City of Stockton
Stockton, California
Single Audit
and Independent Auditors’ Reports
For the Year Ended June 30, 2023
FINAL DRAFT 08.02.2024
ATTACHMENT A
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Single Audit Report
For the Year Ended June 30, 2023
Table of Contents
Page
Independent Auditors’ Reports:
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;
Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance ........................................................ 3
Schedule of Expenditures of Federal Awards ............................................................................................................ 6
Notes to the Schedule of Expenditures of Federal Awards ........................................................................................ 9
Schedule of Findings and Questioned Costs ............................................................................................................ 10
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ATTACHMENT A
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ATTACHMENT A
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 Auditors’ Report
To the Honorable Mayor and Members of City Council
of the City of Stockton
Stockton, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of th e City of Stockton, California (the “City”), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated March 13, 2024.
Report on 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) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a ma terial misstatement of the entity’s financial 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 severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We identified certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as items 2023-001 and 2023-002 that we consider to be material weaknesses.
FINAL DRAFT 08.02.2024
ATTACHMENT A
To the Honorable Mayor and Members of City Council
of the City of Stockton
Stockton, California
2 Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisi ons of laws, regulations, cont racts and grant agreements, noncompliance with which could have a direct and material effect on the financ ial statements. However, providing an opinion 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 require to be reported under Government Auditing Standards.
City’s Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the City’s response to the findings identified in our audit and described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Santa Ana, California
March 13, 2024
FINAL DRAFT 08.02.2024
ATTACHMENT A
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF
FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE
Independent Auditors’ Report
To the Honorable Mayor and Members of City Council
of the City of Stockton
Stockton, California
Report on Compliance for Each Major Federal Program
Opinion on Each Major Federal Program
We have audited the City of Stockton, California’s (the “City”) compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended June 30, 2023. The City’s major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs.
In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2023.
Basis for Opinion on Each Major Federal Program
We conducted our audit of compliance in accordance with a uditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Princi ples, and Audit Requirements for Federal Awards (the “Uniform Guidance”). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditors’ Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of City and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of City’s compliance with the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to City’s federal programs.
FINAL DRAFT 08.02.2024
ATTACHMENT A
To the Honorable Mayor and Members of City Council
of the City of Stockton
Stockton, California
4 Auditors’ Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on City’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Noncompliance with the compliance require ments referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about City’s compliance with the requirements of each major federal program as a whole.
In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards , and the Uniform Guidance, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding City’s compliance with the complia nce requirements referred to above and performing such other procedures as we considered necessary in the circumstances.
Obtain an understanding of City’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of City’s internal control over compliance. Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.
Other Matters
The results of our auditing procedures disclosed instances of noncompliance which are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying schedule of findings and questioned costs as items 2023-005 and 2023-006. Our opinion on each major federal program is not modified with respect to these matters.
Government Auditing Standards requires the auditor to perform limited procedures on City’s response to the noncompliance findings identified in our audit described in the accompanying schedule of findings and questioned costs. City’s response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
Report on Internal Control Over Compliance
Our consideration of internal control over compliance was for the limited purpose described in the Auditors’ Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance and therefore, material weaknesses or signif icant deficiencies may exist that were not identified.
However, as discussed below, we did identify certain deficiencies in internal control over compliance that we consider to be material weaknesses and significant deficiencies.
FINAL DRAFT 08.02.2024
ATTACHMENT A
To the Honorable Mayor and Members of City Council
of the City of Stockton
Stockton, California
5 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, 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 a 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 timely basis. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs as item 2023-004 to be a material weakness.
A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, 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. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs as items 2023-003, 2023-005 and 2023-006 to be significant deficiencies.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.
Government Auditing Standards requires the auditor to perform limited procedures City’s response to the internal control over compliance findings identified in our compliance audit described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance.
Accordingly, this report is not suitable for any other purpose.
Report on the Schedule of Expenditures of Federal Awards Required by Uniform Guidance
We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated March 13, 2024, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming our opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain other procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditure of Federal Awards is fairly stated in all material respects in relation to the basic financial statements as a whole.
