CITY OF SALINAS
SINGLE AUDIT
of
FEDERALLY ASSISTED GRANT PROGRAMS
JUNE 30, 2021
McGILLOWAY, RAY, BROWN & KAUFMAN
ACCOUNTANTS & CONSULTANTS
TABLE OF CONTENTS
Page
Independent Auditor’s Report
on Internal Control over Financial Reporting and on
Compliance and Other Ma tters Based on an Audit of
Financial Statements Performed in Accordance with
Government Auditing Standards 1
Independent Auditor’s Report
on Compliance for Each Major Federal Program; and
on Internal Control Over C ompliance Required by the
Uniform Guidance; and on the Schedule of Expenditures
of Federal Awards 3
Schedule of Expenditures of Federal Awards 6
Notes to Schedule of Expenditures of Federal Awards 9
Schedule of Findings and Questioned Costs 12
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
The Honorable Mayor and
Members of City Council
of the City of Salinas
Salinas, California
We have audited, in accordance with the auditing standards gene rally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller Genera l of the United States, the financial statements of the governmental a ctivities, the bu siness-type activities, each major fund and the aggregate remaining fund informa tion of the City of Salinas, Ca lifornia (the City), as of and for the fiscal year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City's basic financial statements and have issued our report thereon dated May XX, 2022.
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) to determine the audit procedures that are appropriate in the circumstances for the purpose of express ing our opinions on the financial statements, but not for the pur pose 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 allo w management or employees, in the normal course of performing the ir assigned functions, to prevent, or detect and correct, misstatements on a timely basis . A material weakness i s a deficiency, or a combination of d eficiencies, in internal contr ol, such that there is a reasonable possibility that a material misstatement of the entity’s financ ial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less s evere than a material weakness, yet important enough to merit attention by those charged with governance.
2 Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not desig ned to identify all deficienci es in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did id entify certain deficiencies in internal control, described in the accompanying schedule of fin dings and questioned costs as item 2021-001 that we consider to be a material weakness.
Compliance and Other Matters
As part of obtaining reasonable a ssurance about whether the Cit y’s financial statements are free from material misstatement, we performed tests of its complianc e with certain provisions of laws, regulations, contracts, a nd grant agreements, noncomplian ce with which could have a direct and material effect on the financial statements. However , providing an opinion on compliance with those provisions was not an objective of our au dit, 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 Audit ing Standards and which are described in the accompanying schedule of findings and question ed costs as items 2021-002, 2021-003, 2021-004, and 2021-005.
City’s 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 t h e f i n a n c i a l s t a t e m e n t s a n d, accordingly, we express no opinion on it.
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 entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communicatio n is not suitable for any other purpose.
McGilloway, Ray, Brown & Kaufman
Salinas, California
May XX, 2022
3 INDEPENDENT AUDITOR’S REPORT
ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM
AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED
BY THE UNIFORM GUIDANCE AND ON THE SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS
The Honorable Mayor and
Members of City Council
of the City of Salinas
Salinas, California
Report on Compliance for Each Major Federal Program
We have audited the City of Salinas, California’s (the City) co mpliance 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 fiscal year ended June 30, 2021. The City's major federal p rograms are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for the compliance with federal statu tes, 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 compliance for e ach of the City’s major federal programs based on our audit of the types of compliance requirem ents referred to above. We conducted our audit of compliance in accordance with auditing s tandards generally accepted in the United States of America; the standards applicable to finan cial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and t he audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirement, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about wheth er noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidenc e 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 o pinion on compliance for each major federal program. Howeve r, our audit does not provide a l egal determination of the City’s compliance.
4 Opinion on Each Major Federal Program
In our opinion, the City complied, in all material respects, wi th the types of compliance requirements referred to above that could have a direct and mat erial effect on each of its major federal programs for the year ended June 30, 2021.
Other Matter
The results of our auditing procedures disclosed instances of n oncompliance which are required to be reported in accordance with the Uniform Guidance and whic h are described in the accompanying schedules of findings and questions costs as item 2021-001. Our opinion on each major federal program is not modified with respect to this matter.
The City’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The Cit y’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 Internal Control over Compliance
Management of the City is responsible for establishing and main taining effective internal control over compliance with the types of compliance requirements refer red to above. In planning and performing our audit of complianc e, we considered the City's in ternal control over compliance with the types of requirements t hat could have a direct and mat erial effect on each major federal program to determine the auditing procedures that are appropria te in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of in ternal control over compliance.
Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, no ncompliance with a type of compliance requirement of a fede ral program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal c ontrol over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in inter nal control over compliance is a deficiency, or a combination of deficiencies, in internal control over complianc e with a type of compliance requirement of a federal program that is less severe than a mat erial weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal c ontrol over compliance was for t he limited purpose described in the first paragraph of this section and was not designed to ide ntify 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 identify certain deficiencies in internal control over c ompliance, as described in the accompanying schedule of findings and questioned costs as items 2021-002, 2021-003, 2021- 004, and 2021-005 that we consider to be material weaknesses.
The City’s response to the internal control over compliance fin dings identified in our audit is described
in the accompanying schedule of findings and question ed 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.
5 The purpose of this report on in ternal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
We have audited the financial statements of the governmental ac tivities, 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 sta tements, which collectively comprise the City’s basic financial statements. We issued our r eport thereon dated May 6, 2022, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements tha t collectively comprise the City’s basic financial statements. Th e accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by th e Uniform Guidance and is not a required part of the basic financ ial statements. Such informati on is the responsibility of management and was derived from and relates directly to the und erlying accounting and other records used to prepare the basic financial statements. The inf ormation has been subjected to the auditing procedures applied in t he audit of the f inancial state ments and certain additional procedures, including comparing and reconciling such informatio n directly to the underlying accounting and other records used to prepare the basic financial s t a t e m e n t s o r t o t h e b a s i c financial statements themselves, and other additional procedure s i n a c c o r d a n c e w i t h a u d i t i n g standards generally accepted in the United States of America. I n our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the financial statements as a whole.
McGilloway, Ray, Brown & Kaufman
Salinas, California
May XX, 2022
See accompanying notes to schedule of expenditures of federal awards 6 Assistance
Listing Number
Grant or Pass-Through
Number
Federal
Expenditures
Amount
Provided to
Subrecipients
U.S. Department of Housing and Urban Development
Office of Community Planning and Development
CDBG - Entitlement Grant Cluster*
CDBG Entitlement Grant 14.218 B-15-MC-06-0005 28,545 $
CDBG Entitlement Grant B-16-MC-06-0005 93,648
CDBG Entitlement Grant B-17-MC-06-0005 1,247
CDBG Entitlement Grant B-18-MC-06-0005 20,904
CDBG Entitlement Grant B-19-MC-06-0005 8,255
CDBG Entitlement Grant B-20-MC-06-005 382,887
CDBG Entitlement Grant Program Income 151,028
COVID-19 CDBG Entitlement Grant B-20-MW-06-0005 996,947 Total CDBG - Entitlement Grant Cluster - CFDA No. 14.218 1,683,461 963,767 $ Emergency Solutions Grant Program 14.231 E-19-MC-06-0005 44,159 Emergency Solutions Grant Program 19-ESG-12331 269,086
Emergency Solutions Grant Program E-20-MC-06-0005 23,731 COVID-19 Emergency Solutions Grant Program E-20-MW-06-0005 2,964, 963 COVID-19 Emergency Solutions Grant Program 20-ESGCV1-0002 749,400 Total Emergency Solutions Grant Program - CFDA No. 14.231 4,051, 339 2,568,791 Home Investment Partnerships Program 14.239 M19-MC-06-0212 35,110 M20-MC-06-0212 470,626
Program Income 601,576
Total Home Investment Partnerships Program - CFDA No. 14.239 1,1 07,312 973,499 U.S. Department of Justice
COVID-19 Coronavirus Emergency Supplemental Funding Program 16.0 34 2020-VD-BX-0511 146,839 Crime Victim Assistance/Discretionary Grants
Victim Specialist Program Investigation Unit 16.582 2019-V3-GX-00 57 104,990 - Office of Community Oriented Policing Services
Public Safety Partnership and Community Policing Grant
Cops Hiring Program - Eight School Resource Officers 16.710 201 4-UL-WX-0022 118,063 - Bureau of Justice, Office of Justice Programs - JAG Program Edward Byrne Memorial Justice Assistance Grant Program* 16.738 20 17-DJ-BX-0918 74,976 2018-DJ-BX-0822 56,941
2019-DJ-BX-0694 88,542
