirements referred to above that could have a direct and material effect on ALN 97.036-Disaster Grants-Public Assistance for the year ended June 30, 2021.
Unmodified Opinion on Each of the Other Major Federal Programs 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 other major federal programs identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs for the year ended June 30, 2021.
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 in ternal control over compliance with the types of requirements that could have a direct and material e ffect on each major federal program to determine the auditing procedures that are appropriate in the circum stances 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 exis ts 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 time ly basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of de ficiencies, 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.
To the Honorable Mayor and Members of City Council
of the City of Richmond
Richmond, California
5 Our consideration of internal cont rol over compliance was for the limited purpose described in the first paragraph of this section and was not designed to id entify all deficiencies in internal control over compliance that might be material weaknesses or si gnificant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we did identify certain deficiencies in internal control over compliance, described in the accompanying schedule of findings and questioned costs as ite ms SA2021-001, that we consider to be significant deficiencies.
The City’s response to the internal control over complia nce findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the govern mental 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. We were engaged to audit the financial statements of the discretely presented component units as of and for the year ended June 30, 2021. These financial statements collectively comprise the City’s basic financial statements. We issued our report thereon dated December 31, 2021, which contained unmodified opinions on the governmental activities, General Fund, Community Development and Loan Programs Special Revenue Fund, Port of Richmond Fund, Municipal Sewer Fund and aggregated remaining funds, and disc laimer opinions on the business-type activities, Richmond Housing Authority Enterprise Fund, and the aggregate discretely presented component units.
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 re quired 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 a ccounting 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 an d 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 al l material respects in relation to the basic financial statements as a whole.
To the Honorable Mayor and Members of City Council
of the City of Richmond
Richmond, California
6 The purpose of this report on internal control over co mpliance 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.
Badawi & Associates, CPAs
Berkeley, California
May 9, 2022, except for the schedule of expenditures
of federal awards on pages 7 to 9, which are as of December 31, 2021 City of Richmond
Schedule of Expenditures of Federal Awards
For the year ended June 30, 2021
Federal State/Other FY 2021
Catalog Pass-through Program
Grantor Agency and Grant Title Number Number Expenditures U.S. Department of Defense
Direct Program:
Community Base Reuse Plans, Project Grant/Cooperative Agreement Naval Fuel Depot Point Molate Pollution Remediation 12.612 211,836$ Total U.S. Department of Defense 211,836
U.S. Department of Housing and Urban Development:
CDBG Entitlement Grants Cluster
Direct Programs:
Community Development Block Grant 14.218 4,412
CDBG Entitlement Grants Cluster Total 4,412
Total U.S. Department of Housing and Urban Development 4,412 U.S. Department of Justice
Pass-through from CA-Office of Emergency Services:
Violence Against Women Formula Grants 16.588 ST20037830 128,323 Pass-through from CA-Department of Justice:
Public Safety Partnership and Community Policing Grants Community Policing Development Program 16.710 2016-CK-WX-K016 40,094 COPS Peer Support Enhancement 16.710 2019MHWXK001 30,000 Program Subtotal 70,094
Direct Program:
Coronavirus Emergency Supplemental Funding 16.034 2020-VD-BX-1694 158,780 Pass-through from Contra Costa County:
Edward Byrne Memorial Justice Assistance Grant 2016 16.738 47,778 Edward Byrne Memorial Justice Assistance Grant 2018 16.738 14,272 Program Subtotal 62,050
Total U.S. Department of Justice 419,247
See accompanying Notes to Schedule of Expenditures of Federal Awards 7 City of Richmond
Schedule of Expenditures of Federal Awards
For the year ended June 30, 2021