Santa Ana, California
August 12, 2024, except for the Schedule of Expenditures of Federal Awards, which is as of March 13, 2024.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2023
See accompanying Notes to the Schedule of Expenditures of Federal Awards. 6 Assistance Amount
Listing Grant Award Federal Provided to
Number Number Expenditures Subrecipients
U.S. Department of Housing and Urban Development
Direct Program:
CDBG - Entitlement Grants Cluster:
Community Development Block Grants/Entitlement Grants 14.218 B-19-MC-06-0026 117,761 $ - $ Community Development Block Grants/Entitlement Grants 14.218 B-20-MC-06-0026 1,717,163 58,185 Community Development Block Grants/Entitlement Grants 14.218 B-21-MC-06-0026 76,365 76,365 Community Development Block Grants/Entitlement Grants 14.218 B-22-MC-06-0026 609,934 - Community Development Block Grants/Entitlement Grants 14.218 Program Income 2,530,547 954,048 COVID 19 - Community Development Block Grant Program 14.218 B-20-MW-06-0026 268,076 159,500 Neighborhood Stabilization Program 14.218 B-08-MN-060009 1,007 - Neighborhood Stabilization Program 14.218 B-11-MN-060009 1,007 - Total Community Development Block Grants/Entitlement Grants 5,321,860 1,248,098 Total CDBG - Entitlement Grants Cluster: 5,321,860 1,248,098 Emergency Solutions Grant Program 14.231 E-21-MC-06-0026 38,506 27,167 Emergency Solutions Grant Program 14.231 E-22-MC-06-0026 46,533 27,408 COVID 19 - Emergency Solutions Grant Program 14.231 E-20-MW-06-0026 889,971 800,135 Total Emergency Solutions Grant Program 975,010 854,710 HOME Investment Partnership Program 14.239 M-17-MC-06-0221 42,563 - HOME Investment Partnership Program 14.239 M-18-MC-06-0221 40,022 - HOME Investment Partnership Program 14.239 M-20-MC-06-0221 35,837 - HOME Investment Partnership Program 14.239 M-22-MC-06-0221 11,791 - COVID 19 - HOME Investment Partnership Program 14.239 M-21-MP-06-0221 43,873 - Total HOME Investment Partnership Program 174,086 - Total U.S. Department of Housing and Urban Development 6,470,956 2,102,808 U.S. Department of Justice
Direct Program:
COVID 19 - Coronavirus Emergency Supplemental Funding Program 16.034 2020-VD-BX-1296 42,348 - Total Coronavirus Emergency Supplemental Funding 42,348 - Community-Based Violence Prevention Program 16.123 2020-PB-BX-0021 31,683 - Total Community-Based Violence Prevention Program 31,683 - Edward Byrne Memorial Justice Assistance Grant Program 16.738 2019-DJ-BX-0623 61,074 42,874 Edward Byrne Memorial Justice Assistance Grant Program 16.738 2020-DJ-BX-0458 116,750 36,206 Edward Byrne Memorial Justice Assistance Grant Program 16.738 15PBJA-21-GG-01198-JAGX 178,029 146,646 Edward Byrne Memorial Justice Assistance Grant Program 16.738 15PBJA-22-GG-02064-JAGX 16,840 - Total Edward Bryne Memorial Justice Assistance Grant Program 372,693 225,726 Byrne Discretionary Grants Program 16.753 15PBJA-22-GG-00124-BRND 410,914 - Total Byrne Discretionary Grants Program 410,914 - Total U.S. Department of Justice 857,638 225,726 U.S. Department of Transportation
Pass-Through State of California Department of Transportation:
Highway Planning and Construction:
19-20 ST Resurfac on Fed 20.205 STPL-5008(190) 20,357 - West Lane Ped Access Imp 20.205 HSIPL-5008(136) 3,324 - Bus Rapid Transit V 20.205 CML-5008(188) 424,582 - Bus Rapid Transit 1-B 20.205 CML-5008(149) 619,561 - Install/Upgrade Bike FAC 20.205 CML-5008(150) 1,492 - Thornton @ Hammer & Lower Sac 20.205 CML-5008(156) 11,867 - Bridge Rehab/Replacement 20.205 BPMPL-5008(157) 18,646 - Hawk Ped Signal Install 7 20.205 HSIPL-5008(151) 81,544 - Guardrail, Transition Rail 20.205 HSIPL-5008(152) 12,948 - Federal Grantor/Pass-Through Grantor
Program Title
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Expenditures of Federal Awards (Continued)
For the Year Ended June 30, 2023
See accompanying Notes to the Schedule of Expenditures of Federal Awards. 7 Assistance Amount
Listing Grant Award Federal Provided to
Number Number Expenditures Subrecipients
U.S. Department of Transportation (Continued)
Pass-Through State of California Department of Transportation (Continued):
Highway Planning and Construction Cluster (Continued):
Miner Ave Comp St Impr Ph1 20.205 ATPL-5008(158) 16,483 - Hunter St Diet/Bike Instl 20.205 HSIPL-5008(155) 362,437 - West Ln Traf Sig Control Sys 20.205 CML-5008(165) 24,684 - Hugh Friction Treatment 20.205 HSIPL-5008(153) 36,982 - Bear Creek/Piley Slough Bike 20.205 CML-5008(175) 908,400 - Closing Gaps to School 20.205 ATPCML-5008(178) 53,636 - HSIP 8-Convt Signal Fr Ped 20.205 HSIP-5008(166) 1,263,179 - HSIP 8-Raised Med @ Pacific 20.205 HSIPL-5008(164) 1,013,022 - HSIP 8-Raised Med @ El Dorado 20.205 HRRRL-5008(163) 273,423 - HSIP 8-Road Diet @ El Dorado 20.205 HSIPL-5008(162) 239,313 - Lincoln/ 8th Roundabout 20.205 CML-5008(176) 865,504 - March Ln Ebmud Bike & Ped 20.205 ATPCML-5008(179) 870,883 - Moutauban/Hammertown Rnd 20.205 CML-5008(174) 183,780 - Pacific/March Intrsec