Total Bureau of Justice, Office of Justice Program - JAG Program2 2 0 , 4 5 9 22,615 Federal Reimbursements UNKNOWN UNKNOWN 31,042 - *Denotes major program
CITY OF SALINAS
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2021
Federal Grantor, Pass Through Grantor, Cluster, Program Title Direct Federal Awards
See accompanying notes to schedule of expenditures of federal awards 7 Assistance
Listing Number
Grant or Pass-Through
Number
Federal
Expenditures
Amount
Provided to
Subrecipients
U.S. Department of Transportation
Federal Aviation Administration
Airport Improvement Program 20.106 AIP 3-06-0206-27 1
AIP 3-06-0206-28 9,968
AIP 3-06-0206-29 441,827
Total Airport Improvement Program - CFDA No. 20.106 451,796 - U.S. Department of Treasury
COVID-19 Coronavirus Relief Fund* 21.019 Unknown 2,002,977 - U.S. Department of Homeland Security
Federal Emergency Management Agency
Emergency Food and Shelter National Program 97.024 LRO#077600036 2 4,998 - Federal Emergency Management Agency
COVID-19 California COVID-19 Pandemic 97.036 FEMA-4482-DR-CA 75,74 0 - Federal Emergency Management Agency
Assistance to Firefighters Grant (AFG) 97.044 EMW-2017-FR-40462 50 ,434 - Federal Emergency Management Agency
Homeland Security Grant Program 97.067 UASI-2019-0035 195,199 - Federal Emergency Management Agency
Staffing for Adequate Fire and Emergency Response 97.083 EMW-2013 6FH-00524 176,465 - Total Direct Federal Awards 10,441,114 4,528,672
Indirect Federal Awards
U.S. Department of Justice
Missing Children's Assistance
Passed through City of San Jose
CA Gov Office of Emergency Services Internet Crimes Against Children 15.543 IC18-10-7928 208,000 - U.S. Department of Transportation
Highway Planning and Construction Cluster
Passed through Federal Highway Administration
HSIP Pedestrian Crossing Enhancement, Sanborn Road Improvements 20.205 HSIPL 5045 (027) 119,547 HSIP North Main Intersection HSIPL 5045 (033) 216,142
Passed through Federal Highway Administration - Caltrans Active Transportation Program, Alvin-Linwood, Chaparral, Maryal 20.205 ATPL-5045 (030) 1,984,476 Active Transportation Program, Bardin Road Safe Routes ATPL-5045 (031) 602,919 Active Transportation Program, Downtown Complete Street ATPL-5045 (032) 1,616,256 Total Highway Planning and Construction Cluster - CFDA No. 20.205 4,539,340 - *Denotes major program
CITY OF SALINAS
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2021
Federal Grantor, Pass Through Grantor, Cluster, Program Title Direct Federal Awards, continued
See accompanying notes to schedule of expenditures of federal awards 8 Assistance
Listing Number
Grant or Pass-Through
Number
Federal
Expenditures
Amount
Provided to
Subrecipients
Indirect Federal Awards, continued
Highway Safety Cluster
Passed through State and Community Highway Safety
Selective Traffic Enforcement Program 20.600 PS20029 121,347 PT120149 8,139
PT21047 46,703
Total Highway Safety Cluster - CFDA No. 20.600 176,189 - Selective Traffic Enforcement Program 20.608 21-OTS-12 8,228 PS21012 50,714
Total Selective Traffic Enforcement Program - CFDA No. 20.608 58,942 - U.S. Department of Treasury
Emergency Rental Assistance Program
Passed through United Way Monterey County
COVID-19 Emergency Rental Assistance Program (ERAP)* 21.023 Unknown 816,245 - Total Indirect Federal Awards 5,798,716 -
Total Direct and Indirect Federal Awards 16,239,830$ 4,528,672$ *Denotes major program
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2021
Federal Grantor, Pass Through Grantor, Cluster, Program Title
CITY OF SALINAS
CITY OF SALINAS
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2021
9 1. Reporting Entity
The Schedule of Expenditures of Federal Awards (the Schedule) includes expenditures of federal awards for the City of Salinas, California (City).
2. Summary of Significant Accounting Policies Applicable to the Sc hedule of Expenditures of Federal Awards
A. Scope of Presentation
The accompanying Schedule presents the expenditures incurred by t h e C i t y t h a t a r e reimbursable under programs of federal agencies providing federal awards. For the purpose of this schedule, federal awards include both federal financial assistance received directly from a federal agency, as well as federal funds received indire ctly by the City from a nonfederal agency or other organization. Only the portion of program expenditures reimbursable with such federal fu nds is reported in the accompa nying schedule. Program expenditures in excess of the max imum federal reimbursement aut horized or the portion of the program expenditures that was funded with other state, loca l or other nonfederal funds are excluded.
