If you have any questions, please contact Todd Bouey of Financial Analysis and Reporting at (213)

Transcription

1 RON GALPER!N CONTROLLER Honorable Members of the City Council City of Los Angeles, California Dear Honorable Members: SUBJECT: FISCAL YEAR SINGLE AUDIT REPORT Under the City Charter, the City Council is responsible for arranging for and determining the scope of the annual financial statement audit. Attached to this transmittal are four copies of the fiscal year audited Single Audit Report. The report is based on the results of an audit conducted by Simpson and Simpson, a firm of independent certified public accountants. Other audited reports, such as the financial statements for the Municipal Improvement Corporation of Los Angeles and the Cost Allocation Plan will be forwarded to the City Council as they are completed. If you have any questions, please contact Todd Bouey of Financial Analysis and Reporting at (213) Sincerely, ~~ CLAIRE BARTELS Chief Deputy Controller Attachments 200 N, MAIN STREET, SUITE 300, LOS ANGELES, CA (213) CONTROLLER.LACITY.ORG AN EQUAL EMPLOYMENT OPPORTUNITY - AFFIRMATIVE ACTION EMPLOYER

2 u.s. BANK rower 633 WLST 5TH STIUT:l; SUITE 3320 LOS ANGELES, CA (213) TELEPHONE (213) FAX SIMPSON &. SIMPSON CERTIf'II]) PUf}UC ACCOUNT1\NTS i'oi.ln!)inc, I'ARTNERS BftA!NARD C. SIMPSON, CPr\ MEUlA W. SIMI)SON, CPI\ Audit and Governmental Efficiency Cornmittee Los Angeles City Council C/o City Clerk City Hall, Room North Spring Street Los Angeles, California Enclosed are four (4) bound copies of the single audit reports for the City of Los Angeles (City) for the fiscal year ended June 30, 2013 and four (4) copies of the required corrective action plan provided by the Controller's Office. We performed our audits in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, and U.S. Office of Management and Budget (OMB) Circular A-133. As indicated in our report dated January 10, 2014, we expressed unrnodified opinions on the compliance and internal control over financial reporting. As indicated in our report dated March 21, 2014, we expressed an unmodified opinion on the compliance with requirements applicable to all major programs under OMB Circular A- 133, except for Community Development Block Grant/Entitlement Grants which was qualified. If you have any questions, please contact us at (213) Sincerely, ''fa+- (oj'l~ Simpson & Simpson Enclosures: 4 cc: Todd Bouey, Controller's Office with 100 enclosures (CPA) The CPA. Never Underestimate The Value:"

3 RON GALPERIN CONTROLLER SUBJECT: ACTION PLAN FOR CITY OF LOS ANGELES SINGLE AUDIT Under the provisions of U.S. Office of Management and Budget Circular A-133, a recipient of Federal funds must prepare a Corrective Action Plan for each finding in its Single Audit Schedule of Findings and Questioned Costs. For the fiscal year Single Audit, the City of Los Angeles (City) had 14 such findings as follows: 1. Finding No Finding No Finding No Finding No Finding No Finding No Finding No Finding No Finding No Noncompliance with Activities Allowed and Unallowed Requirement (Material Noncompliance) Noncompliance with Earmarking Requirement (Noncompliance and Significant Deficiency) Noncompliance with Reporting Requirement (Material Noncompliance and Material Weakness) Noncompliance with Reporting Requirement (Noncompliance and Significant Deficiency) Noncompliance with Reporting Requirement (Noncompliance and Significant Deficiency) Noncompliance with Reporting Requirement (Noncompliance and Significant Deficiency) Noncompliance with Subrecipient Monitoring Requirement Noncompliance with Special Tests and Provisions (Noncompliance and Significant Deficiency) Noncompliance with Allowable Costs/Cost Principles Requirement 200 N. MAIN STREET, SUITE 300, LOS ANGELES, CA (213) CONTROLLER.LACITY.ORG AN EQUAL. EMPLOYMENT OPPORTUNITY - AFFIRMATIVE ACTION EMPLOYER