Federal State/Other FY 2021
Catalog Pass-through Program
Grantor Agency and Grant Title Number Number Expenditures U.S. Department of Labor
Workforce Innovation and Opportunity Act (WIOA) Cluster Pass-through from California Employment & Training Administration:
WIOA - Adult program
Workforce Accelerator 8.0 17.258 AA011024 79,596
English Language Learners- 1153 17.258 ELL SFP PY 20-21 150,258 English Language Learners-1226 17.258 ELL SFP PY 21-23 3,267 Veterans Hire (VEAP) 17.258 VEAP SFP PY 2018-19 131,711 WIOA - Adult program 17.258 K491036-201/202 308,911
Program Subtotal 673,743
WIOA Youth 17.259 K9111039/ AA011024/
AA111024-301/302 380,824
WIOA Dislocated Worker Formula Grants
COVID-19 Project Hire 17.278 AA011024 493,932
COVID-19 Supportive Service English Language Learners 17.278 AA011024 133,492 WIOA Dislocated Worker 17.278 K491036-501/502 204,179
WIOA Rapid Response 17.278 K491036-540/541 118,027
Rapid Response Layoff Aversion 17.278 K594779-292/293 27,931 WIA/WIOA Dislocated Worker Rapid Reponse 17.278 1233 1,377 Program Subtotal 978,939
Workforce Innovation and Opportunity Act (WIOA) Cluster Total 2,033,506 Pass-through from California Employment & Training Administration COVID-19 Employment Recovery NDWG 17.277 AA011024-1194 168,349 Pass-through from California Employment & Training Administration Youth Build 2020 17.274 YB-34247-19-60-A-6 295,916
Total U.S. Department of Labor 2,497,771
U.S. Department of Transportation
Pass-through from CA-Department of Transportation
Highway Planning & Construction
Yellow Brick Road 20.205 ATPL-5137(049) 2,466
Bridge Preventive Maintenance 20.205 6,132
Castro Ranch Road Rehabilitation 20.205 STPLR-7500(235) 1,249,031 Program Subtotal 1,257,629
Pass-through from CA-Office of Traffic Safety
Selective Traffic Safety Program 608 20.608 PT20115 2,018 Selective Traffic Safety Program 608 20.608 PT21040 97,121 Program Subtotal 99,139See accompanying Notes to Schedule of Expenditures of Federal Awards 8 City of Richmond
Schedule of Expenditures of Federal Awards
For the year ended June 30, 2021
Federal State/Other FY 2021
Catalog Pass-through Program
Grantor Agency and Grant Title Number Number Expenditures U.S. Department of Transportation, continued
Pass-through from CA-Office of Traffic Safety
Traffic Records Improvement 20.616 TR21018 6,534
Pass-through from CA-Office of Traffic Safety
Selective Traffic Enforcement Program 20.600 PT21040 10,357 Total U.S. Department of Transportation 1,373,659
U.S. Institute of Museum and Library Services
Direct Program:
CENIC Broadband 45.310 40-8622 15,463
Family Literacy Program for Families 45.310 5312 27,314 Total US. Institute of Museum and Library Services 42,777 U.S. Environmental Protection Agency
Direct Program
Brownfields Job Training Cooperative Agreements
Environmental Workforce Development and Job Training 66.815 80,068 Brownfield Assessment and Clean-up Cooperation Agreement Brownfield Assessment and Clean-up Cooperation Agreement 66.818 81,955 Brownfield Revolving Loan Fund 66.818 99,698
Program Subtotal 181,653
Total U.S. Environmental Protection Agency 261,721
U.S. Department of Education
Pass-through from California Department of Rehabilitation State Vocational Rehabilitation Services Program 84.126a STEPS 2020 75,024 Total U.S. Department of Education 75,024
U.S. Department of Treasury
Pass-through from State of California
Emergency OP/COVID-19 - CARES ACT 21.019 N/A 1,082,717
Total U.S. Department of Education 1,082,717
U.S. Department of Homeland Security
Pass-through for CA-Office of Emergency Services
Via Verde Emergency Repairs 97.036 FEMA-4308-DR-CA 1,085,871 Total U.S. Department of Education 1,085,871
Total Federal Expenditures 7,055,035$
See accompanying Notes to Schedule of Expenditures of Federal Awards 9 This page intentionally left blank
10 City of Richmond
Single Audit Report
Notes to Schedule of Expenditures of Federal Awards
For the year ended June 30, 2021
11 1. REPORTING ENTITY
The financial reporting entity, as defined by Governmental Accounting Standards Board (GASB), consists of the primary government, which is the City of Rich mond (City), organizations for which the primary government is financially accountable, and other orga nizations for which the nature and significance of their relationship with the primary government are su ch that exclusion would cause the reporting entity’s financial statements to be misleadi ng or incomplete. The Schedule of Expenditure of Federal Awards (the Schedule) includes expenditures of federal awards for the City and its component units as disclosed in the notes to the Basic Financial Statements, except for federal awards of the Richmond Housing Authority.