B. Basis of Accounting
The accompanying schedule of expenditures of federal awards is presented using the modified accrual basis of accounting for governmental funds, which is described in Note 1 of the City’s basic financial statements. Such expenditures, as th e federal awards were both awarded prior to and after December 24, 2014, are recognized fo llowing the cost principles contained in the Uniform Guidanc e and OMB A-87, Cost Principles for State, Local, and Indian Tribal Governments, where in certain types of expenditures are not allowable or are limited as to reimbursement.
C. Direct and Indirect (Pass-Through) Federal Awards
Federal awards may be granted di rectly to the City by a federal granting agency or may be granted to other government agencies which pass-through federal a w a r d s t o t h e C i t y . T h e Schedule includes both of these types of Federal awards programs when they occur.
D. Indirect Cost Rate
The City has elected not to use the 10% de minimis indirect cos t rate as allowed under the Uniform Guidance.
E. Relationship to Federal Financial Reports
Grant expenditure reports for the year ended June 30, 2021, whi ch have been submitted to grantor agencies, will, in some cases, differ from amounts disc losed herein. The reports prepared for grantor agencies are typically prepared at a later date and often reflect refined estimates of the year-end accruals. The reports will agree at t ermination of the grant as the discrepancies, if any, are for timing differences.
CITY OF SALINAS
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2021
10 3. Sub-recipients
The City provided federal awards to sub-recipients as follows:
Federal CFDA Amount
Number Provided
U.S. Department of Housing and Urban Development
Office of Community Planning and Development
Community Development Entitlement Grant Program 14.218
Special Programs
Girl Scouts of Monterey Bay 35,000 $
Grow Salinas Fund 400,000
Methodist Church 36,261
Partners for Peace 8,207
Food Bank 310,957
Eden Council Hope & Opportunity 84,000
Salvation Army 58,035
Downtown Street Team 31,307
Total CFDA No. 14.218 963,767
U.S. Department of Housing and Urban Development
Emergency Solutions Grants Program 14.231
Special Programs
Central Coast Center for Independent Living 513,260
Community Homeless Solutions 906,451
San Benito County 141,892
Coalition of Homeless Services Providers 87,665
Step Up on Second Street 8,400
CSUMB - University Corporation at Monterey Bay 65,737
Interim Inc. 100,000
Salvation Army 78,098
YWCA Monterey County 4,424
Downtown Street Team 238,633
Community Human Services 160,508
Franciscan Workers of Junipero Serra 19,459
Housing Resource Center of Monterey County 244,264
Total for CFDA No. 14.231 2,568,791
Home Investments Partnership Program 14.239
Special Programs
Multi Family Housing - Parkside Apartments 973,499
Total for CFDA No. 14.239 973,499
Total sub-recipients for U.S. Department of Housing
and Urban Development 4,506,057
U.S. Department of Justice
Bureau of Justice Assistance 16.738
Edward Bryne Memorial Justice Assistance Grant Program
Monterey County Probation Department 22,615
Total for CFDA No. 16.812 22,615
Total all sub-recipient awards 4,528,672$
Program Title
CITY OF SALINAS
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2021
11 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 fo r reimbursement to the grantor agencies.
CITY OF SALINAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2021
12 Section I - Summary of Auditor's Results
Financial Statements
Type of auditor's report issued on whether the financial statements audited were prepared in accordance with GAAP Unmodifie d
Internal control over financial reporting:
Material weakness(es) identified? X Yes No
Significant deficiency(ies) identified? Yes X None reported Noncompliance material to financial statements noted? Yes X No Federal Awards
Internal control over major federal programs:
Material weakness(es) identified? X Yes
Significant deficiency(ies) identified? Yes X None reported Type of auditor's report issued on compliance for major federal programs: Unmodified Any audit finding disclosed that are required to be reported in accordance with 2 CFR Section 500.516(a)? X Yes No
Identification of Major Federal Programs
U.S. Department of Housing, Community Development Block Grant Entitlement Grant Cluster U.S. Department of Justice, Edward Bryne Memorial Justice Assistance Grant Program U.S. Department of Treasury, Coronavirus Relief Fund
U.S. Department of Treasury, Emergency Rental Assistance Program Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as low-risk auditee? X Yes No
CFDA Number
14.218
16.738
21.019
21.023
CITY OF SALINAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2021
13 Section II – Financial Statement Findings
Finding Number: 2021-001 Material Weakness – Internal Controls Over the Financi al Close and Reporting Process
Criteria or Specific Requirement: Internal controls over performing the accounting period close that is designated by the City’s governing body, manageme nt, and personnel to address risks and to provide reasonable a ssurance that the trial balanc es used in the financial statement preparation process are final, contain all valid journal entries made, and are in balance.
