HomeMy WebLinkAboutItem 01 Fiscal Year 2015 Federal Grant Compliance Report AGENDA ITEM SUMMARY Meeting Date: 3/28/2016
Meeting Type: Work Session
Staff Contact/Dept.: Nathan Bell/Finance Staff Phone No: 726-2364
Estimated Time: 30 Minutes
S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Financially Responsible and Stable Government
Services ITEM TITLE:
FISCAL YEAR 2015 FEDERAL GRANT COMPLIANCE REPORT
ACTION REQUESTED:
Review the City’s Fiscal Year 2015 Federal Grant Compliance Report
ISSUE STATEMENT:
In accordance with compliance requirements related to the City expending more
than $500,000 in federal awards, the City is required to complete an A-133 audit (the Single Audit). The report will be presented to the City Council at the April 4th,
2016 regular meeting on the consent calendar.
ATTACHMENTS: Attachment 1: City’s Fiscal Year 2015 Federal Grant Compliance Report
DISCUSSION/ FINANCIAL IMPACT:
Grove, Mueller & Swank, the City’s independent auditors, has completed the Single Audit for the City’s Fiscal Year 2015 and has issued their opinion thereon.
Ryan Pasquarella, of Grove, Mueller & Swank, will review the audit process, the Independent Auditor’s Reports, and the City’s Federal Grant Compliance Report
during the work session.
As a preliminary summary for the Council’s information, you may note that the
auditors found no material weaknesses or significant deficiencies in the internal
controls over financial reporting. Additionally, the auditors found no material weaknesses in compliance with the requirements for federal awards and they issued
an “unmodified opinion” on the City’s Federal Grant Compliance Report. However, the auditors found two significant deficiencies in internal control over compliance with the requirements of the City’s Community Development Block
Grant program. A significant deficiency in internal control over compliance is a deficiency that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. In addition to Mr. Pasquarella,
City staff will be present to address the audit findings.
CITY OF SPRINGFIELD, OREGON
FEDERAL GRANT
COMPLIANCE REPORT
Fiscal Year Ended June 30, 2015
Prepared by:
Finance Department
Accounting Division
Attachment 1, Page 1 of 12
Attachment 1, Page 2 of 12
475 Cottage Street NE, Suite 200, Salem, Oregon 97301
(503) 581-7788
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 To the Honorable Mayor, Members of the
City Council and the City Manager City of Springfield 225 5th Street
Springfield, Oregon 97477
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, the aggregate discretely presented component unit, each major fund, and the aggregate remaining
fund information of the City of Springfield, Oregon (the City) as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements,
and have issued our report thereon dated December 22, 2015.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances
for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of 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 material misstatement of the City’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. Given these limitations, during our audit we did not identify any deficiencies in internal
control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
3Attachment 1, Page 3 of 12
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. 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 required to be reported under Government Auditing
Standards.
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.
CERTIFIED PUBLIC ACCOUNTANTS
December 22, 2015
4Attachment 1, Page 4 of 12
475 Cottage Street NE, Suite 200, Salem, Oregon 97301
(503) 581-7788
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON
INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133
To the Honorable Mayor, Members of the City Council and the City Manager
City of Springfield
225 5th Street Springfield, Oregon 97477
Report on Compliance for Each Major Federal Program
We have audited the City of Springfield, Oregon’s (the City) compliance with the types of compliance
requirements described in the OMB Circular A-133 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, 2015. The City’s major federal programs 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 compliance with the requirements of laws, regulations, contracts, and grants
applicable to its federal programs.
Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of the City’s major federal programs based on
our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards 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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance
about whether noncompliance with the types of compliance requirements referred to above that could have a
direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we
considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City’s compliance.
Opinion on Each Major Federal Program
In our opinion, the City of Springfield, Oregon 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, 2015.
5Attachment 1, Page 5 of 12
Other Matters
The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported
in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and
questioned costs as items 2015-001 and 2015-002. Our opinion on each major federal program is not modified with respect to these matters.
The City’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
Report on Internal Control over Compliance
Management of the City is responsible for establishing and maintaining effective internal control over
compliance with the types of compliance requirements referred to above. In planning and performing our audit
of compliance, we considered the City’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that
are appropriate 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 OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance.
Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance.
A deficiency in internal control over compliance 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 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. 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.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant
deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over
compliance that we consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as items
2015-001 and 2015-002 that we consider to be significant deficiencies.
The City’s response to the internal control over compliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the auditing
procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133
We have audited the financial statements of the governmental activities, the business-type activities, each major
fund, the discretely presented component unit, and the aggregate remaining fund information of the City as of
and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated December 22, 2015, which
contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as
required by OMB Circular A-133 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 additional procedures, including
6Attachment 1, Page 6 of 12
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 expenditures of federal awards is fairly stated in all material respects in relation to the
basic financial statements as a whole.