Mod 20.205 CML-5008(181) 6,484 - Realtime Traffic Flow Monitor 20.205 CML-5008(180) 238,545 - Tam O'Shanter/Knickerbock 20.205 CML-5008(173) 6,379 - Bridge rehab & replacement 20.205 BPMP-5 008(201) 2,183 - HSIP 9-LT El Dorado/March 20.205 HSIPL-5008(183) 21,332 - HSIP 9-LT Airport/Hazeltn 20.205 HSIPL- 5008(184) 20,336 - HSIP 9-Sidewlk Med Mlk Bl 20.205 HSIPL-5008(186) 309,617 - HSIP 9-Rec Rpd Flsh Bcons 20.205 HSIPL-5008(185) 224,163 - Transp Mgmt Ctr Equip Upg 20.205 CMSTPL-5008(191) 70,497 - Arch-airport Rd Ts 20.205 CML-5008(192) 31,856 - Alpine & Alvarado 3-Wy Ts 20.205 CML-5008(193) 64,083 - West Lane Quene Cutter 20.205 STPLR-7500(289) 72,502 - HSIP 8-Install Guardrails 20.205 HSIPL-5008(168) 495 - Total Highway Planning and Construction 8,374,519 - Pass-Through State of California Office of Traffic Safety:
Highway Safety Cluster:
State and Community Highway Safety 20.600 PT22087 26,006 - State and Community Highway Safety 20.600 PT23181 139,917 - Total State and Community Highway Safety 165,923 - Total Highway Safety Cluster 165,923 -
Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 PT22087 105,489 - Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 PT23181 163,683 - Total Minimum Penalties for Repeat Offenders for Driving While Intoxicated 269,172 - Total U.S. Department of Transportation 8,809,614 - U.S. Treasur
y
Pass-Through State of California Department of Housing and Community Development:
COVID 19 - Coronavirus Relief Fund (Homekey Round 1) 21.019 20-HK-00067 2,779,929 2,779,929 Total Coronavirus Relief Fund 2,779,929 2,779,929 Direct Program:
COVID 19 - Coronavirus State and Local Fiscal Recovery Funds 21.027 N/A 14,381,078 - Pass-Through State of California Department of Housing and Community Development:
COVID 19 - Coronavirus State and Local Fiscal Recovery Funds 21.027 22-HK-17482 2,253,916 2,253,916 Total COVID 19 - Coronavirus State and Local Fiscal Recovery Funds 16,634,994 2,253,916 Emergency Rental Assistance Program:
Direct Program:
Emergency Rental Assistance Program 21.023 N/A 127,350 - Emergency Rental Assistance Program 21.023 N/A 189,046 - Emergency Rental Assistance Program 21.023 N/A 157,845 - Total Emergency Rental Assistance 474,241 - Total U.S. Treasury 19,889,164 5,033,845
Federal Grantor/Pass-Through Grantor
Program Title
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Expenditures of Federal Awards (Continued)
For the Year Ended June 30, 2023
See accompanying Notes to the Schedule of Expenditures of Federal Awards. 8 Assistance Amount
Listing Grant Award Federal Provided to
Number Number Expenditures Subrecipients
U.S. Small Business Administration
Direct Program:
Congressional Earmarks Initiative 59.059 SBAHQ22I0043 283 - Total U.S. Small Business Administration 283 - U.S. Environmental Protection Agency
Direct Program:
Brownfields Assessment and Cleanup Cooperative 66.818 99T74401 186,954 - Water Infrastructure Finance and Innovation (WIFIA) 66.958 N/A 108,000,000 - Total U.S. Environmental Protection Agency 108,186,954 - U.S. Department of Homeland Security
Direct Program:
Assistant to Firefighters Grant (AFG) 97.044 EMW-2018-FO-04270 13,899 - Staffing for Adequate Fire and Emergency Response (SAFER) 97.083 EMW-2020-FF-01451 1,370,743 - Total U.S. Department of Homeland Security 1,384,642 - Total Expenditures of Federal Awards 145,599,251$ 7,362,379 $ Federal Grantor/Pass-Through Grantor
Program Title
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Notes to the Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2023
9 Note 1 – Reporting Entity
The financial reporting entity consists of the primary government, City of Stockton, California (the “City”), organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete.
The City Council acts as the governing body and is able to impose its will on the following organizations, establishing financial accountability:
The Stockton Public Financing Authority
Fiduciary Component Unit:
Successor Agency of the Former Redevelopment Agency of the City of Stockton
Note 2 – Basis of Presentation
The accompanying Schedule of Expenditures of Federal Awards (the "Schedule") includes the federal award activity of City under programs of the federal government for the year ended June 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles , and Audit Requirements for Federal Awards (the “Uniform Guidance”). Because the Schedule presents only a selected portion of the operations of City, it is not intended to and does not present the financial position of the City. Negative amounts reflected in the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years.
The Schedule also includes $2,779,929 of federal award activity from prior years that was not included in the City’s previously issued Single Audit Reports. For more information, refer to the current year finding 2023-002.
Note 3 – Summary of Significant Accounting Policies
Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement.