Condition: Such internal control is an integral process in the financial c lose and reporting process that should be continuously adapted to staffing challen ges the City is facing. The City did not fill the vacancies in critical positions and these posi tions remained unfilled for several months.
Cause: While the City has controls in place to perform the accounting period close, staffing shortages led to a delay in applying the year-end closing procedures that had previously been applied consistently.
Effect or potential effect: Incomplete and inaccurate trial balances that did not match management prepared reconciliations.
Context: Certain audit schedules and journal entries were provided to th e auditor after the scheduled timing of the audit, and there was no evidence to support management’s timely review of the year-end process before the trial balances were deemed f inal by management. Therefore, management's reconciliation of trial balances was significantly delayed, resulting in the need for twelve material audit adjustments.
Recommendation: We recommend that management evaluate the causes of the deficie ncies noted above and incorporate necessary processes to ensure that the controls in place to perform the accounting period close are consistently applied, including during times when staffing shortages exist.
View of Responsible Officials: Management agrees with this comment and recognizes that staffing shortages and management changes contributed to a dela y in the production of the financial statement footnotes and related reconciliation reports.
During fiscal year 2021, the Department of Finance had an overw helming number of changes in key management personnel including the hiring of a new Director of Finance, the vacancy of the Assistant Director of Finance pos ition during the entire fiscal year, and the promotion of senior accounting staff to fill the Acc ounting Manager position (the i ncumbent having vacated the position prior to fiscal year-end June 30, 2021). In addition, a Senior Accountant position and a Finance Management Analyst position had been vacant during most of the audit process, and a Senior Accounting Technician was on medical leave during the entire closing of the fiscal year.
The City addressed staffing shortages by filling the following management vacancies: Director of Finance (July 2021), Accounting Manager (September 2021), an d Assistant Director of Finance (January 2022). Additiona lly, the vacant Finance Manage ment Analyst position was filled in April 2022 and the remaining Senior Accountant position is expected to be filled prior to the end of the cur
rent fiscal year.
No findings had been discovered/ reported by the City’s auditors for several consecutive years, indicating the Department of Finance already has effective inte rnal controls in place to perform the accounting fiscal year-end closing. To ensure these controls are applied consistently, the City will promote cross-training amongst the senior accounting team. This will ensure that, in the
CITY OF SALINAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2021
14 occurrence of another major staffing shortage, staff will still be able to effectively adhere to year- end internal controls.
CITY OF SALINAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2021
15 Section III – Federal Award Findings and Questioned Costs Finding Number: 2021-002 Material Weakness – All owable Costs and Activities, Eligibility Compliance and Control Finding
Federal Award: No. 21.023 Emergency Rental Assistance Program – COVID 19 Federal Agency: U.S. Department of Treasury
Pass-Through Entity: United Way of Monterey County
Criteria or Specific Requirement: 2 CFR section 200.303a,d states the non-Federal entity must: (a) Establish and maintain effective internal control ove r the Federal award that provides reasonable assurance that the non-Federal entity is managing th e Federal award in compliance with Federal statues, regulations, and the terms and conditions of the federal award; (d) Take prompt action when instances of noncompliance are identified in cluding noncompliance identified in audit findings. 2 CFR sections 200.400 through 200.401 provide the general provisions for cost principle s. Section 200.400(b) states that the non-Federal entity assumes responsibility of administering Federal funds in a manner consistent with underlying agreements, program objectives and terms and conditions of the Federal award.
Condition: During the fiscal year ended June 30, 2021, improper rental ass istance payments were identified, and related checks were not voided timely.
Cause: The short period of time required to make awards available and the presence of new requirements for the program were burdensome for management to disburse in compliance with Federal guidelines and may have resulted in exposure to errors and irregularities. Ineffective communication between the Housing Department and Finance Depart ment caused checks to not be voided timely.
