8-2019 City of Orange Single Audit
CITY OF ORANGE, CALIFORNIA
SINGLE AUDIT OF FEDERALLY ASSISTED
GRANT PROGRAMS
FOR THE YEAR ENDED JUNE 30, 2019
CITY OF ORANGE
TABLE OF CONTENTS
For the year ended June 30, 2019
Page
Number
Independent Auditors’ 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 - 2
Independent Auditors’ Report on Compliance for Each Major
Program and on Internal Control over Compliance Required
by Uniform Guidance and on the Schedule of Expenditures
of Federal Awards 3 - 5
Schedule of Expenditures of Federal Awards and
Schedule of Findings and Questioned Costs
Schedule of Expenditures of Federal Awards 6
Notes to Schedule of Expenditures of Federal Awards 7 - 8
Schedule of Findings and Questioned Costs 9 - 10
Summary Schedule of Prior Audit Findings 11
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1
INDEPENDENT AUDITORS’ 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
The Honorable Mayor and
Members of City Council
of the City of Orange
Orange, 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, each major fund, and the aggregate remaining fund information
of the City of Orange, California (the City), as of and for the year ended June 30, 2019, 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 3, 2019.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate
in the circumstances for the purpose of expressing our opinions on the financial statements, but not for
the purpose of expressing an opinion on the effectiveness of 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 and therefore, material weaknesses or significant deficiencies
may exist that were not identified. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
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Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we do not express
such an opinion. The results of our tests disclosed an instance of noncompliance or other matter that is
required to be reported under Government Auditing Standards, which is described in the accompanying
schedule of findings and questioned costs as Finding Number 2019-001.
City’s Response to Finding
The City’s response to the finding identified in our audit is described in the accompanying schedule of
findings and questioned costs. The City’s response was not subjected to the auditing procedures
applied in the audit of 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.
Irvine, California
December 3, 2019
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INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH
MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE
REQUIRED BY THE UNIFORM GUIDANCE AND ON THE SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS
The Honorable Mayor and
Members of City Council
of the City of Orange
Orange, California
Report on Compliance for Each Major Federal Program
We have audited the City of Orange’s (the City) compliance with the types of compliance
requirements described in the Office of Management and Budget 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, 2019. The City’s major federal programs are identified in the summary of auditors’ results
section of the accompanying schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and
conditions of its federal awards applicable to its federal programs.
Auditors’ Responsibility
Our responsibility is to express an opinion on compliance for each of the City’s major federal
programs based on our audit of the types of compliance requirements referred to above. We conducted
our audit of compliance in accordance with auditing standards generally accepted in the United States
of America; the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States; and 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). Those standards and the Uniform
Guidance require that we plan and perform the audit to obtain reasonable assurance about whether
noncompliance with the types of compliance requirements referred to above that could have a direct
and material effect on a major federal program occurred. An audit includes examining, on a test basis,
evidence about the City’s compliance with those requirements and performing such other procedures
as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major
federal program. However, our audit does not provide a legal determination of the City’s compliance.
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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, 2019.
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.
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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, 2019, and the related notes to the financial statements, which collectively comprise the
City’s basic financial statements. We issued our report thereon dated December 3, 2019, 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.
Irvine, California
December 3, 2019
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
AND
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Catalog of
Federal
Domestic Program
Assistance Identification Federal Subrecipient
Federal Grantor / Pass - Through Grantor / Program / Cluster Title Number Number Expenditures Expenditures
United States Department of Housing and Urban Development
Direct Assistance:
Community Development Block Grants/Entitlement Grants 14.218 B-14-MC-06-0507 1,342,183$ 73,993$
HOME Investment Partnerships Program 14.239 M-10-MC06-0544 31,038 -
Total United States Department of Housing
and Urban Development 1,373,221 73,993
United States Department of Justice
Direct Assistance:
Equitable Sharing Program - Asset Forfeiture 16.922 CA0301500 754,316 -
Total United States Department of Justice 754,316 -
United States Department of Treasury
Direct Assistance:
Equitable Sharing Program - Asset Forfeiture 21.016 CA0301500 23,192 -
Total United States Department of Treasury 23,192 -
United States Department of Transportation
Passed-through State of California Department of Transportation:
Highway Planning and Construction 20.205 12-ORA-0-ORA(077) 12,284 -
Passed-through California Office of Traffic Safety:
Highway Planning and Construction 20.205 HSIPL-5073(078) 838 -
Highway Planning and Construction 20.205 HSIPL-5073(080) 331 -
Highway Planning and Construction 20.205 OCTA-5073(083) 28,717 -
Highway Planning and Construction 20.205 OCTA-5073(084) 28,357 -
Highway Planning and Construction 20.205 OCTA-5073(085) 5,754 -
Highway Planning and Construction 20.205 OCTA-5073(086) 9,550 -
Highway Planning and Construction 20.205 OCTA-5073(090) 1,152 -
Highway Planning and Construction 20.205 OCTA-5073(087) 17,667 -
Highway Planning and Construction 20.205 OCTA-5073(088) 20,259 -
Highway Planning and Construction 20.205 OCTA-5073(089) 1,017 -
Total Highway Planning and Construction 125,926 -
Highway Safety passed-through California Office of Traffic Safety:
Highway Safety Cluster:
State and Community Highway Safety 20.600 PT18107 63,789 -
National Priority Safety Program 20.616 PT1785 5,686 -
Total Highway Safety Cluster 69,475 -
Minimum Penalties for Repeat Offenders for Driving
While Intoxicated 20.608 PT18107 176,852 -
Total United States Department of Transportation 372,253 -
United States Department of Homeland Security
Passed-through the County of Orange:
Emergency Management Performance Grant 97.042 Unknown 11,125 -
Total United States Department of Homeland Security 11,125 -
TOTAL EXPENDITURES OF FEDERAL AWARDS 2,534,107$ 73,993$
CITY OF ORANGE
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the year ended June 30, 2019
See accompanying notes to the Schedule of Expenditures of Federal Awards.
