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ACCEPT THE SINGLE AUDIT AND INDEPENDENT AUDITORS’ REPORTS AND THE REPORT ON INTERNAL CONTROLS FOR THE YEAR ENDED JUNE 30, 2020
recommended action
RECOMMENDATION
It is recommended that the City Council accept by motion the Single Audit and Independent Auditors’ Reports and the Report on Internal Control Related Matters Identified in the Audit for the year ended June 30, 2020.
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Summary
Presented for the City Council’s review is the City of Stockton’s Single Audit and Independent Auditors’ Reports (Attachment A) for the year ended June 30, 2020. On April 5, 2021, the Audit Committee received, reviewed, and accepted these audit reports. The Single Audit report identifies two (2) new findings or questioned costs. Staff recommends that Council adopt the motion as proposed.
DISCUSSION
Background
Single Audit
The Single Audit and Independent Auditors’ Reports (Attachment A) is an annual audit of federal awards or pass-through of federal awards to the City. The City’s expenditures of federal awards in Fiscal Year 2019-20 totaled $14.9 million. The Single Audit report identifies two (2) new findings or questioned costs; 2020-001 and 2020-002.
2020-001 Internal Control Over Preparation of Schedule of Expenditures of Federal Awards (SEFA) Information on the Federal Programs
Condition:
Several grants did not have accurate expenditure total respective to each grant award number as expenditures showed more than the grant received total. It was recommended that the City implement procedures to ensure that complete and accurate information of each grant is reported on the SEFA prepared by the City.
City’s Corrective Actions:
Time constraints prevented the Finance Division from being able to assemble the federal expenditures in time for the audit that make up the SEFA. Staff will compile the federal expenditures for submittal.
Housing Division procedures: The SEFA expenditures are reconciled against the staff’s expenditure tracking sheet as they are accrued and as reflected in IDIS. Economic Development Department (EDD) Administrative Analyst II will track and submit information to Finance Department for SEFA purposes. This will be implemented for the FY20-21 audit.
2020-002 Reporting - Internal Controls and Compliance over Reporting
Condition:
With respect to the CDBG Neighborhood Stabilization Program (NSP) awards, the City did not submit the required Quarterly Performance Report, Disaster Recovery Grant Reporting (DRGR), that is due each quarter for the fiscal year quarter 3 (January 2020 to March 2020) and for the fiscal year quarter 4 (April 2020 to June 2020). It is recommended that the City implement procedures to ensure timely filing of required Quarterly Performance Report for NSP 1 and 3 program.
City’s Corrective Actions:
City’s DRGR report was submitted late due to the DRGR portal not accepting the quarterly report. Staff was notified that until the U.S. Department of Housing and Urban Development (HUD) completed and reviewed the City’s Annual Action Plan the NSP Quarter report could not be submitted/uploaded for review. Upon approval of the Annual Action Plan by the HUD the DRGR report was submitted and accepted. Economic Development Department (EDD) Administrative Analyst II will follow up with HUD to ensure timely submission. This will be implemented for the FY20-21 audit.
Internal Control Related Matters
The Report on Internal Controls provides a review of the City’s financial reporting systems and procedures that are used to ensure accurate financial statements. An internal control is designed to provide reasonable assurance that the City meets its objectives regarding the reliability of financial reporting, effectiveness, and efficiency of operations and compliance with applicable laws and regulations. The auditor considers the City’s internal control over financial reporting during the design of audit procedures for financial statements. The auditors do not express any opinion on the effectiveness of the City’s internal controls.
The auditors had no new findings in the report for the year ended June 30, 2020.
FINANCIAL SUMMARY
There is no financial impact associated with accepting this item.
Attachment A - 2020 Single Audit and Independent Auditors’ Reports