Effect or potential effect: It is reasonably possible that the City would provide funding t o ineligible recipients.
Questioned costs: $33,939 in known questioned costs and $16,511 in likely questioned federal costs related to ineligible recipients and checks not voided ti mely. $10,903 of known questioned costs related to checks not voided timely.
Context: A nonstatistical sample of 37 recipients were selected for test ing. We noted one instance of an ineligible recipient passing eligibility determi nations and extr apolated the questioned costs over the total population. Four additional che cks were not appropriately voided and were the result of isolated incidents.
Recommendation: We recommend that management implement procedures and control processes to ensure checks are only issued when eligibility of a recipient is certain and to implement more effective internal communications between departments.
View of Responsible Officials: Management concurs with this recommendation to implement procedures and control processes to ensure checks are only issued when the eligibility of a recipient is certain and to implement more effective internal c ommunications between departments to timely void related check.
CITY OF SALINAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2021
16 The following procedure has been implemented to ensure recipient’s eligibility before issuing checks:
In addition to the above procedures, the Housing Division and t he Finance Department are working together to timely void checks. The Finance department daily monitors disbursement transactions and keeps communicat ion with bank representatives to stop payment or to void checks due to suspicious activity or alterations.
Additionally, the Finance departme nt has implemented mechanisms to mitigate any potential questioned cost; including, sending to Housing a monthly report for all outstanding checks related the Emergency Rental Assistant Program (ERAP), Housing reviews the list to identify a reason why checks are outstanding and provides timely instructi ons to Finance for checks no longer needed and to stop payment or to void checks.
CITY OF SALINAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2021
17 Finding Number: 2021-003 Material Weakness - Special Tests – Compliance and Control Finding
Federal Award: No. 21.023 Emergency Rental Assistance Program – COVID 19 Federal Agency: U.S. Department of Treasury
Pass-Through Entity: United Way of Monterey County
Criteria or Specific Requirement: 2 CFR section 200.303e states the non-Federal entity must:
take reasonable measures to safe guard protected personally iden tifiable information and other information the Federal awarding agency or pass-through agency designates as sensitive or the non-Federal entity considered sensitive consistent with state, l o c a l , a n d t r i a l l a w s r e g a r d i n g privacy and responsibility over confidentiality.
Condition: Protected personally identifiable information related to recipi ents was not appropriately safeguarded.
Cause: Protected personally information was saved in an electronic loc ation accessible by all Community Development employees, including those who did not wo rk directly on the Emergency Rental Assistance federal award, as well as one emplo yee who works outside of the Community Development department.
Effect or potential effect: Potential inappropriate use or disclosure of personally protec ted identifiable information.
Questioned costs: None.
Context: We noted all documents related to eligibility determination, in cluding demographic and financial information, were saved in an electronic location accessible by employees who did not work directly on the Emergency Rental Assistance Program.
Recommendation: The eligibility files should be accessible only to those employ ees who work directly on the grant. Upon ente ring in a grant agreement, the Housing Department should coordinate with the Information Technology department to create private electronic folders accessible by only employees who need access, rather than providing department wide access.
View of Responsible Officials: Management understands these comments. The City’s Emergency Rental Assistance Program (ERAP) Team resorted to usi ng the City’s internal I- Drive as an emergency measure to store applicant’s documents after the grantor’s software, Smart Referral Network (SRN), fa iled to meet the program’s need s. In order to process timely payments to reduce eviction risks and meet the expenditures dea dlines, the City had to improvise its process.
The ERAP Program Manager has ide ntified a safer electronic loca tion to store information, which is only accessible to employees working directly on ERAP. As of December 2021, the ERAP team stores documents electronically in the City’s One Dri ve, and the Program Manager is the authorized individual to grant access to ERAP staff only.
CITY OF SALINAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2021
18 Finding Number: 2021-004 Material Weakness - Subrecipients – Compliance and Con trol Finding
Federal Award:
(1) No. 14.218 U.S. Department of Hous ing Community Development Ent itlement Grant Program
(2) No. 14.231 U.S. Department of Housing Emergency Solutions Grant Program (3) No. 16.738 U.S. Department of Justice, Edward Bryne Memorial Justice Assistance Grant Program
Federal Agency: U.S. Department of Housing and U.S. Department of Justice Pass-Through Entity: Not applicable
Criteria or Specific Requirement: 2 CFR section 200.303a state s the non-Federal must establish and maintain effective internal control over the Fede ral award that provides reasonable assurance that the non-Federal en tity is managing the Federal a ward in compliance with Federal statues, regulations, and the terms and conditions of the feder al award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptr oller General of the United Sta t e s o r t h e “ I n t e r n a l C o n t r o l Integrated Framework”, issued by the Committee of Sponsoring Or ganizations of the Treadway Commission (COSO).
