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HomeMy WebLinkAboutReso 63-2024 (24-413)Page 1 of 2 SINGLE AUDIT FOR THE YEAR ENDED JUNE 30, 2023 CORRECTIVE ACTION PLAN FINANCIAL STATEMENT FINDINGS - CURRENT YEAR There were no financial statement findings in the current year. FEDERAL AWARD FINDINGS - CURRENT YEAR Finding Reference Number: SA 2023-001 Cash Management Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grant COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0042 COVID-19 - B-20-MW-06-0042 CDBG Daly City Pass Through # Not Available Name of Pass-through Entity: City of Daly City x Fiscal Year of Initial Finding: 2023 x Name(s) of the contact person: Karen Chang, Finance Director/Nell Selander ECD Director x Corrective Action Plan: The Finance and Economic & Community Development Departments (ECD) are working collaboratively to ensure timely drawdowns moving forward. Over the past year, substantial improvements have been made to standard contracts with grantees, as well as the City’s CDBG Policies & Procedures Manual. Finance and ECD are working together to implement changes to the City’s policies to facilitate more timely drawdowns. While staff turnover and training has delayed this, the City is on-track to meet timeliness deadlines as defined by HUD. x Anticipated Completion Date: July 1, 2024 Page 2 of 2 Finding Reference Number: SA2023-002 - Federal Funding Accountability and Transparency Act (FFATA) Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grant COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0042 COVID-19 - B-20-MW-06-0042 CDBG Daly City Pass Through # Not Available Name of Pass-through Entity: City of Daly City x Fiscal Year of Initial Finding: 2022 x Name(s) of the contact person: Karen Chang, Finance Director/Nell Selander ECD Director x Corrective Action Plan: The City was made aware of this finding during last year’s audit. While it was the City’s intention to implement and correct this finding during FY 2022-23, significant staff turnover in the Economic & Community Development (ECD) and Finance Departments prevented the timely completion of this task. The City has included a process for complying with the FFATA requirement in the newly approved CDBG Policies & Procedures Manual, which involves collaboration between ECD and Finance to ensure all sub-awards over $30,000, not just from the CDBG program, are entered into the FSRS system. This requirement will be met in FY 23-24. x Anticipated Completion Date: July 1, 2024 Page 1 of 4 SINGLE AUDIT FOR THE YEAR ENDED JUNE 30, 2023 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FINANCIAL STATEMENT FINDINGS - PRIOR YEAR Finding Reference Number: SA2022-001 - Schedule of Expenditures of Federal Awards (SEFA) Preparation Assistance Listing Number: 14.218, 14.239, 20.205 Assistance Listing Title: Community Development Block Grant/Entitlement Grants (CDBG) COVID-19 - Community Development Block Grants/Entitlement Grants- CV Home Investment Partnerships Program (HOME) Highway Planning and Construction (Federal-Aid Highway Program) Name of Federal Agency: Department of Housing and Urban Development Department of Transportation Federal Award Identification Number: B-21-MC-06-0042 COVID-19 – B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available HOME Pass Through #Not Available BPMP-5177 (039), HSIPL-5177 (043) Name of Pass-through Entity: City of Daly City, County of San Mateo, State of California Department of Transportation x Fiscal Year of Initial Findings: June 30, 2022 x Name(s) of the contact person: Karen Chang, Finance Director x Current Status: Implemented Page 2 of 4 FEDERAL AWARD FINDINGS - PRIOR YEAR Finding Reference Number: SA2022-002 - Federal Funding Accountability and Transparency Act (FFATA) Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 – B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City x Fiscal Year of Initial Finding: June 30, 2022 x Name(s) of the contact person: Karen Chang, Finance Director x Current Status: The City was made aware of this finding during last year’s audit. While it was the City’s intention to implement and correct this finding during FY 2022-23, significant staff turnover in the Economic & Community Development (ECD) and Finance Departments prevented the timely completion of this task. The City has included a process for complying with the FFATA requirement in the newly approved CDBG Policies & Procedures Manual, which involves collaboration between ECD and Finance to ensure all sub-awards over $30,000, not just from the CDBG program, are entered into the FSRS system. This requirement will be met in FY 23-24. Finding Reference Number: SA2022-003 - Monitoring of CDBG Program Activities For Compliance with Program Rules and Regulations Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 – B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City x Fiscal Year of Initial Finding: June 30, 2022 x Name(s) of the contact person: Nell Selander, ECD Director/ Karen Chang, Finance Director x Current Status: City updated the CDBG Grant management manual and submitted formal response to HUD in June and August 2023. Based on the response from HUD on February 16, 2024, HUD reviewed and accepted City’s response as satisfactory and have closed their findings for 2023-01B & 2023-01C. Finding for 2023-01A remains open and HUD requested the City to provide additional documents to support the eligibility requirements. The City responded to HUD on March 8, 2024 to address their outstanding items under Finding 2023-01A. This item is currently under review by HUD. Page 3 of 4 Finding Reference Number: SA2022-003 - Monitoring of CDBG Program Activities For Compliance with Program Rules and Regulations (Continued) Based on the response from HUD on February 16, 2024, HUD reviewed and accepted City’s response as satisfactory and have closed their findings for 2023-02A, 2023-02C, and 2023-02D. The finding for 2023-02B remains open pending clarification regarding the invoice date against a particular grant