4 March 28,2014 Page 2 of Finding No Noncompliance with Subrecipient Monitoring Requirement (Noncompliance) 11. Finding No Noncompliance with Eligibility Requirement (Noncompliance and Significant Deficiency) 12. Finding No Noncompliance with Eligibility Requirement (Noncompliance and Significant Deficiency) 13. Finding No Noncompliance with Period of Availability Requirement 14. Finding No Noncompliance with Period of Availability Requirement Each City department is responsible for the operation of all programs in its assigned responsibilities including Federal programs. Under City Charter Section 362, the City Council has the responsibility of determining the extent of the City audit and contracting with an independent auditor to perform said audit. For this purpose, the City Council created an audit committee. The City Controller is the Chair of the Audit Committee and is responsible to ensure that the audit is completed. All audit reports, including the Single Audit and this Corrective Action Plan, are filed with the City Council. The, Economic and Workforce Development Department, Police Department and the Mayor's Office prepared their respective Corrective Actions Plans. The plans include proposed corrective action, anticipated completion date, and the name and telephone number(s) of the persons(s) to contact. The Single Audit is considered part of the City Charter's audit requirements. As such, the Single Audit Reporting package (Single Audit Reports, Findings, and Corrective Action Plan), will be submitted to the City Council and its Audits and Governmental Efficiency Committee.

5 Page 3 of 17 If readers of the plans have questions with respect to the process, or if we can be of assistance, please contact Sally Rocio in the Office of the City Controller at (213) If readers have questions about the proposed corrective actions, please contact the concerned individuals named in the attached plan. Sincerely, C1~bcdh CLAIRE BARTELS Chief Deputy Controller cc: The Honorable Eric Garcetti, Mayor Audits and Governmental Efficiency Committee Jan C. Perry, General Manager, Economic and Workforce Development Department Rushmore Cervantes, Interim General Manager, Housing and Community Investment Department Charlie Beck, Chief of Police, Los Angeles Police Department

6 Page 4 of 17 ACTION PLAN Finding No Noncompliance with Activities Allowed and Unallowed Requirement (Material Noncompliance) Grant Nos.: Programs: CFDA Nos.: Department of Housing and Urban Development (HUD) N/A - Direct Award Community Development Department (CDD)/ (HCID), Effective July 1,2013 B-12-MC and B-13-MC Community Development Block Grants/Entitlement Grants (CDBG) (Cluster with CFDA No ) The U.S. Department of Housing and Urban Development (HUD) determined that: 1) the City has not provided sufficient documentation demonstrating that Community Based Development Organizations (CBDO's) activities met the requirements as eligible projects; and 2) certain CBDO's were not eligible as their board membership composition was not maintained in accordance with the required qualification. The City was directed to discontinue funding those organizations as CBDO's as of May 23, The City acquiesces to HUD's interpretation of the regulations and will use CBDO's to carry out community economic development activities that include creation and retention of permanent full-time equivalent jobs. HCID has notified the Mayor and City Council of this finding in January Several policy discussions have taken place to evaluate the impact of HUD's finding to the City's operations. April 2014 CONTACTS: Janet West, Senior Management Analyst II Telephone Number: (213) Lyndon Salvador, Departmental Chief Accountant Telephone Number: (213)

7 March 28,2014 Page 5 of 17 Finding No Noncompliance with Earmarking Requirement Grant Nos.: Programs: CFDA Nos.: Department of Housing and Urban Development (HUD) N!A - Direct Award Community Development Department (CDD) and Los Angeles Housing Department (LAHD)! (HCID), Effective July 1, 2013 Various Community Development Block Grants!Entitlement Grants (CDBG) and ARRA - Community Development Block Grants! Entitlement Grants (CDBG-R) and The City's CDBG Program Year 38 for the period April 1, 2012 through March 31,2013, actual expenditures for public service activities exceeded the 15 percent cap as defined by the grant criteria. The City is committed to adhering to the 15 percent cap policy effective in program year 39 and forward. Through written correspondences, the City has proposed to HUD to under-obligate the program year 39 funds to cover the over-obligation in program year 38. The City anticipates a response from HUD in the near future. June 2014 CONTACTS: Janet West, Senior Management Analyst II Telephone Number: (213) Lyndon Salvador, Departmental Chief Accountant Telephone Number: (213)