Note 4 – Indirect Cost Rate
The City has not elected to use the 10 percent de-minimis indirect rate as allowed under Uniform Guidance.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2023
10 Section I – Summary of Auditors’ Results
Financial Statements
Types of report the auditors issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified
Internal control over financial reporting:
Material weakness(es) identified? 2023-001 and 2023-002
Significant deficiency(ies) identified? None noted
Noncompliance material to financial statements noted? No
Federal Awards
Internal control over major federal programs:
Material weakness(es) identified? 2023-004
Significant deficiency(ies) identified? 2023-003, 2023-005 and 2023-006
Type of auditors’ report issued on compliance for major federal programs: Unmodified
Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Yes
Identification of major federal programs:
Assistance Listing Federal
Number(s) Name of Federal Program or Cluster Expenditures
14.218 Community Development Block Grants/Entitlement Grants 5,321,860$
14.231 Emergency Solutions Grants Progra m 975,010
21.019 COVID 19 - Coronavirus Relief Fund (Homekey Round 1) 2,779,929
21.027 Coronavirus State and Local Fiscal Recovery Funds 16,634,994
66.958 Water Infrastructure Finance and Innovation (WIFIA) 108,000,000
97.083 Staffing for Adequate Fire and Emergency Response (SAFER) 1,370,743 Total Expenditures of All Major Federal Programs 135,082,536$ Total Expenditures of Federal Awards 145,599,251$
Percentage of Total Expenditures of Federal Awards 92.78%
Dollar threshold used to distinguish between type A and type B programs: $1,127,978
Auditee qualified as low-risk auditee under 2 CFR 500.520? No FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
11 Section II – Financial Statements Findings
A. Current Year Findings– Financial Statement Findings
2023-001 – Internal Control Over Financial Reportin g – Prior Year Adjustments, Year-End Closing, Reconciliation, and Delay in Issuance of the Single Audit
Criteria:
Management is responsible for the preparation and fair presentation as well as the accuracy of its financial statements including disclosures in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. As part of satisfying that responsibility, management should ensure complete year-end closing and diligently produce reliable and accurate financial information.
Generally accepted auditing standards defined internal control as a process – affected by the Members of City Council, management, and other personnel – designed to provide reasonable assurance regarding the achievement of objectives in the following categories:
Reliability of financial reporting
Effectiveness and efficiency of operations, and
Compliance with applicable laws and regulations.
In essence, accounting policies and procedures would aid the City in providing training for accounting personnel, communicating and providing a source of reference to approved policies, and maintaining consistency of recording financial transactions.
Management is responsible for providing timely and accurate financial information. Since the City has expended over $750,000 of expenditures of federal awards, Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Aware (“Uniform Guidance”), states the City is required to submit the Data Collection Form and the reporting package to the Federal Audit Clearinghouse and the State Controller’s Office, which include the Basic Financial Statements of the City, within the earlier of 30 days after receipt of auditor’s report, or nine months after the end of the audit period.
Condition:
During the year ended June 30, 2023, the City reported several corrections impacting the Net Position and Fund Balances:
1. The Governmental Activities Net Position was adjusted by $(34,536,104) due to corrections on unavailable revenue and unearned revenue.
2. The Special Revenue Fund Balance was adjusted by $(38,524,453) due to corrections on unavailable revenue, unearned revenue, and revenue recognition.
3. The Other Governmental Fund Balance was adjusted by $621,346 due to corrections on revenue recognition.
During the audit, we noted stale receivables and payables to be reconciled from the subsidiary ledgers to the general ledgers.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
12 Section II – Financial Statements Findings (Continued)
A. Current Year Findings– Financial Statement Findings (Continued)
2023-001 – Internal Control Over Financial Reportin g – Prior Year Adjustments, Year-End Closing, Reconciliation, and Delay in Issuance of the Single Audit (Continued)
Condition (Continued):
The City has experienced significant delays in the pr eparation and issuance of the Single Audit required under Uniform Guidance. Due to the delay in issuance of the Single Audit report, the Data Collection Form was not submitted timely.
Cause:
There is no formal process in place to conduct periodic review and reconciliation of the grant revenue between advance funding grants and reimbursement grants. Furthermore, detailed review and reconciliation of the general ledger balances from the old financial system (HTE) to the current financial system (MUNIS) is incomplete.
Context and Effect:
A prior period adjustment is reported as noted in th e Condition. Without further reviewing and reconciling the time of the transition from the old financial system to the Munis, stale receivables and payables could result in material misstatement of the financial statements.
The City is neither in compliance with Uniform Guidance nor is it meeting its current demands for external financial reporting.
Recommendation:
We recommend the City evaluate its staff size for Finance Division. We also recommend the City update and follow its policy to review and reconcile the unavailable revenue related to grants. The policy and procedures should also include the year-end closing procedures and the accounts to be reconciled in accordance with Governmental Accounting Standards Board Statements and provide training to staff to properly perform the reconciliation and closing.
In addition, the policy and procedures should include critical due dates and develop a listing of assignment, including department coordinated items, based on available resources to meet those due dates.
Views of Responsible Officials:
Management concurs with the finding.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
13 Section II – Financial Statements Findings (Continued)
A. Current Year Findings– Financial Statement Findings (Continued)
2023-002 – Internal Control Over Preparation of Schedule of Expenditures of Federal Awards
Criteria:
2 CFR 200.302(b)(1) states that the nonfederal entity must identify in its accounts all federal awards received and expended, as well as the federal programs under which they were received. Federal program and award identification must include, as applicable, the assistance listing title and number, the federal award identification number and year, the name of the federal agency, and the name of the pass-through entity, if any. This information enables the auditee to reconcile amounts presented in the financial statements to related amounts in the schedule of expenditures of federal awards.