Condition: Adjustments were made to the expenditures of the Schedule of Fe deral Award Expenditures Subrecipient Listing.
Cause: Ineffective internal communication.
Effect or potential effect: Incomplete or inaccurate reported amounts of funding provided to subrecipients.
Questioned costs: None.
Context: On the original listing provided to the auditors, two federal a wards subrecipient expenditures were overstated and one federal award with subreci pient expenditures was not included. The listing was updated by the City.
Recommendation: Effective information and communication are vital for an entity to achieve its objectives. Management should obtain relevant data from rel iable internal sources in a timely manner and ensure provided data are reasonably free from error.
View of Responsible Officials: Management agrees with this c omment and acknowledges that the City presented numbers to the auditors from City Data Servi ces (CDS) instead of numbers from New World System in error.
NWS is the main financial management system that tracks the rei mbursement of funds in real- time. The City has added input fields to CDS which will be use d to create reports and assist to reconcile expenditures with NWS. This feature added to the Eme rgency Solutions Grant (ESG) programs in January 2022, will be extended to other grants admi nistered by the Housing and Community Development Division. This new feature will facilita te the communication between CDS and NWS systems.
CITY OF SALINAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2021
19 The initial list of sub-recipients provided included programs o perated by City Staff and allowed by the Community Development Block Grant (CDBG) and ESG guideli nes. These programs were removed from the first list submitted and will not be included in future list of subrecipient.
CITY OF SALINAS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2021
20 Finding Number: 2021-005 Material Weakness – Subrecipient Monitoring – Complian ce and Control Finding
Federal Award: No. 16.738 U.S. Department of Justice, Edward Bryne Memorial Ju stice Assistance Grant Program (JAG Grant)
Federal Agency: U.S. Department of Justice
Pass-Through Entity: Not applicable
Criteria or Specific Requirement: 2 CFR section 200.332 states that all pass-through entities must ensure that every subaward is clearly identified to the su brecipient as a subaward and includes specific information as per 2 CFR section 200.332(1), including, but not limited to:
Federal award identification, Federal award identification number, Federal award date, subaward period of performance start and end date, amount of obligated Federal Funds, Assistance Listing number and title, and all requirements imposed by the pass-thro ugh entity on the subrecipient so that the Federal award is used in compliance with statues, regu lations, and terms and conditions.
Additionally, 2 CFR section 200.332(d) states all pass-through entities must monitor the activities of the subrecipient a s necessary to ensure that the subaward is used for authorized purposes, in compliance with Fed eral statues, regulations, and terms and conditions of the subaward.
Condition: The agreement between the City and the subrecipient does not co ntain the information required by Uniform Guidance. Formal subrecipient m onitoring was not conducted during the year.
Cause: It was an oversight by the responsible personnel that appropria te information was not communicated to the subrecipient. The City lacked adequate inte rnal controls to ensure compliance with subrecipient monitoring requirements.
Effect or potential effect: Incomplete subawards and failure to perform the required monitoring activities resulted in non-compliance with the requirement.
Questioned costs: None.
Context: The JAG Grant had one subrecipient during the audited period. T h e C i t y h a s a n approved agreement with the subr ecipient, but the agreement doe s not contain information required by Uniform Guidance. While the City did thoroughly rev iew all expenditures submitted for reimbursement by the subrecipient before processing reimbur sements and regularly communicates with the subrecipient regarding expenditures and g rant activities, formal subrecipient monitoring was not performed.
Recommendation: We recommend the City Police Department ensure all subawards ar e made in accordance with Uniform Guidance and implement subrecipient monitoring policies and procedures in accordance with Uniform Guidance.
View of Responsible Officials: The Salinas Police Department modified the JAG Grant MOU template with the subrecipient to clearly identify Federal awar d information and applicable compliance requirements, including special conditions, as ident ified in the DOJ Financial Guide “Post-award Requirements 3.14 Subrecipient Management and Monitoring.” The Salinas Police Department also
implemented more formal sub-recipient monitorin g policies and procedures, specifically the required submission of written quarterly reports from the subrecipient.