8 Page 6 of 17 Finding No Noncompliance with Reporting Requirement (Material Noncompliance and Material Weakness) Grant Nos.: Programs: CFDA Nos.: Department of Housing and Urban Development (HUD) N/A - Direct Award Community Development Department (CDD)/ (HCID), Effective July 1, 2013 B-11-MC and B-12-MC Community Development Block Grants/Entitlement Grants (CDBG) (Cluster with ) The City did not comply with the Federal Accountability and Transparency Act (FFATA) reporting requirement by completing FFTA Sub-award Reporting System (FSRS) for subawards to subrecipients and subcontractors. The City will submit the FFATA report for CDBG. The majority of the contracts information will be entered by June 30, June 2014 CONTACTS: Janet West, Senior Management Analyst II Telephone Number: (213) Lyndon Salvador, Departmental Chief Accountant Telephone Number: (213)

9 Page 7 of 17 Finding No Noncompliance with Reporting Requirement Grant No.: Department of Housing and Urban Development (HUD) N/A - Direct Award Community Development Department (CDD)/ (HCID)-Effective July 1, 2013 B-11-MC and B-12-MC Community Development Block Grant (CDBG) (Cluster with CFDA No ) Since the City has an approved consolidated plan for program year , it is required to submit an annual performance report to HUD for the program year. The external auditors tested the system-generated C04PR03 Summary Report (PR03) and the Grantee Performance Report (GPR) and noted that 22 out of 40 selected projects were either not submitted or not properly updated. HCID accepts this finding but would note that when compiling data for the PR03 report in May 2013, it was found that the HUD lois reporting system had a glitch that prevented entering some of the required data. City staff had notified HUD of this issue in writing and programming error was not corrected until March June 2014 CONTACTS: Janet West, Senior Management Analyst II Telephone Number: (213) Lyndon Salvador, Departmental Chief Accountant Telephone Number: (213)

10 Page 8 of 17 Finding No Noncompliance with Reporting Requirement Grant No.: Department of Housing and Urban Development (HUD) N/A - Direct Award Community Development Department (CDD)/ (HCID)-Effective July 1,2013 B-11-MC Community Development Block Grant (CDBG) (Cluster with CFDA No ) For each HUD grant over $200,000 for housing rehabilitation, housing construction or other public construction, the City is required to submit an annual performance report titled " Section 3 Summary Report, Economic Opportunities for Low- and Very Low-Income Persons" (Section 3 Summary Report). The external auditors noted that the City did not identify and report all of its contractors and subrecipients. The City reported only the Section 3 data collected from Los Angeles Housing Department (LAHD) for construction projects. HCID will create an action plan to educate City stakeholders (Mayor's Office, DPW, ITA, Department of Recreation & Parks, and internal staff) on the Section 3 requirements and how the City's contracting process can be augmented to comply whencdbg funds are expended on public infrastructure. September 2014 CONTACTS: Janet West, Senior Management Analyst II Telephone Number: (213) Lyndon Salvador, Departmental Chief Accountant Telephone Number: (213)

11 Page 9 of 17 Finding No Noncompliance with Reporting Requirement Grant Nos.: Department of Housing and Urban Development (HUD) N/A Los Angeles Housing Department (LAHD)/ (HCID)-Effective July 1,2013 CA-H13F005, CA-H120002, and CA-H Housing Opportunity for Persons with AIDS (HOPWA) The City is required to submit an Annual Progress Report (APR) and Consolidated Annual Performance and Evaluation Report (CAPER) to HUD within 90 days after the close of the program year. The City submitted the following reports after the 90-day period: 1) the CAPER for grant no. CA-H13-F005; 2) the APR for grant no. CA-H with missing supporting documents for financial data reported in Part 3 of the APR; and 3) the APR for grant no. CA- H ended June 30, 2013, has not been submitted as of March 21, Policies and procedures will be implemented to ensure timely submission of the CAPER and APR and that supporting documents will be properly maintained. August 2014 CONTACTS: Suzette Flynn, Director, Monitoring and Technical Assistance Division Telephone Number: (213) Lyndon Salvador, Departmental Chief Accountant Telephone Number: (213)

