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Item No. 3 - CONSIDERATION OF SINGLE AUDIT REPORT FOR THE YEAR ENDEDJUNE 30, 2020AGENDA ITEM NO.3 Xft AGENDA STAFF REPORT City of West Covina I Office of the City Manager DATE: June 1, 2021 TO: Mayor and City Council FROM: David Carmany City Manager SUBJECT: CONSIDERATION OF SINGLE AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 2020 RECOMMENDATION: It is recommended that the City Council receive and file the Single Audit Report including the Government Auditing Standards Letter for the year ended June 30, 2020. BACKGROUND: This report concerns regulatory compliance as the City through sound business practices follows State and Federal laws or regulations relevant to operations. A Single Audit, previously known as the OMB Circular A-133 audit, is required for a City that expends $750,000 or more in federal funds in one year. It is an organization -wide financial statement and federal awards' audit that provides assurance to the Federal Government that the City has adequate internal controls in place and is generally in compliance with program requirements. DISCUSSION: Single Audit Report on Federal Awards As a recipient of Federal grant funds in excess of $750,000, the City's Single Audit Report on Federal Awards is required to be submitted in compliance with the financial reporting requirement in accordance with Title 2, Code of Federal Regulations (CFR), Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The Single Audit Report (Attachment No. 1) includes a Government Auditing Standards Letter, Compliance Report, Schedule of Expenditures of Federal Awards, Audit Findings, and a Corrective Action Plan. Government Auditing Standards Letter The Government Auditing Standards Letter (pages 1-2 of Attachment No. 1) notes any identified deficiencies or weaknesses in internal control over financial reporting that could lead to material misstatements in the City's financial statements as well as any other compliance findings. 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. The auditors identified three deficiencies in internal control over financial reporting that they considered to be material weaknesses for the year ended June 30, 2020. Two of these findings, Finding Number 2020-001 and Finding Number 2020-003 were repeats from the prior year. The new finding, Finding Number 2020-002, was related to turnover of key staff and continuity in the Finance Department. In addition to the material weaknesses, two significant deficiency findings were identified. The first, Finding Number 2020-004, was related to the list of authorized purchasing approvals not being updated to reflect changes in authorized personnel. The second finding, Finding Number 2020-005, was in regard to documentation of review and approval of bank reconciliations. All findings have been addressed internally and responded to in the Corrective Action Plan (pages 16-17 of Attachment No. 1). The results of the tests performed disclosed no instances of non-compliance or other matters that are required to be reported under Government Auditing Standards. Prepared by: Stephanie Sikkema, Assistant Finance Director Additional Approval: Robbeyn Bird, Finance Director Fiscal Impact FISCAL IMPACT: There is no fiscal impact associated with this item. Attachments Attachment No. 1 - Single Audit Report on Federal Awards for the Year Ended June 30, 2020 CITY COUNCIL GOALS & OBJECTIVES: Achieve Fiscal Sustainability and Financial Stability City of West Covina, California Single Audit Report on Federal Awards Year Ended June 30, 2020 ROGERS, ANDERSON, MALODY & SCOTT, LLP CERTIFIED PUBLIC ACCOUNTANTS. SINCE 1948 City of West Covina Single Audit Report on Federal Awards Table of Contents Paqe 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 Schedule of Expenditures of Federal Awards, in Accordance with the Uniform Guidance..............................................3 Schedule of Expenditures of Federal Awards..............................................................................6 Notes to the Schedule of Expenditures of Federal Awards.........................................................7 Schedule of Findings and Questioned Costs: Section I: Summary of Auditor's Results................................................................................8 Section II: Financial Statement Findings................................................................................9 Section III: Federal Awards Findings and Questioned Costs...............................................14 Summary Schedule of Prior Audit Findings...............................................................................15 CorrectiveAction Plan...............................................................................................................16 ©m ROGERS, ANDERSON, MALODY & SCOTT, LLP ©© CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie Dr. Suite 100 San Bernardino. CA 92408 909 889 0871 T REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 909 889 5361 F AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN ramscpa.net AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS PARTNERS Brenda L. Odle, CPA, MST Independent Auditor's Report Terry P. Shea, CPA Scott W. Marro, CPA, CGMA To the Honorable Mayor and Members of City Council Leena Shanbhag, CPA. MST, CGMA of the City of West Covina Bradferd A. Welebir, CPA. MBA, CGMA West Covina, California jenny W. Liu, CPA, MST We have audited, in accordance with the auditing standards generally MANAGERS/STAFF accepted in the United States of America and the standards applicable to Charles De