year. The City responded to HUD on March 8, 2024 to address their outstanding items under Finding 2023-01A. This item is currently under review by HUD. Based on the response from HUD on February 16, 2024, HUD reviewed and accepted City’s response as satisfactory and have closed their findings for 2023-03. Finding Reference Number: SA2022-004 - Financial Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 – B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City x Fiscal Year of Initial Finding: June 30, 2022 x Name(s) of the contact person: Karen Chang, Finance Director and Nell Selander, ECD Director x Current Status: Implemented, for all except the 15011 report. However, it does not appear that separate reporting is required by HUD to comply with the 15011 reporting requirements for the year ended June 30, 2023. Therefore, this finding is considered implemented. Finding Reference Number: SA2022-005 - Cash Management – Draw Down of Community Development Block Grant Funds in Advance of Expenditures Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 – B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City x Fiscal Year of Initial Finding: June 30, 2022 x Name(s) of the contact person: Karen Chang, Finance Director x Current Status: Implemented Page 4 of 4 Finding Reference Number: SA2022-006 - Subrecipient Monitoring Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Federal Award Identification Number: EES4XJFTXC28 x Fiscal Year of Initial Finding: June 30, 2022 x Name(s) of the contact person: Karen Chang, Finance Director x Current Status: Implemented CITY OF SOUTH SAN FRANCISCO SINGLE AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 2023 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO SINGLE AUDIT REPORT For The Year Ended June 30, 2023 TABLE OF CONTENTS Page Schedule of Findings and Questioned Costs .............................................................................. 1 Section I – Summary of Auditor’s Results ......................................................................... 1 Section II – Financial Statement Findings .......................................................................... 2 Section III – Federal Award Findings and Questioned Costs ............................................. 2 Schedule of Expenditures of Federal Awards ............................................................................ 5 Notes to the Schedule of Expenditures of Federal Awards ....................................................... 7 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 ................... 9 Independent Auditor's Report on Compliance for Each Major Program and on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance .......................... 11 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended June 30, 2023 SECTION I – SUMMARY OF AUDITOR’S RESULTS SECTION I—SUMMARY OF AUDITOR’S RESULTS Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP Unmodified Internal control over financial reporting: •Material weakness(es) identified?Yes X No •Significant deficiency(ies) identified?Yes X None Reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major federal programs: •Material weakness(es) identified?Yes X No •Significant deficiency(ies) identified? X Yes None Reported Type of auditor’s 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)? X Yes No Identification of major program(s): Assistance Listing Number(s) Name of Federal Program or Cluster 14.218 CDBG - Entitlement Grants Cluster Community Development Block Grants/Entitlement Grants COVID-19 - Community Development Block Grants/Entitlement Grants- CV 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Fund Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low-risk auditee? Yes X No 1 SECTION II – FINANCIAL STATEMENT FINDINGS Our audit did not disclose any significant deficiencies, material weaknesses or instances of noncompliance material to the basic financial statements. We have also issued a separate Memorandum on Internal Control dated December 27, 2023, which is an integral part of our audits and should be read in conjunction with this report. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Our audit disclosed the following findings and questioned costs required to be reported in accordance with Uniform Guidance. Finding Reference Number: SA 2023-001 Cash Management Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grant COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0042 COVID-19 - B-20-MW-06-0042 CDBG Daly City Pass Through # Not Available Name of Pass-through Entity: City of Daly City Criteria: :24 CFR 570.902 indicates that the Department of Housing and Urban Development will review the performance of each entitlement, HUD-administered small cities, and Insular Areas recipient to determine whether each recipient is carrying out its CDBG-assisted activities in a timely manner. One of the factors in determining timeliness is the timing of the use of entitlement grant funds and the amount of undisbursed entitlement grant funds that remain in the Integrated Disbursement Information System (IDIS). Therefore, the City should submit drawdown requests in the IDIS system throughout the fiscal year as costs are incurred. Those drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. Condition: During our testing of CDBG grant drawdown requests during fiscal year 2023, we noted that a drawdown made in February 2023 was for September 2022 expenditures and an August 2023 drawdown was for February 2023 expenditures. The City submitted the drawdown requests in the IDIS well over three months after the program expenditures were incurred. We also noted that the City did not submit a drawdown for fiscal year 2023 for program expenditures we tested totaling $121,242. Effect: The City is not matching expenditures with associated revenues throughout the fiscal year as expenditures are incurred and is at risk of being out of compliance with the provisions of 24 CFR 570.902. Cause: We understand that the drawdowns were delayed due to staff turnover. Recommendation: The City should develop procedures to ensure that drawdown requests are submitted more frequently, at least on a quarterly basis, and should requests reimbursement for the program expenditures noted above as soon as possible. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City. 2 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) Finding Reference Number: SA2023-002 - Federal Funding Accountability and Transparency Act (FFATA) Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant – Entitlement Grant COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-22-MC-06-0042 COVID-19 - B-20-MW-06-0042 CDBG Daly City Pass Through # Not Available Name of Pass-through Entity: City of Daly City Criteria: Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252 that are codified in 2 CFR Part 170, direct recipients of grants are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Subawards that are entered into the FSRS System should be maintained so that any amendments to the subawards are also reflected in the system. Condition: We selected two of the City’s subawards for testing of the reporting on the FSRS. The two subawards selected were both more than $30,000. City staff was not able to provide documentation that the subawards were reported in the FSRS. Cause: We understand that the FFATA reporting was not completed due to staff turnover. Effect: The City is not in compliance with the FFATA reporting requirements. Identification as a repeat finding: Yes, since 2022 Recommendation: The City should review all first-tier subaward agreements of $30,000 or more to ensure that FFATA reporting is completed. In addition, the City should develop procedures to ensure that FFATA reporting is accurate at all times and reflects any contract amendments and final subaward funding amounts. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City. 3 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Fiscal Year Ended June 30, 2023 Federal Assistance Pass-Through Pass-Through Federal Grantor/ Listing Identifying To Federal Pass-Through Grantor/Program or Cluster Title Number Number Subrecipients Expenditures Department of Housing and Urban Development Direct Program: CDBG - Entitlement Grants Cluster Community Development Block Grants/Entitlement Grants 14.218 $90,133 $318,921 COVID-19 - Community Development Block Grant/Entitlement Grants-CV 14.218 70,744 95,922 Pass-Through Program From: City of Daly City Community Development Block Grants/Entitlement Grants 14.218 Not Available 6,943 Program Subtotal 160,877 421,786 Pass-Through Program From: County of San Mateo Home Investment Partnerships Program 14.239 Not Available 15,460 Total Department of Housing and Urban Development 160,877 437,246 Department of Agriculture Pass-Through Program From: California Department of Education Child and Adult Care Food Program (CACFP) 10.558 Not Available 20,978 Department of Commerce - Economic Development Administration Direct Program Economic Development Cluster: Economic Adjustment Assistance 11.307 276,125 Department of Justice Direct Program: Equitable Sharing Program - Narcotics Task Force 16.922 128,438 Department of Labor Direct Program: Community Project Funding / Congressionally Directed Spending Economic Advancement Center - Workforce Development 17.289 38,788 Department of Transportation Pass Through Program From: California State Department of Transportation Highway Planning and Construction (Federal-Aid Highway Program) Grand Blvd Project Phase 3 20.205 CML-5177 (040) 141,545 Commercial and Spruce Signalized Intersection 20.205 HSIPL-5177 (041) 55,197 Pedestrian Improvements, 3 Intersections 20.205 HSIPL-5177 (043) 18,401 E101 Transit Shelter and Bulb Turnout 20.205 CRRSAL-5177 (047) 5,467 Program Subtotal 220,610 California Office of Traffic Safety Highway Safety Cluster: State and Community Highway Safety FY 2022/23 OTS STEP Grant 20.600 PT23180 55,523 Total Department of Transportation 276,133 Department of the Treasury Direct Program Equitable Sharing Program Narcotics Task Force - Asset Forfeiture Fund 21.016 237,555 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds 21.027 1,995,741 Total Department of Treasury 2,233,296 Department of Aging Pass-Through Program From: County of San Mateo Aging Cluster: Special Programs for the Aging - Title III, Part B - Grants for Supportive Services and Senior Centers Adult Day Care 93.044 57000-FY23-R078984J 33,007 Transportation 93.044 57000-FY23-R078984J 11,068 Special Programs for the Aging, Title III, Part C, Nutrition Services Congregate Nutrition 93.045 57000-FY23-R078984J 25,000 Total Department of Aging 69,075 (Continued) 5 CITY OF SOUTH SAN FRANCISCO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Fiscal Year Ended June 30, 2023 Federal Assistance Pass-Through Pass-Through Federal Grantor/ Listing Identifying To Federal Pass-Through Grantor/Program or Cluster Title Number Number Subrecipients Expenditures Department of Homeland Security Pass-Through Program From: City and County of San Francisco Homeland Security Grant Program Urban Area Security Initiative USAR Response Vehicle Equipment Upgrades 97.067 FY 2021 UASI - SSFFD 19,969 Total Expenditures of Federal Awards $160,877 $3,500,048 California Department of Aging GrantAward (Non-Federal) OAA Title III C1 CongregateNutrition 57000-FY23-R078984J $5,000 See Accompanying Notes to Schedule of Expenditures of Federal Awards and California Department of Aging Award 6 CITY OF SOUTH SAN FRANCISCO NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND CALIFORNIA DEPARTMENT OF AGING AWARD For the Year Ended June 30, 2023 NOTE 1 – REPORTING ENTITY The Schedule of Expenditure of Federal Awards (the Schedule) includes expenditures of federal awards for the City of South San Francisco, California, and its component units as disclosed in the notes to the Basic Financial Statements, except for federal awards of the South San Francisco Conference Center Authority (Authority). Federal awards expended by this entity, if any, are excluded from the Schedule and are subject to a separate Single Audit performed by other auditors. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements, regardless of the measurement focus applied. The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. The proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Expenditures of Federal Awards reported on the Schedule are recognized when incurred. NOTE 3 – INDIRECT COST ELECTION The City has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. NOTE 4 – CALIFORNIA DEPARTMENT OF AGING FUNDED EXPENDITURES During the fiscal year ended June 30, 2023, the City received the following grant from the State of California Department of Aging: State Funded Expenditures Title III C1 - Congregate Nutrition State #57000-FY23-R078984J $5,000 7 This Page Left Intentionally Blank 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 Members of the City Council City of South San Francisco, 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, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of South San Francisco 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 December 27, 2023. Our report includes a reference to other auditors who audited the financial statements of the South San Francisco Conference Center Authority, as described in our report on the City’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Our report also included an emphasis of a matter paragraph disclosing the implementation of new accounting principles. 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 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 or significant deficiencies may exist that were not identified. 9 Report on 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 financial 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 required to be reported under Government Auditing Standards. We have also issued a separate Memorandum on Internal Control dated December 27, 2023, which is an integral part of our audit and should be read in conjunction with this report. 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. Pleasant Hill, California March 28, 2024 10 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE To the Honorable Members of the City Council City of South San Francisco, California Report on Compliance for Each Major Federal Program Opinion on Each Major Federal Program We have audited South San Francisco’s 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 auditor’s results section of the accompanying Schedule of Findings and Questioned Costs. The City of South San Francisco's basic financial statements include the operations of the South San Francisco Conference Center Authority, which received no federal awards during the year ended June 30, 2023. Our audit, described below, did not include the operations of the Authority, because the Authority engaged other auditors to perform an audit of compliance. In our opinion, the City complied, in all material respects, with the 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 auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States (Government Auditing Standards); and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the 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 the City’s compliance with the compliance requirements referred to above. 11 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 the City’s federal programs. Auditor’s 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 the 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 GAAS, 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 requirements 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 the City’s compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with GAAS, 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 the City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. •Obtain an understanding of the 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 the 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 SA2023-001 and SA2023-002. Our opinion on each major federal program is not modified with respect to these matters. Government Auditing Standards require the auditor to perform limited procedures on the City’s response to the noncompliance 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. 12 Report on Internal Control Over Compliance Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s 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 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, as discussed below, we did identify certain deficiencies in internal control over compliance that we consider to be significant deficiencies. 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. 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 SA2023-001 and SA2023-002, to collectively 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 require the auditor to perform limited procedures on the 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. 13 Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining funds 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 December 27, 2023, which contained an unmodified opinion on those financial statements. Our report includes a reference to other auditors who audited the discretely presented component unit financial statements of the South San Francisco Conference Center Authority, as of and for the year ended June 30, 2023, as described in our report on the City’s financial statements. Our report, in so far as it relates to the results of the other auditors, is based solely on the report of the other auditors. 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 the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying 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 basic financial statements and certain additional 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 expenditures of federal awards is fairly stated, in all material respects in relation to the basic financial statements as a whole. Pleasant Hill, California March 28, 2024 14