Federal awards expended by this entity, if any, are excluded from the Schedule and are subject to a separate Single Audit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
Funds received under the various grant programs have be en recorded within the general, special revenue, capital projects, and enterprise funds of the City. The City utilizes the mo dified accrual basis of accounting for the general, special revenue, and capital project fund s. The accrual basis of accounting is used for the enterprise fund. The accompanying Schedule of Expendit ures of Federal Awards (Schedule) is presented in accordance with the requirements of the U niform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Schedule of Expenditures of Federal Awards
The accompanying Schedule presents the activity of a ll Federal financial assistance programs of the City.
Federal financial assistance received directly from Fe deral agencies as well as Federal financial assistance passed through the State of California and other agenci es are included in the Schedule. The Schedule of Expenditures of Federal Awards was prepared from only the accounts of various grant programs and, therefore, does not present the financial position or results of operations of the City.
3. INDIRECT COSTS
The City did not elect to use the 10% de minimis indirect cost rate.
City of Richmond
Single Audit Report
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
12 Section I – Summary of Auditors’ Results
Financial Statements
Types of auditors’ report issued: Modified
Internal control over financial reporting:
x Material weakness(es) identified? Yes
x Significant deficiency(ies) identified? Yes
Any noncompliance material to the financial statements noted: No Federal Awards
Internal control over major programs:
x Material weakness(es) identified? No
x Significant deficiency(ies) identified? Yes
Types of auditors’ report issued on compliance for major programs: Modified Any audit findings disclosed that are required to be reported in accordance with section 200.516(a): Yes Identification of major programs:
Dollar threshold used to distinguish between type A and type B program: $750,000 Auditee qualified as low-risk auditee under
section 200.520? No
City of Richmond
Single Audit Report
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2021
13 Section II –Current Year Findings
A. Current Year Findings – Financial Statement Audit
2021-001 General Fund Financial Position (Material Weakness) Criteria:
The City’s general fund should maintain adequate fund balance reserve to meet required operating obligations. GFOA recommends that General purpose local governments, regardless of size, at a minimum should maintain unrestricted budgetary fund balance in their general fund of no less than two months of regular general fund operating expenditures.
Condition:
The City’s unrestricted fund balance in the General Fund was $34,714,304, which can only cover less than 3 months expenditures in General Fund that was very close to the recommended minimum level. The ability of the City to meet required operating obligations is dependent on the City’s ability to develop and implement a plan that will successfully increase cash flows.
Cause:
The City has either overspend its budget in the past or the budget was not balanced which depleted available fund balance.
Context and Effect:
Deficiency in fund balances may require significant cost cutting measures to reach a budget that will recoup the fund balance as well as provide the necessary re venues and financing for continued operations of the City.
Recommendation:
We recommend the City continue to analyze all potential cost cutting measures and revenue sources, and review options to establish a budget plan for the Ge neral Fund to recoup the fund balance as well as provide continued financing for City operations.
Management Response:
The City is constantly looking at measures to incr ease revenues. In November 2018, Richmond voters approved Measure H, which increased the real estate transfer tax for properties with a sales price of over $1 million from 0.7 percent to 1.25 percent for sales pr ices below $3 million, 2.5 percent for sales prices between $3 million and $10 million, and 3.0 percent for sales prices over $10 million. This tiered structure has generated for the City of Richmond additional new revenue of more than $20 million since it went into effect on December 28, 2018.
City of Richmond
Single Audit Report
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2021
14 Section II –Current Year Findings, Continued
A. Current Year Findings – Financial Statement Audit, Continued Additionally, Richmond voters approved Measure U, which changed the methodology for calculating business tax from that based on numb er of employees to gross receipts. This is expected to both bring in millions more per year and includes an inflation-linked escalator. As gross receipts are expected to increase with inflation, so are the taxes collected.
The City is making progress in achieving the goal of having the City’s reserve policy of 15% per policy by reducing or even eliminating various negative fund balances. 2021-002 Completeness of Accrued Liabilities (Significant Deficiency) Criteria:
Expenditures/expenses should be recognized in the accounting period in which the liability is incurred.
Condition:
During our review of the unprocessed invoices folder, we found the City had around $3.2M unprocessed invoices that were for goods or services provided during fy2021 and those invoices were not properly accrued back to fy2021.
Cause:
The City doesn’t have a proper process in place to ca pture all the accruals, especially when invoices are received later than the cutoff date. The delay in submission of the invoices from departments also contributes to the failure to capture the accruals timely.
Context and Effect:
Failure to capture all liabilities can lead the financial statements to be materially misstated.
Recommendation:
We recommend the City to implement internal controls to capture material accruals for which the invoices received after cutoff date and recognize the liabilities properly.