12 March 28,2014 Page 10 of 17 Finding No Noncompliance with Subrecipient Monitoring Requirement Grant Nos.: Department of Housing and Urban Development (HUD) N/A Los Angeles Housing Department (LAHD)/ (HCID)-Effective July 1, 2013 CA-H13F005, CA-H120002, and CA-H Housing Opportunity for Persons with AIDS (HOPWA) The City performed fiscal but not program operations monitoring of subrecipient during the fiscal year Also, the City did not issue a management decision or communication relative to one subrecipient's Single Audit report finding. HCID is currently revising policies and procedures to ensure that on-site program monitoring will be performed in accordance with the federal requirements. The procedures will include the process of ensuring timely management decisions to any findings identified in subrecipients' Single Audit reports. Completion of on-site program monitoring for PY is in progress. August 2014 CONTACTS: Suzette Flynn, Director, Monitoring and Technical Assistance Division Telephone Number: (213) Lyndon Salvador, Departmental Chief Accountant Telephone Number: (213)

13 Page 11 of 17 Finding No Noncompliance with Special Tests and Provisions Grant Nos.: Department of Housing and Urban Development (HUD) N/A Los Angeles Housing Department (LAHD)/ (HCID)-Effective July 1, 2013 CA-H13F005, CA-H120002, and CA-H Housing Opportunity for Persons with AIDS (HOPWA) The City did not perform inspections to determine whether properties met the specified housing quality standards during the fiscal year. HCID is in the process of completing program monitoring for Program Year and will review habitability reports for all newly rented units. Also, HCID will ensure that (a) policies and procedures include all required HOPWA provisions, and (b) inspections are completed to determine whether the units/properties meet housing quality standards. August 2014 CONTACTS: Suzette Flynn, Director, Monitoring and Technical Assistance Division Telephone Number: (213) Lyndon Salvador, Departmental Chief Accountant Telephone Number: (213)

14 Page 12 of 17 Finding No Noncompliance with Allowable Costs/Cost Principles Requirement Grant No.: Department of Justice (DOJ) N/A - Direct Award Los Angeles Police Department (LAPD) 2012-UL-WX-0004 Public Safety Partnership and Community Policing Grants The 2012 COPS Hiring Program (CHP) required that all police officers hired must be military veterans. The external auditor noted that the post-9/11 military status of one out of 37 selected samples for testing could not be verified. The employee's salary and fringe benefits were funded by the CHP grant from employment dates from December 3, 2012 through September 24, LAPD will make an adjustment to the next invoice for salary and fringe benefits. The personnel package of any police officers hired under this program will be reviewed to verify appropriate military veteran documentation. This review process will be documented and maintained in the grant files. April 2014 CONTACT: Stella Larracas, Senior Management Los Angeles Police Department Telephone Number: (213) Analyst

15 Page 13 of 17 Finding No Noncompliance with Subrecipient Monitoring Requirement (Noncompliance) Grant No.: Department of Justice (DOJ) California Emergency Management Agency (Cal EMA) Los Angeles Police Department (LAPD) ZH ARRA - Recovery Act - Edward Byrne Memorial JAG Program/Grants to States and Territories The City's documentation demonstrating compliance with subrecipient monitoring requirement was not available. Whereas it required the lone subrecipient to submit quarterly reports, it was unable to provide copies of the quarterly reports received and evidence of review of those reports. LAPD will establish monitoring procedures to provide guidance for desk and on-site reviews. This will be in addition to the current practice of regular desk reviews of invoices and supporting documentation, communication with the subrecipient regarding expenditure status, any contractual issues and budgetary modifications; review by LAPD program staff of the contractor's quarterly performance reports to ensure that the subrecipient is meeting their goals and objectives. May 2014 CONTACT: Stella Larracas, Senior Management Analyst Los Angeles Police Department Telephone Number: (213)