Simard. CPA financial audits contained in Government Auditing Standards issued by the Gardenya Duran, CPA, CGMA Comptroller General of the United States, the financial statements of the Brianna Schultz. CPA governmental activities, the business -type activities, each major fund, and v e W., CPA the aggregate remaining fund information of the City of West Covina, Evelyn Morentin-Barcena. CPA Evel Veronica Hernandez, CPA California (the City), as of and for the year ended June 30, 2020, and the Tara R. Thorp, CPA, MSA related notes to the financial statements, which collectively comprise the Laura Arvizu, CPA City's basic financial statements, and have issued our report thereon dated Louis Fernandez, CPA February 17, 2021. Xinlu Zoe Zhang, CPA. MSA John Maldonado, CPA, MSA Internal Control Over Financial Reporting Th. Le, CPA, MBA Julia Rodriguez Fuentes, CPA, MSA 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 MEMBERS American Institute of effectiveness of the City's internal control. Accordingly, we do not express Certified Public Accountants an opinion on the effectiveness of the City's internal control. PCPS arms Alliance Our consideration of internal control over financial reporting was for the P 9 (or CPA Firms for limited purpose described in the preceding paragraph and was not Governmental Audit Quality center designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses EmployeePlan or significantY deficiencies may exist that have not been identified. However, Audit Quallityity Center as described in the accompanying Schedule of Findings and Responses, California society of we did identify certain deficiencies in internal control that we consider to be Certified Public Accountants material weaknesses and significant deficiencies. 10 Proud Member of AlliottGlobalAlliance STABILITY. ACCURACY. TRUST. 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. We consider the deficiencies described in the accompanying Schedule of Findings and Questioned Costs as item 2020-001, 2020-002 and 2020-003 to be material weakness. 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. We consider the deficiencies described in the accompanying Schedule of Findings and Responses as items 2020-004 and 2020-005 to be significant deficiencies. 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. We noted certain matters that we have reported to management of City of West Covina in a separate letter dated February 17, 2021. City's Response to Findings The City's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Responses. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. 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. eAX" kldt4 c ^, 4Cooly -e ,�u�tf, LAP. San Bernardino, California Q February 17, 2021 ROGERS, ANDERSON, MALODY & SCOTT, LLP CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie Dr. Suite 100 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL San Bernardino, CA 92408 PROGRAM; REPORT ON INTERNAL CONTROL OVER 9098895361 T909 COMPLIANCE; AND REPORT ON SCHEDULE OF EXPENDITURES 5361 F OF FEDERAL AWARDS IN ACCORDANCE WITH THE UNIFORM ramscp ramscpa.net GUIDANCE PARTNERS Independent Auditor's Report Brenda L. Odle, CPA, MST Terry P. Shea, CPA Scott W. Marro, CPA, CGMA To the Honorable Mayor and Members of City Council Leena Shanbhag, CPA. MST, CGMA of the City of West Covina Bradferd A. Welebir, CPA. MBA. CGMA West Covina, California jenny W. Liu, CPA, MST Report on Compliance for Each Major Federal Program MANAGERS/STAFF Charles De Simard. CPA We have audited the City of West Covina's (the City) compliance with the Gardenya Duran, CPA, CGMA types of compliance requirements described in the U.S. Office of Brianna Schultz. CPA Management and Budget (OMB) Compliance Supplement that could have Jingpe Wu. CPA a direct and material effect on each of the City's major federal programs for Evelyn Morentin-Barcena. CPA the year ended June 30, 2020. The City's major federal programs are Veronica Hernandez, identified in the summary of auditor's results section of the accompanying Tara R. Thorp, CPA, MSA Thorp, CPA,MSA schedule of findings and questioned costs. Laura Arvizu, CPA Louis Fernandez, CPA Xinlu Zoe Zhang, CPA. MSA Management's Responsibility John Maldonado, CPA, MSA Th. Le, CPA, MBA Management is responsible for compliance with federal statutes, Julia Rodriguez Fuentes, CPA, MSA regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor's Responsibility MEMBERS Our responsibility is to express an opinion on compliance for each of the American Institute of Certified Public Accountants City's majorfederal programs based on our audit of the types of compliance PCPS requirements referred to above. We conducted our audit of compliance in for erms Alliance accordance with auditingstandards generally accepted in the United (or CPA Firms 9 Y P Governmental Audit States of America; the standards applicable to financial audits contained in Quality Center Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Audit Quallityity Center EmployeePenn Regulations (CFR) q Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform California Society of Guidance). Those standards and the Uniform Guidance require that we Certified Public Accountants 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 Proud Member of program occurred. An audit includes examining, on a test basis, evidence AlliottGlobalAlliance' about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. STABILITY. ACCURACY. TRUST. 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 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, 2020. 