Management Response:
The Finance Department is working with all the depa rtments and vendors to ensure that invoices are submitted and processed in a timely manner. One step is reminding the departments that vendors are required to remit all invoices directly to Finance De partment, so the invoices are more easily tracked and processed more efficiently. Additionally, Accounts Payable staff is tracking any receivables received after the accrual cutoff date and analyzing to see if they are material for adjusting journal entry.
City of Richmond
Single Audit Report
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2021
15 B. Current Year Findings and Questioned Costs – Major Federal Award Program Audit SA2021-001: Failure to Maintain Proper Documentation
Assistance Listing Numbers: 97.036
Assistance Listing Title: Disaster Grants – Public Assistance Name of Federal Agency: U.S. Department of Homeland Security Federal Award Identification Number: FEMA-4308-DR-CA
Name of pass-through Entity:C a l i f o r n i a O f f i c e o f E m e r g e n c y S e r v i c e s Criteria:
The grant requires the filing of quarterly progress reports on all open large projects within 30 days after the end of each calendar quarter.
Condition:
The City was unable to show proof of the timely submission of the selected quarterly progress reports.
Cause:
The City doesn’t have internal control in place to en sure the timely submission of the reports. Since the project manager, who was the only person involved in the reporting process, left the City, the City was unable to locate any proof of the timely submission of the reports.
Context and Effect:
We can’t verify if the City is in compliance with the reporting requirements for the grant.
Recommendation:
The City should implement controls to ensure all required reports are submitted timely and maintain documentation of the submission.
Management Response:
All City departments are required to submit grant reim bursements requests to the Grant Helpdesk when it is completed. The Finance Department is in progress to hire an additional employee to support the budget division. This employee will be responsible for monitoring grant submissions, so timely reminders can be sent out and proper escalation steps can be taken if no response or information is submitted by deadlines.
City of Richmond
Single Audit Report
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2021
16 Section III- Prior Year Findings
A. Prior Year Findings – Financial Statement Audit
2020-001 General Fund Financial Position (Material Weakness) Criteria:
The City’s general fund should maintain adequate fund balance reserve to meet required operating obligations. GFOA recommends that General purpose local governments, regardless of size, at a minimum should maintain unrestricted budgetary fund balance in their general fund of no less than two months of regular general fund operating expenditures.
Condition:
The City’s unrestricted fund balance in the General Fund was $21,940,238, which can only cover less than 2 months expenditures in Ge neral Fund. The ability of the City to meet required operating obligations is dependent on the City’s ability to develop and implement a plan that will successfully increase cash flows.
Cause:
The City has either overspend its budget in the past or the budget was not balanced which depleted available fund balance.
Context and Effect:
Deficiency in fund balances may require significant cost cutting measures to reach a budget that will recoup the fund balance as well as provide the necessary re venues and financing for continued operations of the City.
Recommendation:
We recommend the City continue to analyze all potential cost cutting measures and revenue sources, and review options to establish a budget plan for the Ge neral Fund to recoup the fund balance as well as provide continued financing for City operations.
Current Status:
See current year finding.
City of Richmond
Single Audit Report
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2021
17 Section III- Prior Year Findings, Continued
A. Prior Year Findings – Financial Statement Audit, Continued 2020-002 Completeness of Accrued Liabilities (Significant Deficiency) Criteria:
Expenditures/expenses should be recognized in the accounting period in which the liability is incurred.
Condition:
During our expenditures testing for fiscal year 2 020, we noted around $6 million in invoices were for services or goods provided in fiscal year 2019 but were not captured and recognized appropriately in fiscal year 2019. Among the $6 million, $5.3 million were capitalized expenditures/expenses.
Cause:
The City doesn’t have a proper process in place to ca pture all the accruals, especially when invoices are received later than the cutoff date. The delay in submission of the invoices from departments also contributes to the failure to capture the accruals timely.
In addition, the misleading instruction on the AP approval email template, “All invoices received after August 16, 2019 will be paid from FY2019/2020”, might also cause the failure in capturing all accruals.
Context and Effect:
Failure to capture all liabilities can lead the financial statements to be materially misstated.
Recommendation:
We recommend the City to implement internal controls to capture material accruals for which the invoices received after cutoff date and recognize the liabilities properly.
Current Status:
See current year finding.
City of Richmond
Single Audit Report
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2021
18 Section III- Prior Year Findings, Continued
B. Prior Year Findings and Questioned Costs – Major Federal Award Program Audit No findings and questioned costs in the current year.