Pursuant to Code of Federal Regulation §200.510 Financial statements:
All auditees must:
(a) Financial statements. The auditee must prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The financial statements must be for the same organizational unit and fiscal year that is chosen to meet the requirements of this part. However, non-Federal entity-wide financial statemen ts may also include departments, agencies, and other organizational units that have separate audits in accordance with § 200.514(a) and prepare separate financial statements.
(b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's fina ncial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended.
While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must:
(1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. For example, the National Institutes of Health is a major subdivision in the Department of Health and Human Services.
(2) Provide total Federal awards expended for each individual Federal program and the assistance listing number or other identifying number when the assistance listing number information is not available. For a cluster of programs also provide the total for the cluster.
Pursuant to Code of Federal Regulation §200.514 Scope of audit:
The auditor must determine whether the financial statements of the auditee are presented fairly in all material respects in accordance with generally accepted accounting principles. The auditor must also determine whether the schedule of expenditures of Federal awards is stated fa irly in all material respects in relation to the auditee's financial statements as a whole.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
14 Section II – Financial Statements Findings (Continued)
A. Current Year Findings– Financial Statement Findings (Continued)
2023-002 – Internal Control Over Preparation of Schedule of Expenditures of Federal Awards (Continued)
Condition:
During the audit, the City provided multiple rounds of revisions to the Schedule of Expenditures of Federal Awards (“Schedule”), which impacted the major program determination and the type A and type B threshold calculation.
During our review of the Schedule provided by th e City, we noted the Homekey Program Round 1, passed through the State of California in the amount of $2,779,929 was excluded from the Schedule in the previous years.
Cause:
There was insufficient communication between the Finance Division and project managers overseeing the federal programs and inadequate training to correctly identify funding sources.
Context and Effect:
With a vacancy in the grants department and the receipt of unprecedented COVID relief pass-through funding, the departments faced challenges due to insufficient knowledge of proper reporting processes. The multiple rounds of revisions to the Schedule could potentially impact the determination on the major programs to be tested and also lead to the wrong determination.
Recommendation:
We recommend frequent communication between the Finance Division and other departments in identifying federal programs. In addition, we recommend the City provide more training to both grant management staff and finance staff to enhance the skill in identifying pass th rough programs and ensure the accuracy and completeness of the Schedule.
Views of Responsible Officials:
Management concurs with the finding.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
15 Section II – Financial Statements Findings (Continued)
B. Prior Year Findings – Financial Statement Findings
2022-001 – Internal Control Over Financial Reportin g – Prior Year Adjustments, Year-End Closing, Reconciliation, and Delay in Issuance of the Single Audit
Condition:
During the year ended June 30, 2023, the Successor Agency to the Redevelopment Agency reported a correction of cash with fiscal agent in the amount of $1,868,468 and the adjustment resulted in the net position restatement from $(59,008,834) to $(60,877,302).
During the audit, we noted stale receivable and payable to be reconciled from the subsidiary ledgers to the general ledgers.
The City has experienced significant delays in the pr eparation and issuance of the Single Audit required under Uniform Guidance. Due to the delay in issuance of the Single Audit report, the Data Collection Form is not submitted timely.
Recommendation:
We recommend the City evaluate its staff size for Finance Division. We also recommend the City update and follow its policy to review and reconcile the general le dger. The policy and procedures should also include the year-end closing procedures and the accounts to be reconciled in accordance with Governmental Accounting Standards Board Statements and provide training to staff to properly perform the reconciliation and closing.
In addition, the policy and procedures should include critical due dates and develop a listing of assignment, including department coordinated items, based on available resources to meet those due dates.
Status:
This finding is still applicable for the year ended June 30, 2023 See current year finding 2023-001.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
16 Section II – Financial Statements Findings (Continued)
B. Prior Year Findings – Financial Statement Findings (Continued)
2022-002 – Internal Control Over Preparation of Schedule of Expenditures of Federal Awards
Condition:
During our review of the Schedule of Expenditures of Federal Awards (“Schedule”) provided by the City, we noted the Emergency Rental Assistance Program, passed through the State of California in the amount of $18,614,118 were excluded in the Schedule.
During the audit, there were multiple rounds of revisions to the Schedule that were provided by the City. Included in the revision was the Federal related expenditures for the American Rescue Plan Act, that passed through the California State Water Resource Control Board, in the amount of $3,599,667, which was initially excluded from the Schedule.
Recommendation:
We recommend frequent communication between the Finance Division and other departments in identifying federal programs. In addition, we recommend the City provide more training to both grant management staff and finance staff to enhance the skill in identifying pass th rough programs and ensure the accuracy and completeness of the Schedule.