Purpose of this Report
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 OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.
CERTIFIED PUBLIC ACCOUNTANTS
March 8, 2016
7Attachment 1, Page 7 of 12
Grant Number or FederalFederalPass-Through Expenditures
Federal Grantor/Pass-Through CFDA Entity Identifying in Fiscal Year Amount Provided
Grantor/Program Title Number Number 2014-2015 to Subrecipients
U.S. Department of Justice
Direct Programs: 2011 Justice Assistance Grant - Local 16.738 N/A 1,450$
2012 Justice Assistance Grant - Local 16.738 N/A 10,282
2013 Justice Assistance Grant - Local 16.738 N/A 16,944 2014 Justice Assistance Grant - Local 16.738 N/A 17,147
Total U.S. Department of Justice 45,823
U.S. Department of Homeland Security
Grants passed through State of Oregon:
Presidential Major Disaster Declaration FEMA 97.073 4169-DR-OR 97,093
Lane County Regional Interoperable Radio Enhancement 97.073 14-248 159,000
State Ops Center Project Participation 97.073 13-241 13,363
Total U.S. Department of Homeland Security 269,456
U.S. Department of Housing and Urban Development Direct Programs:
Community Development Block Grant 14.218 N/A 219,997 159,308$
Community Development Block Grant Program Income 14.218 N/A 113,912 City of Eugene:
HOME Investment Partnership Programs 14.239 Unknown 15,000
Total U.S. Department of Housing and Urban Development 348,909
U.S. Department of Transportation
Highway Planning and Construction Cluster
Grants passed through State of Oregon: Surface Transportation Program - Urban 20.205 Agreement No. 29760 11,106
Surface Transportation Program - Urban 20.205 Agreement No. 29458 43,131
Grants passed through Lane Council of Governments: Federal Surface Transporation Planning (STP-U) 20.205 Unknown 3,678
Federal Surface Transporation Planning (STP-U) 20.205 Unknown 21,118
Total Highway Planning and Construction Cluster 79,033
Highway Safety Cluster
Grants passed through State of Oregon:
Springfield PD Safety Belt Overtime Enforcement Grant 20.600 OP-14-45-03NNN 2,487
Total U.S. Department of Transportation 81,520
U.S. Department of the Interior
Grants passed through State of Oregon: State Historic Preservation Office 15.904 HPF OR-14-18 1,451
State Historic Preservation Office 15.904 HPF OR-12-19 70
Total U.S. Department of the Interior 1,521
Total Expenditures of Federal Awards 747,229$ 159,308$
CITY OF SPRINGFIELD, OREGON
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For The Year Ended June 30, 2015
8Attachment 1, Page 8 of 12
City of Springfield, Oregon
NOTES TO THE SCHEDULE OF EXPENDITURES OF
FEDERAL AWARDS
June 30, 2015
NOTE A – BASIS OF PRESENTATION
The accompanying schedule of expenditures of federal awards (the “Schedule”) includes the federal grant activity of the City under programs of the federal government for the year ended June 30, 2015. The
information in this Schedule is presented in accordance with the requirements of the Office of
Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations. Because the Schedule presents only a selected portion of the operations of the City, it is
not intended to and does not present the financial position, changes in net position, or cash flows of the
City.
NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-87, Cost
Principles for State, Local, and Indian Tribal Governments, wherein certain types of expenditures are not
allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent
adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identifying numbers are presented where available.
NOTE C – LOANS RECEIVABLE OUTSTANDING
The City had the following loan balances outstanding at June 30, 2015
Program Title
Federal CFDA
Number
Amount
Outstanding
Community Development Block Grant 14.218 $ 974,334
HUD HOME Grant 14.239 2,482,516
$ 3,456,850
NOTE D – LOANS PAYABLE OUTSTANDING
As of June 30, 2015, the City did not have any loan balances outstanding included in the Schedule of Expenditures of Federal Awards.
9Attachment 1, Page 9 of 12
CITY OF SPRINGFIELD, OREGON, FEDERAL GRANT COMPLIANCE REPORT
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2015
SUMMARY OF AUDITOR’S RESULTS
Financial Statements Type of auditor’s report issued: Unmodified
Internal control reporting: · Material weakness(es) identified? No · Significant deficiencies identified? None reported
Noncompliance material to financial statements noted? No
Federal Awards
Internal control over major programs: · Material weakness(es) identified? No
· Significant deficiencies identified? Yes
Type of auditor’s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with
section 510(a) of Circular A-133? Yes
Identification of major program:
CFDA Numbers Name of Federal Program or Cluster
14.218 Community Development Block Grants/Entitlement Grants
Dollar threshold used to distinguish between type A and type B programs: $300,000 Auditee qualifies as low-risk auditee? Yes
FINANCIAL STATEMENT FINDINGS
None.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Finding 2015-001 – Community Development Block Grants/Entitlement Grants (CDBG) – CFDA#14.218
– Quarterly Financial Reporting (Significant Deficiency)
Criteria: Per the compliance supplement issued annually by the Office of Budget and Management and CFR
85.41 CDBG recipients are required to submit form SF-425, Federal Financial Report quarterly. Additionally,
general requirements set forth in OMB Circular A-133 require that grantees develop and maintain procedures to ensure the accuracy and completeness of submitted reports.