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7
CITY OF ORANGE
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the year ended June 30, 2019
1. BASIS OF PRESENTATION
The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the
federal award activity of the City of Orange (the City) under programs of the federal government
for the year ended June 30, 2019. The information in this Schedule is presented in accordance with
the 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).
Because the Schedule presents only a selected portion of the operations of the City, it is not
intended to and does not present the financial statements of the City. The City’s reporting entity is
defined in Note 1 of the notes to the City’s financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Expenditures reported on the Schedule are reported using the modified accrual basis of accounting
for governmental funds and the accrual basis for proprietary funds, which is described in Note 1 of
the notes to the City’s financial statements. 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.
3. INDIRECT COST RATE
The City has elected not to use the 10% de minimis indirect cost rate as allowed under the Uniform
Guidance.
4. CONTINGENCIES
Under the terms of federal and state grants, additional audits may be requested by the grantor
agencies and certain costs may be questioned as not being appropriate expenditures under the terms
of the grants. Such audits could lead to a request for reimbursement to the grantor agencies.
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CITY OF ORANGE
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
(CONTINUED)
For the year ended June 30, 2019
5. SUBRECIPIENTS
During the fiscal year ended June 30, 2019, the City disbursed federal funds to the following
subrecipients under the Community Development Block Grant program (CFDA #14.218):
Amount
Disbursed
Fair Housing Foundation $ 24,522
Helping Our Mentally Ill Experience Success, Inc. 16,750
Home Aid Orange County 4,150
Assistance League of Orange 15,000
Friendly Center, Inc 13,571
Total Disbursed to Subrecipients $ 73,993
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CITY OF ORANGE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
For the year ended June 30, 2019
1. SUMMARY OF AUDITORS’ RESULTS
Financial Statements
Type of auditor’s report issued:
Unmodified
Internal control over financial reporting:
Material weakness identified? yes x no
Significant deficiency identified? yes x none reported
Noncompliance material to financial statements noted: x yes no
Finding Number 2019-001
Federal Awards:
Internal control over major programs: Material weakness(es) identified? yes x no
Significant deficiency(es) identified? yes x none reported
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 Section
200.516(a) of the Uniform Guidance? yes x no
Identification of major programs:
CFDA Number(s) Name of Federal Program or Cluster
16.922 United States Department of Justice -
Equitable Sharing Program - Asset Forfeiture
21.016 United States Department of Treasury -
Equitable Sharing Program - Asset Forfeiture
Dollar threshold used to distinguish
between type A and type B programs: $ 750,000
Auditee qualified as low-risk auditee? x yes no
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CITY OF ORANGE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(CONTINUED)
For the year ended June 30, 2019
2. FINDINGS - FINANCIAL STATEMENT AUDIT
COMPLIANCE AND OTHER MATTERS
Finding Number 2019-001
Criteria
Senate Bill 341 (SB 341) requires all successor housing entities to comply with annual report
requirements. One requirement is for the City to report housing financial and activity information
by including specified information with the Annual Progress Report (APR) required to be annually
submitted to the Department of Housing and Community Development (HCD) by April 1 of the
subsequent year pursuant to the State of California housing law in reporting progress in
implementing the housing element.
Condition
The City submitted the APR for the fiscal year ended June 30, 2018 on April 10, 2019, which was
after the due date of April 1, 2019.
Cause
The City staffing resources limited the ability to meet the requirement.
Effect
The effect is unknown.
Recommendation
We recommend that the City implement policies and procedures to ensure timely reporting of the
APR to HCD.
Management’s Response
Staff resource limitations and competing project demands resulted in a delay to accumulate the
required information and submit the report to the State. The City continues to make efforts to
submit this report on a timely basis.
3. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAM AUDIT:
None noted.
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CITY OF ORANGE
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
For the year ended June 30, 2019
1. FINDINGS - FINANCIAL STATEMENT AUDIT:
COMPLIANCE AND OTHER MATTERS
Finding Number 2018-001
Condition
The City submitted the Annual Progress Report (APR) for the fiscal year ended June 30, 2017 on
June 21, 2018, which was after the due date of April 1, 2018.
Recommendation
We recommend that the City implement policies and procedures to ensure timely reporting of the
APR to Department of Housing and Community Development (HCD).
Current Status
This finding has not been corrected. See Finding 2019-001.
Finding Number 2018-002
Condition
Assembly Bill 2766 (AB2766), Chapter 1705 (Health and Safety Code Sections 44220 through
44247) as it relates to the Air Pollution Reduction Special Revenue Fund (AQMD) requires the
City which operates a trip reduction program to have required documentation of compliance with
program requirements for each employee that participates. The City did not have proper support
for one employee that participated in the program during fiscal year 2017-2018.
Recommendation
We recommend that the City implement policies and procedures to ensure all participating
employees submit the required documentation.
Current Status
This finding has been corrected.
2. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAM AUDIT:
None noted.