Status:
This finding is still applicable for the year ended June 30, 2023 See current year finding 2023-002.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
17 Section III – Federal Awards Finding and Questioned Costs
A. Current Year Findings and Questioned Costs – Major Federal Award Program Audit
2023-003 – Allowable Costs/Cost Principles – Internal Control over Payroll Expenditures
Identification of the Federal Program:
Assistance Listing Number: 14.231
Assistance Listing Title: Emergency Solutions Grant Program Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A
Federal Award Identification Number: E-20-MW-06-0026, E-21-MC-06-0026, E-22-MC-06-0026
Assistance Listing Number: 14.218
Assistance Listing Title: Community Developm ent Block Grants-Entitlement Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A
Federal Award Identification Number: B-20-MW-06-0026, B-21-MC-06-0026, B-22-MC-06-0026, B-23-MC-06-0026 Program Income
Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation):
Total salaries charged to Federal awards (including extra service pay) are subject to the Standards of Documentation as described by 2 CFR §200.430(i). Per this section, salaries and wages charged to Federal awards must be based on records that accurately reflect the work performed. These records must:
Be incorporated into the organization’s official records;
Reasonably reflect the total activity for which the employee is compensating across all grant related and non-grant related activities (100% effort);
Support the distribution of employee salary across multiple activities or cost objectives (for example, effort spent on multiple federal awards, spent on general/or administrative activities, vacation, sick leave, leave without pay, etc.); and
Utilize an "after-the-fact" review of the employee’s actual hours worked during the reporting period for identifying and correcting significant changes (as defined by the organization’s written policies).
Condition:
Emergency Solutions Grant Program
The City was unable to locate and provide the timesheets for (2) out of eleven (11) samples tested with Payroll Cost allocated to the Program. Within the overall population of a hundred and five (105) lines of ESG and ESG- CV payroll charges, the City also had four (4) unsupported employee benefits charged to the program has benefit charged to program.
Community Development Block Grants-Entitlement Grants Cluster Payroll costs for eighteen (18) out of forty (40) samples tested were allocated to programs were not supported by approved time samples or updated cost allocation methods/plan, nor were they reconciled to actual time spent on the various programs.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
18 Section III – Federal Awards Finding and Questioned Costs (Continued)
A. Current Year Findings and Questioned Costs – Major Federal Award Program Audit (Continued)
2023-003 – Allowable Costs/Cost Principles – Internal Control over Payroll Expenditures (Continued)
Cause:
The City did not adhere to its established policies and procedures for verifying that employee compensation charged to federal programs was supported by contemporaneous time records or an after-the-fact distribution of actual time and effort spent on federal program activities. Additionally, a thorough review and reconciliation of payroll time entries and postings from the old financial system (HTE) to the new financial system (MUNIS) was not conducted, resulting in the failure to preserve supporting documentation, such as timesheets, during the transition process.
Effect or Potential Effect:
The City did not comply with the program’s requirements for allowable costs. There is an increased risk that employees’ compensation charged to the program may not have represented an actual time and effort expended on the program’s activities.
Questioned Costs:
None.
Context:
See condition above for the context of the finding.
Identification as a Repeat Finding, If Applicable:
Not applicable.
Recommendation:
We recommend that the City enhance its internal controls over payroll processes by implementing policies and procedures that ensure employee compensation charged to federal programs is supported by contemporaneous or after-the-fact documentation of actual time and effort spent on federal program activities.
Additionally, all
supporting documentation should be properly saved.
Views of Responsible Officials:
Management concurs with the finding.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
19 Section III – Federal Awards Finding and Questioned Costs (Continued)
A. Current Year Findings and Questioned Costs – Major Federal Award Program Audit (Continued)
2023-004 – Eligibility – Internal Control Over Eligibility
Identification of the Federal Program:
Assistance Listing Number: 21.023
Assistance Listing Title: Em ergency Rental Assistance Program Federal Agency: Department of Treasury
Pass-Through Entity: State of California Department of Finance Federal Award Identification Number: N/A
Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation):
Pursuant to the May 2023 Compliance Supplement, Eligibility:
This approach to eligibility was implemented in accordance with 15 USC 9058a, for ERA 1 in 15 USC 9058a(c)(2)(C)(ii) concerning documentation of payments to households, 15 USC 9058a(f)(2)(A) and (B) of the Act concerning signature requirements for applications and documentation required for tenants, 15 USC 9058a (k)(1) concerning area median income determinations, and 15 USC 9058a (k)(3)(A)(I) and (II) concerning eligible household determinations and attestation requirements. This treatment is further explained in the ERA FAQs; 15 USC 9058a; and the Treasury, Department of Justice and Department of Housing and Urban Development joint letter issued August 27, 2021 ( https://home.treasury.gov/system/files/136/Eviction- Moratorium-Joint-Letter.pdf).
To the extent that a grantee has established and cons istently followed its own reasonable procedures for implementing an eligibility determination process, consistent with Treasury’s guidance, it is not Treasury’s expectation that grantees should seek additional documentation from a beneficiary after the initial determination of eligibility has been completed, including for those determined to be eligible using self-attestation, categorical eligibility, or fact-specific proxies in qualifying circumstances. Testing of individual household eligibility-related documentation should be limited to material already collected by the grantee during application as much as possible to avoid imposing undue burden on households that remain at risk of housing instability.
Condition:
During our audit, we noted five (5) samples out of nine (9) samples selected for the eligibility requirement testing with internal control deficiency relate d to the income eligibility verification. The city failed to collect the zero income attestation document from applicant. The amount of income shown in documents uploaded by applicant was different from the amount shown in application/system, check box for income verification was not ticked off by supervisor though the verification was completed. However, we recalculated those five applicants’ income based on the income verification support provided and those applicants were eligible to receive the grant subsidy based on the income limit.