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 the Uniform Guidance, 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. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, however material weaknesses may exist that have not been identified. 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 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, each major fund, and the aggregate remaining fund information of the City as of and for the year ended June 30, 2020, and the related notes to the financial statements, which collectively comprise the City's basic financial statements. We issued our report thereon dated February 17, 2021 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 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 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. San Bernardino, California (/ April 19, 2021 (except for the Schedule of Expenditures of Federal awards, of which the date is February 17, 2021) City of West Covina Schedule of Expenditures of Federal Awards Year Ended June 30, 2020 Federal Grantor/ Federal Program Amount Pass -through Grantor/ CFDA Identification Federal Provided to Program Title Number Number E penditures Subrecipients U.S. Department of Housing and Urban Development Direct Assistance Co. m unity Developm ant Block Grant Cluster 14.218 B-17-MC-06-0532 $ 77,841 $ 7,061 Com m unity Developm ant Block Grant Cluster 14.218 B-18-MC-06-0532 270,461 101,677 Com m unity Developm ant Block Grant Cluster 14.218 B-19-MC-06-0532 98,330 17,975 COVID-19- Comm unity Development Block Grant Cluster 14.218 B-20-MW-06-0532 199,160 Subtotal 645,792 126,713 Total U.S. Department of Housing and Urban Development 645,792 126,713 U.S. Department of Justice Direct Assistance Equitable Sharing Program 16.922 CA1975 1,406,185 Subtotal 1,406,185 - Edward Byrne Memorial Justice Assistance Grant Program 16.738 2018-DJ-BX-0166 10,170 - Edward Byrne Memorial Justice Assistance Grant Program 16.738 2019-DJ-BX-0196 18,809 Subtotal 28,979 - COVIDA9-Coronavirus Emergency Supplemental Funding Program 16.034 2020-VD-BX-0264 2,341 Subtotal 2,341 - Total U.S. Department of Justice 1,437,505 U.S. Department of Transportation Passed through the State ofCalifomia, Department of Transportation Highway Planning & Construction Cluster 20.205 STPL-5259(028) 3,522 Subtotal 3,522 - Passed through the California Office of Traffic Safety Selective Traffic Enforcement Program 20.608 PT20139 15,121 Subtotal 15,121 Total U.S. Department of Transportation 18,643 U.S. Department of Treasury Direct Assistance Equitable Sharing Program 21.016 CA1975 427,956 Total U.S. Department of Treasury 427,956 U.S. Department of Health and Human Services Pass -through from the Countyof Los Angeles, Department ofCommunity& Senior Citizens Services Special Programs for Aging, Title III, PartC, Nutrition Services 93.045 ENP-162011 338,085 Total U.S. Department of Health and Human Services 338,085 U.S. Department of Homeland Security Pass -through from the State ofCalifomia, Office ofEmergency Services 2017 Homeland Security Grant 97.067 2017-0083 83,710 Total U.S. Department of Homeland Security 83,710 Total Expenditures of Federal Awards $ 2,951,691 $ 126,713 See accompanying notes to the schedule of expenditures of federal awards. 6 City of West Covina Notes to the Schedule of Expenditures of Federal Awards Year Ended June 30, 2020 BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards (SEFA), includes the federal awards activity of the City of West Covina (the City) that are reimbursable under federal programs of federal government for the year ended June 30, 2020. The information in this SEFA is presented in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the SEFA 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 fund balance, or cash flows of the City. For the purposes of this schedule, federal financial assistance includes both federal financial assistance received directly from a federal agency, as well as federal funds received indirectly by the City from a nonfederal agency or other organization. Only that portion of program expenditures reimbursable with such federal funds are reported in the accompanying schedule. Program expenditures in excess of the maximum federal reimbursement authorized or the portion of the program expenditures that were funded with state, local or other non-federal funds are excluded from the accompanying schedule. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the SEFA are reported on the modified 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. Negative amounts shown on the SEFA, if any, represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. The City has elected to use the 10-percent de minimis indirect cost rate, where applicable, allowed under the Uniform Guidance. OUTSTANDING LOANS The City has made several housing rehabilitation loans to qualified applicants using Community Development Block Grants/Entitlement Grants (CFDA No. 14.218) funding. These loans bear interest up to 5% and are repaid when title to the property changes. There were no new loans funded in the current year. The outstanding balance of these loans at June 30, 2020 is $3,491,221. SUBRECIPIENTS During the fiscal year ended June 30, 2020, the City disbursed $126,713 of federal awards to a subrecipients for the Community Development Block Grant (CFDA No. 14.218). City of West Covina Schedule of Findings and Questioned Costs Year Ended June 30, 2020 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 identified? X Yes Significant deficiencies identified? X Yes Noncompliance material to financial statements noted? Yes X FederalAwards Internal control over major programs: Material weakness identified? Yes X Significant deficiencies identified Yes X 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 2 CFR 200.516(a)? Yes X Identification of major programs: No None Reported No No None Reported No CFDA Number Name of Federal Program 16.922 Equitable Sharing Program Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low -risk auditee? Yes X No 8 City of West Covina Schedule of Findings and Questioned Costs (continued) Year Ended June 30, 2020 Section II: Financial Statement Findings Finding Number 2020-001 — Internal Control Environment Material Weakness Criteria An important element of internal controls over financial reporting is for the City to have procedures in place to ensure that all applicable financial reporting guidelines are followed and properly applied. Condition and Context Over the past year, the City has experienced a high turnover at all levels in the Finance Department. As a result, the request for the Actuarial Valuation report for GASB 75 Accounting Information regarding Other Post -Employment Benefits (OPEB) and GASB 68 Accounting and Financial Reporting for Pensions — An Amendment of GASB Statement No. 27 was postponed. This matter has been the cause of significant delays in producing complete, reconciled and properly adjusted financial statements and other information. Cause The City did not maintain the appropriate staffing levels within the Finance Department to ensure that all financial closing procedures were performed. This is a repeat finding from prior year identified as finding 2019-001. Effect Delay in the completion of the Comprehensive Annual Financial Report. Recommendation We recommend the City maintain appropriate staffing in the Finance Department which will ensure that the policies and procedures in the year-end review process are properly carried out. Views of Responsible Officials and Planned Corrective Action See attached Corrective Action Plan. City of West Covina Schedule of Findings and Questioned Costs (continued) Year Ended June 30, 2020 Section II: Financial Statement Findings Finding Number 2020-002 — Errors in Pension Census Data Material Weakness Criteria In order for the City to record its liability for providing supplemental pension benefits to eligible participants, it must submit census data to actuaries who use this information to calculate the City's liability. Condition and Context During the audit, we were unable to vouch participant information from the census data to source documents. Cause Due to the turnover of key staff, there is a lack of appropriate documentation maintained in personnel files. Effect The City's pension liability could be improperly calculated and misstated. Recommendation We recommend the Finance Department review the participant files, ensure only eligible participants are included in the census data to be submitted and maintain proper documentation for the information provided to actuaries. Management's Response See attached Corrective Action Plan. 10 City of West Covina Schedule of Findings and Questioned Costs (continued) Year Ended June 30, 2020 Section It: Financial Statement Findings (continued) Finding Number 2019-003 — Internal Control over Federal Grant Reporting Material Weakness Criteria An important element of internal controls overfinancial reporting is for the entity to have procedures in place for the accurate completion of the Schedule of Expenditures of Federal Awards (SEFA). Condition and Context Over the past year, the City has experienced a high turnover at all levels in the Finance Department. As a result, the SEFA has not been prepared by a consistent person and has required multiple revisions. This is a repeat finding from prior year identified as finding 2019-002. Cause The City did not maintain the appropriate staffing levels within the Finance Department to allow for the proper preparation of the SEFA, including a responsible individual to perform a review of the completed SEFA. Effect The City could be under/over stating expenditures on the SEFA. Recommendation We recommend the City maintain proper staffing levels within the Finance Department to allow for the proper preparation of the SEFA, including a responsible individual to perform a review of the completed SEFA. Views of Responsible Officials and Planned Corrective Action See attached Corrective Action Plan. City of West Covina Schedule of Findings and Questioned Costs (continued) Year Ended June 30, 2020 Section II: Financial Statement Findings (continued) Finding Number 2020-004 — Purchasing Approvals Significant Deficiency Criteria A system of purchasing approval should be established, maintained and updated in a timely manner. Condition During our audit of the City, we noted that a listing of authorized purchasing approval limit signatures was not updated to reflect changes in authorized personnel. Cause The City did not update authorized purchasing approvals in a timely manner. Effect Approval for payments could be completed by individuals without the appropriate authorizations. Recommendation We recommend that the City perform an annual review of authorized purchasing approvals on record and make any necessary updates as soon as possible. Management's Response See attached Corrective Action Plan. 12 City of West Covina Schedule of Findings and Questioned Costs (continued) Year Ended June 30, 2020 Section II: Financial Statement Findings (continued) 2020-005 — Bank Reconciliation Review Significant Deficiency Criteria Bank reconciliations should be prepared, reviewed and approved in a timely manner. Condition During our audit of the City, we noted that bank statements for various accounts were not reviewed or approved in a timely manner. Cause Even though the bank reconciliations were prepared, there was no documentation for the date of completion and no indication of a review had been completed. Effect Errors in the reconciliations can go undetected for a period of time without the appropriate review and approval procedures. Recommendation We recommend that the City ensure that all bank reconciliations are reviewed in a timely manner and documentation of when the preparation and review are completed. Management's Response See attached Corrective Action Plan. 13 City of West Covina Schedule of Findings and Questioned Costs (continued) Year Ended June 30, 2020 Section III: Federal Awards Findings and Questioned Costs No matters to report. 