16 Page 14 of 17 Finding No Noncompliance with Eligibility Requirement Grant/Pass-through Nos.: Department of Labor (DOL) California Employment Development Department (EDD) Community Development Department (CDD)/ Economic and Workforce Development Department (EWDD)- Effective July 1, 2013 K282478, K386300, and K Workforce Investment Act (WIA) Youth Activities (Cluster with CFDA Nos , , and ) The external auditor noted that one out of 60 selected participants for eligibility testing did not have supporting documentation on file to verify compliance with the Selective Service registration requirements under the Military Selective Service Act and five participants registered with Selective Service after enrollment date. EWDD is drafting a new Selective Service (SS) Registration policy for staff to verify that adult male participants ages are in compliance with the SS requirements at initial participation. Also, the policy will require staff to confirm registration within SS enrollment date after male participants turn age 18. Participants who refuse to register will be suspended from the program. This language will be included in subsequent agreement and amendments to existing agreements. June 2014 CONTACT: Catherine Bondoc, Departmental Chief Accountant Economic and Workforce Development Department Telephone Number: (213)

17 Page 15 of 17 Finding No Noncompliance with Eligibility Requirement Grant No.: Department of Labor (DOL) N/A - Direct Awards Community Development Department (CDD)/. Economic and Workforce Development Department (EWDD)- Effective July 1, 2013 IF A-6 Workforce Innovation Fund (WI F) The external auditor noted that two out of 51 selected participants with Selective Service after enrollment date. for eligibility testing registered EWDD is drafting a new Selective Service (SS) Registration policy for staff to verify that adult male participants ages are in compliance with the SS requirements at initial participation. Also, the policy will require staff to confirm registration within SS enrollment date after male participants turn age 18. Participants who refuse to register will be suspended from the program. This language will be included in subsequent agreement and amendments to existing agreements. June 2014 CONTACT: Catherine Bondoc, Departmental Chief Accountant Economic and Workforce Development Department Telephone Number: (213)

18 Page 16 of 17 Finding No Noncompliance with Period of Availability Requirement Grant No.: Department of Homeland Security (DHS) California Emergency Management Agency (CaIEMA) Mayor's Office Homeland Security Grant Program (HSGP) The external auditor noted that 13 of the 45 invoices selected for allowable costs/cost principles and period of availability testing were not paid within 90 days after the grant period ended on December 14, The invoices were received close to the end of the grant period and were subsequently paid after a review and approval process. However, the City did not obtain an extension of the liquidation deadline from CaIEMA. The Mayor's Office will request an extension of the liquidation period from the grantor. Although revised close-out policies and procedures have been implemented, delayed payments were primarily due to issues related to contract execution or amendment. Thus, additional staff has been hired to mitigate this problem. July 2014 CONTACT: Alisa Finsten, Director of Grants and Finance Mayor's Office Telephone Number: (213)

19 Page 17 of 17 Finding No Noncompliance with Period of Availability Requirement Grant No.: Department of Homeland Security (DHS) California Emergency Management Agency (CaIEMA) Mayor's Office 2009-CA- T9-003 Regional Catastrophic Preparedness Grant Program (RCPGP) The external auditor noted that one of the 16 invoices selected for allowable costs/cost principles and period of availability testing was not paid within 90 days after the grant period ended on January 31, The invoices were received close to the end of the grant period and were subsequently paid after a review and approval process. However, the City did not obtain an extension of the liquidation deadline from CaIEMA. The Mayor's Office will request an extension of the liquidation period from the grantor. Although revised close-out policies and procedures have been implemented, delayed payments were primarily due to issues related to contract execution or amendment. Thus, additional staff has been hired to mitigate this problem. July 2014 CONTACT: Alisa Finsten, Director of Grants and Finance Mayor's Office Telephone Number: (213)