Cause:
The City did not have proper internal controls in place to review the process performed.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
20 Section III – Federal Awards Finding and Questioned Costs (Continued)
A. Current Year Findings and Questioned Costs – Major Federal Award Program Audit (Continued)
2023-004 – Eligibility – Internal Control Over Eligibility (Continued)
Effect or Potential Effect:
The City could potentially be out of compliance with the eligibility requirement due to the error in executing the internal control procedures.
Questioned Costs:
None.
Context:
See condition above for the context of the finding.
Identification as a Repeat Finding, If Applicable:
Yes. See prior year finding 2022-003.
Recommendation:
We recommend the City enhance its internal control by implementing policies and procedures over eligibility requirement.
Views of Responsible Officials:
Management concurs with the finding.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
21 Section III – Federal Awards Finding and Questioned Costs (Continued)
A. Current Year Findings and Questioned Costs – Major Federal Award Program Audit (Continued)
2023-005 – Reporting – Internal Control and Compliance over Reporting
Information of the Federal Program(s):
Assistance Listing Number: 14.218
Assistance Listing Title: Community Developm ent Block Grants-Entitlement Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A
Federal Award Identification Number: B-20-MW-06-0026
Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation):
The OMB Compliance Supplement requires that reports submitted to the Federal awarding agency include all activity of the reporting period, are supported by underlying accounting information and are presented in accordance with program requirements.
Pursuant to Guidance on Section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding submit, not later than 10 days after the end of each calendar quarter, a report containing:
information regarding the amount of funds received; the amount of funds obligated or expended for each project or activity; a detailed list of all such projects or activities, including a description of the project or activity; and detailed information on any subcontracts or subgrants awarded by the recipient. This report is limited to Community Development Block Grants/Entitlement Grants Cluster - COVID-19 funding and does not include other Community Development Block Grants/Entitlement Grants Cluster funds that may be used to address coronavirus. Grantees and subrecipients have reported data meeting the Section 15011 requirements at usaspending.gov. The Pandemic Response Accountability Committee (PRAC), an independent oversight committee within the Council of the Inspectors General on Integrity and Efficiency, has determined that the data reported in usaspending.gov has fulfilled these reporting requests. (“Section 15011 Report”).
Condition:
As a result of our test work, we noted that the City did not submit any of the four (4) quarterly Section 15011 Reports for the year ended June 30, 2023.
Cause:
The City was not aware of the Section 15011 CARES reporting.
Effect or Potential Effect:
Delay in filing and not filing the reports resulted in noncompliance with the compliance requirements, which can result in errors going undetected by management.
Questioned Costs:
None.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
22 Section III – Federal Awards Finding and Questioned Costs (Continued)
A. Current Year Findings and Questioned Costs – Major Federal Award Program Audit (Continued)
2023-005 – Reporting – Internal Control and Compliance over Reporting (Continued)
Context:
See condition above for the context of the finding.
Identification as a Repeat Finding, If Applicable:
Not Applicable.
Recommendation:
We recommend that the City conduct thorough research on the reports needed to be submitted and contact the grantor if there is any confusion. When a report cannot be submitted by the due date, the City should request an extension from the funding agency and maintain a record of the approval.
Views of Responsible Officials:
Management concurs with the finding.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
23 Section III – Federal Awards Finding and Questioned Costs (Continued)
A. Current Year Findings and Questioned Costs – Major Federal Award Program Audit (Continued)
2023-006 – Special Tests and Provisions – Internal Co ntrol and Compliance over Obligation, Expenditure, Payment Requirements
Identification of the Federal Program:
Assistance Listing Number: 14.231
Assistance Listing Title: Emergency Solutions Grant Program Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A
Federal Award Identification Number: E-20-MW-06-0026, E-21-MC-06-0026, E-22-MC-06-0026
Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation):
Pursuant to May 2023 Compliance Supplement, Special Tests and Provisions – Obligation, Expenditures and Payment Requirements –
Obligation-ESG. Funds allocated to metropolitan cities, ur ban counties, and territories. Within 180 days after the date that HUD signs the grant agreement (or a grant amendment for reallocation of funds) with a metropolitan city, urban county, or territory, the recipient must obligate all of the grant amount, except the amount for its administrative costs.
ESG-CV funds must be obligated by the recipient in accordance with 24 CFR 576.203(a)(1) and (2), except as provided below. The applicable period for obligating ESG-CV funds begins on the date HUD signed the recipient’s grant agreement for the first allocation of ESG-CV funds. The obligation deadlines below apply to the both the first and second allocation of ESG-CV funds. HUD is also providing further flexibility for recipients (including states and non-states) to provide additional time to identify entities that have capacity and expertise to mitigate the impacts of coronavirus, including those who have not previously or recently received ESG funding.
a. Recipients that are metropolitan cities, urban counties, or territories may have up to 240 days from the date HUD signs the grant agreement to obligate ESG-CV funds. Recipients must maintain in their program records a description of any changes the recipient implemented to identify and select new subrecipients.
Payments to Subrecipients. The recipient must pay each subrecipient for allowable costs within 30 days after receiving the subrecipient’s complete payment request. This requirement also applies to each subrecipient that is a unit of general-purpose local government (24 CFR section 576.203).
Condition:
During our audit, we noted that the ESG Grant Fund oblig ated to sub-recipients under obligation testing were outside of the obligation timeframe of 180 days in case of ESG and 240 days in case of ESG CV without further justifications.