14 City of West Covina Summary Schedule of Prior Audit Findings Year Ended June 30, 2020 Status of Prior Year Findings Section II: Financial Statement Findings Finding Number 2019-001 Status of prior year finding: Repeat finding as 2020-001 Finding Number 2019-002 Status of prior year finding: Repeat finding as 2020-003 Section III: Federal Award Findings and Questioned Costs Finding Number 2019-003 Status of prior year finding: Corrective action has been taken. 15 City of West Covina Corrective Action Plan Fiscal Year Ending June 30, 2020 Below is the City's Corrective Action Plan in regard to the Schedule of Findings and Questioned Costs identified during the audit for fiscal year ending June 30, 2020. Finding Number 2020-001— Internal Control Environment, Material Weakness Audit Finding The City did not maintain the appropriate staffing levels within the Finance Department to ensure that all financial closing procedures were performed. Planned Response Turnover of staff at all levels in the City's Finance Department has been volatile over the past few years. The COVID-19 global pandemic has exacerbated this problem. The Finance Director has been diligently recruiting key personnel and has recently hired a Purchasing Manager, two new accountants, and an Assistant Finance Director position. In addition, the City is currently recruiting for an Accounting Technician in payroll. The full staffing will ensure that the policies and procedures in the year-end review process are properly carried out. Once the Finance Department is fully staffed and trained, this finding will be resolved. Anticipated Completion Date: June 30, 2021 Finding Number 2020-002—Errors in Pension Census Data, Material Weakness Audit Finding Due to the turnover of key staff, there is a lack of appropriate documentation maintained in personnel files. Planned Response The census data that City staff was unable to locate was for employees that have not been employed with the City for quite some time. Human Resources will review and verify that all participants included in the census data are eligible employees. Staff will also make every attempt to update the files with current information. This review and verification will ensure only eligible participants are included in the census data to be submitted and maintain proper documentation for the information provided to actuaries. Anticipated Completion Date: June 30, 2021 Finding Number 2019-003— Internal Control over Federal Grant Reporting, Material Weakness Audit Finding The City did not maintain the appropriate staffing levels within the Finance Department to allow for the proper preparation of the SEFA, including a responsible individual to perform a review of the completed SEFA. 16 Planned Response Turnover of staff at all levels in the City's Finance Department has been volatile over the past few years. The COVID-19 global pandemic has exacerbated this problem. The Finance Director has been diligently recruiting key personnel and has recently hired a Purchasing Manager, two new accountants, and an Assistant Finance Director position. In addition, the City is currently recruiting for an Accounting Technician in payroll. These changes will maintain proper staffing levels within the Finance Department to allow for the proper preparation of the SEFA, including a responsible individual to perform a review of the completed SEFA. Anticipated Completion Date: June 30, 2021 Finding Number 2020-004— Purchasing Approvals, Significant Deficiency Audit Finding The City did not update authorized purchasing approvals in a timely manner. Planned Response City staff has reviewed and updated the list of authorized purchasing approvals and will continue to review and update the list on an annual basis. Anticipated Completion Date: Complete as of April 19, 2021 Finding Number 2020-005 — Bank Reconciliation Review, Significant Deficiency Audit Finding Bank statements for various accounts were not reviewed or approved in a timely manner Planned Response The City has multiple bank accounts for various functions. Each bank account is reconciled individually, signed and dated by the individual that prepared the account, and reviewed, signed, and dated by the supervisor. After the individual bank reconciliations are completed, a summary report is completed to combine all bank accounts. The summary sheet was not signed and dated by the preparer orthe reviewer. The City has implemented a procedure to have both preparer and reviewer sign and date the summary sheet indicating that the preparation and review had been completed. This process will ensure that all bank reconciliations are reviewed in a timely manner and documentation of when the preparation and review are completed. Anticipated Completion Date: Complete as of April 19, 2021 Sincerely, Robbeyn Bird Finance Director 17