Condition: The federal financial reports for the quarters ending December 31, 2014, March 31, 2015, and
June 30, 2015 were not submitted as required. Additionally, the City did not have procedures in place to verify
the accuracy of the data submitted and there was inaccurate data in the report submitted for the quarter ending September 30, 2014.
10Attachment 1, Page 10 of 12
CITY OF SPRINGFIELD, OREGON, FEDERAL GRANT COMPLIANCE REPORT
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2015
Finding 2015-001 – Community Development Block Grants/Entitlement Grants (CDBG) – CFDA#14.218
– Quarterly Financial Reporting (Significant Deficiency) (Continued)
Cause: The City experienced staff turnover in the position responsible for this grant. Procedures were not
adequately documented to ensure that the new employee was aware of these requirements nor did the City have procedures in place to verify the accuracy of reports to be submitted.
Effect: Failure to submit required reports may result in a delay of payment from HUD and/or reduction of funding in the future. There was one error found in the SF-425 report for the quarter ending September 30,
2014 that resulted in the total reported cash disbursements being overstated by approximately $83,000 and
total reported cash on hand being understated by the same amount.
Recommendation: We recommend that the City develop a tracking mechanism that provides assurance that all
required reports are submitted as required. We also recommend that the City implement controls that involve a secondary review the data before it is submitted to ensure accuracy and completeness.
Views of Responsible Official and Corrective Action Plan: The City has developed procedures to ensure the timely submission of the SF-425 quarterly report and prior to submission to HUD will process the documents
through the Finance Department to ensure accuracy of the data. The City has requested technical assistance
from HUD related to the development of policies and procedures that will address this finding.
Finding 2015-002 – Community Development Block Grants/Entitlement Grants (CDBG) – CFDA#14.218 – Subrecipient Monitoring (Significant Deficiency)
Criteria: Per OMB Circular A-133, when an entity passes federal funds to a subrecipient there are monitoring requirements that are required to be followed. Below are two of those requirements:
Award Identification: At the time of the subaward, identifying to the subrecipient the Federal award information (i.e., CFDA title and number, award name and name) and the applicable compliance requirements.
Subrecipient Audits: Ensuring that subrecipients expending $500,000 or more in Federal awards during the subrecipient’s fiscal year have met the audit requirements of OMB Circular A-133 and
that the required audits are completed within 9 months of the end of the subrecipient’s audit period.
If there are findings in the subrecipient report, the entity must issue a management decision on audit findings within 6 months after receipt of the subrecipient’s audit report, and ensure that the
subrecipient takes timely and appropriate corrective action on all audit findings.
Condition: The City passed through to subrecipients $159,308 of their overall $333,909 CDBG federal
expenditures. 2 out of the 2 contracts that were sampled did not contain the appropriate award identification. The contracts included language referencing requirements of CDBG funding however the contract did not
specify that the City considered them a subrecipient nor did the contract contain the CFDA number.
During the application process for subrecipients they are required to submit an audited financial statement (if
they are required to have an audit). The City did not request subsequent audit reports from their subrecipients
to determine that audits were conducted (when required). Projects generally span multiple years and as such the report submitted with the application is usually a few years old when the project is completed.
Cause: The City experienced staff turnover in the position responsible for this grant. Procedures were not adequately documented to ensure that the new employee was aware of these requirements.
11Attachment 1, Page 11 of 12
CITY OF SPRINGFIELD, OREGON, FEDERAL GRANT COMPLIANCE REPORT
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2015
Finding 2015-002 – Community Development Block Grants/Entitlement Grants (CDBG) – CFDA#14.218
– Subrecipient Monitoring (Significant Deficiency) (Continued)
Effect: Failure to properly identify the award information at the time of the contract could lead to inaccurate
reporting by the subrecipient. Subrecipients could have findings in their audit reports that the City is unaware of if the reports are not submitted.
Recommendation: We recommend that the City develop a tracking mechanism that provides assurance that audit reports are received annually for all subrecipients (if required). We also recommend that all contracts
with subrecipients contain the appropriate award identification.
Views of Responsible Official and Corrective Action Plan: The City has requested technical assistance from
HUD related to the development of policies and procedures that will address this finding. As part of this
technical assistance, City staff will work with HUD to develop the necessary internal tracking mechanisms to ensure that required audit reports are received annually for all subrecipients (when required) and that contract
documents contain needed language.
12Attachment 1, Page 12 of 12