In addition, we noted two (2) out of seven (7) samples selected for payment requirements testing were outside of 30 days window without further justifications.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
24 Section III – Federal Awards Finding and Questioned Costs (Continued)
A. Current Year Findings and Questioned Costs – Major Federal Award Program Audit (Continued)
2023-006 – Special Tests and Provisions – Internal Co ntrol and Compliance over Obligation, Expenditure, Payment Requirements (Continued)
Cause:
The City does not have formal policies and procedures in place to obligate the funds within the required timeframe nor complete the subrecipient’s payment request within 30 days. In addition, the City did not have procedures in place to timely request grantor extensions and/or document exceptions that are outside of uniform guidance.
Effect or Potential Effect:
The exceptions noted resulted in noncompliance.
Questioned Costs:
None.
Context:
See condition above for the context of the finding.
Identification as a Repeat Finding, If Applicable:
Yes. See prior year finding 2022-006.
Recommendation:
We recommended the City establish internal control procedures to monitor compliance requirements to ensure the subrecipient’s payment requests are processed timely.
Views of Responsible Officials:
Management concurs with the finding.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
25 Section III – Federal Awards Finding and Questioned Costs (Continued)
B. Prior Year Findings and Questioned Costs – Major Federal Award Program Audit
2022-003 – Eligibility – Internal Control Over Eligibility
Identification of the Federal Program:
Assistance Listing Number: 21.023
Assistance Listing Title: Emergency Rental Assistance Program Federal Agency: Department of Treasury
Pass-Through Entity: State of California Department of Finance Federal Award Identification Number: N/A
Condition:
During our audit, we noted four (4) samples out of forty (40) samples selected for the eligibility requirement testing with internal control deficiency related to the income eligibility verification The application reviewer made errors on data input and reported those applicants’ income as zero instead of the actual income provided by the applicants. However, we recalculated those four (4) applicants’ income based on the income verification support provided and those applicants were eligible to receive the grant subsidy based on the income limit.
Recommendation:
We recommend the City enhance its internal control by implementing policies and procedures over eligibility requirement.
Status:
Internal control issues on eligibility noted again during the audit for the year ended June 30, 2023. Finding carried forward. Refer to finding 2023-004.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
26 Section III – Federal Awards Finding and Questioned Costs (Continued)
B. Prior Year Findings and Questioned Costs – Major Federal Award Program Audit (Continued)
2022-004 – Procurement and Suspension, and Debarment – Internal Control over Verification Against the System for Award Management (“SAM”)
Identification of the Federal Program (s):
Assistance Listing Number: 20.205
Assistance Listing Title: Highway Planning and Construction Federal Agency: Department of Transportation
Pass-Through Entity: State of California Department of Transaction Federal Award Identification Number: Refer to the Schedule
Assistance Listing Number: 21.027
Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: Department of Treasury
Pass-Through Entity: N/A
Federal Award Identification Number: N/A
Condition:
During our audit, we noted that the City did not have documentation on verifying the vendors against the SAM to ensure that they were not suspended or debarred from federally funded purchases.
Recommendation:
We recommended the City establish internal control procedures to monitor compliance requirements to ensure the subrecipient’s payment requests are processed timely.
Status:
The finding was resolved during the year ended June 30, 2023.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
27 Section III – Federal Awards Finding and Questioned Costs (Continued)
B. Prior Year Findings and Questioned Costs – Major Federal Award Program Audit (Continued)
2022-005 – Reporting – Internal Control and Compliance over Reporting
Identification of the Federal Program:
Assistance Listing Number: 66.958
Assistance Listing Title: Water Infrastructure Finance and Innovation (WIFIA) Federal Agency: United Statements Environmental Protection Agency Pass-Through Entity: N/A
Federal Award Identification Number: N/A
Condition:
During the audit, we noted that the City was not aware of the reporting requirements from the loan agreements and only filed the Construction Reporting.
Recommendation:
We recommended the City establish internal control procedures to monitor compliance requirements to make sure the required reports are filed properly and timely.
Status:
The finding was resolved during the year ended June 30, 2023.
FINAL DRAFT 08.02.2024
ATTACHMENT A
City of Stockton
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2023
28 Section III – Federal Awards Finding and Questioned Costs (Continued) B. Prior Year Findings and Questioned Costs – Major Federal Award Program Audit (Continued) 2022-006 – Special Tests and Provisions – Internal Co ntrol and Compliance over Obligation, Expenditure, Payment Requirements
Identification of the Federal Program:
Assistance Listing Number:
14.231
Assistance Listing Title: Emergency Solutions Grant Program Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/
A
Federal Award Identification Number: E-20-MC-06-0026, E-21-MC-06-0026, E-20-MW-06-0026 Condition:
During our audit, we noted two (2) out of nine (9) samples selected for obligation testing were outside of the obligation without further justifications.
In addition, we noted three out of forty samples selected for payment requirements testing were outside of 30 days window without further justifications.
Recommendation:
We recommended the City establish internal control procedures to monitor compliance requirements to ensure the subrecipient’s payment requests are processed timely.
Status:
The City was not in compliance with obligation requirement deadlines and payment requirement deadline.
Finding carried forward into fiscal year 2023. Refer to finding 2023-006.
FINAL DRAFT 08.02.2024
ATTACHMENT A