Single Audit 2019CITY OF ENCINITAS
ENCINITAS, CALIFORNIA
SINGLE AUDIT REPORT ON EXPENDITURES
OF FEDERAL AWARDS
Year ended June 30, 2019
CITY OF ENCINITAS
SINGLE AUDIT REPORT ON EXPENDITURES OF FEDERAL AWARDS
Year ended June 30, 2019
TABLE OF CONTENTS
Page
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 the Schedule of Expenditures of Federal
Awards Required by the Uniform Guidance 3
Schedule of Expenditures of Federal Awards 6
Notes to the Schedule of Expenditures of Federal Awards 7
Summary of Findings and Questioned Costs 8
Status of Prior Audit Findings 10
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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
Independent Auditor’s Report
City Council
City of Encinitas
Encinitas, 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 Encinitas, California (City), as of and
for the year ended June 30, 2019 and the related notes to the financial statements, which
collectively comprise the City of Encinitas’ basic financial statements, and have issued our
report thereon dated December 9, 2019.Our report includes a reference to other auditors
who audited the financial statements of R.E. Badger Joint Powers Authority, R.E. Badger
Financing Authority, and Encina Wastewater Authority, as described in our report on the City’s
financial statements.
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
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. We did identify a deficiency in internal control, described in the accompanying
Summary of Findings and Questioned Costs that we consider to be a significant deficiency.
See finding 2019-001.
2
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are
free from material misstatement, we performed tests of its compliance with certain provisions
of laws, regulations, contracts, and grant agreements, noncompliance with which could have
a direct and material effect on the determination of financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our audit,
and accordingly, we do not express such an opinion. The results of our tests disclosed no
instances of noncompliance or other matters that are required to be reported under
Government Auditing Standards.
City’s Response to Findings
The City’s response to the findings identified in our audit are described in the accompanying
Summary 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 of
Encinitas’ internal control and compliance. Accordingly, this communication is not suitable for
any other purpose.
Irvine, California
December 9, 2019
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Report on Compliance for Each Major Federal Program;Report on Internal Control
Over Compliance;and Report on the Schedule of Expenditures of Federal Awards
Required by the Uniform Guidance
Independent Auditor’s Report
City Council
City of Encinitas
Encinitas, California
Report on Compliance for Each Major Federal Program
We have audited the City of Encinitas’(City)compliance with the types of compliance
requirements described in the OMB Compliance Supplement that could have a direct and
material effect on the City’s major federal program for the year ended June 30, 2019. The
City’s major federal program is identified in the summary of auditor’s results section of the
accompanying schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms
and conditions of its federal awards applicable to its federal program.
Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for the City’s major federal program
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
requirement 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 the
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 of Encinitas complied, in all material respects, with the types of
compliance requirements referred to above that could have a direct and material effect on its
major federal program for the year ended June 30, 2019.
Report on Internal Control Over Compliance
Management of the City of Encinitas 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 the major federal program to determine the auditing procedures that are appropriate in
the circumstances for the purpose of expressing an opinion on compliance for the 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 Uniform
Guidance
We have audited the financial statements of the City of Encinitas as of and for the year ended
June 30, 2019, and have issued our report thereon dated December 9, 2019,which contained
an unmodified opinion on those financial statements. Our audit was conducted for the purpose
of forming an opinion on the financial statements as a whole. 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 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 financial statements.
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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
financial statements or to the 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 expenditure of federal awards is fairly stated in all
material respects in relation to the financial statements as a whole.
Irvine, California
December 9, 2019
Federal Grant Amount
CFDA Identification Federal Provided to
Number Number Expenditures Subrecipients
U.S. Department of Housing and Urban Development
Direct Programs:
CDBG Cluster:
Community Development Block Grant 14.218 B-18-MC-06-0574 203,567$ 66,439$
B-17-MC-06-0574 68,476 -
B-16-MC-06-0574 50,097 -
B-15-MC-06-0574 1,020 -
B-14-MC-06-0574 8,964 -
Total CDBG Cluster 332,124 66,439
Housing Voucher Cluster:
Section 8 Housing Choice Vouchers 14.871 CA155VO 1,326,921 -
Total Housing Voucher Cluster 1,326,921 -
Total U.S. Department of Housing and Urban Development 1,659,045 66,439
U.S. Department of Health and Human Services
Passed through the County of San Diego:
Aging Cluster:
Title III-C1 Congregate Meals 93.045 547764 44,166 -
Title III-B Transportation 93.044 547764 9,403 -
Title III-NSIP C1 Incentive 93.053 547764 7,152 -
Total Aging Cluster 60,721 -
Total U.S. Department of Health and Human Services 60,721 -
U.S. Department of Homeland Security
Passed through the California Office of Emergency Services:
Homeland Security Grant Program (HSGP)97.044 EMW-2012-FF 48,112 -
Urban Area Security Initiative (UASI)97.044 EMW-2012-FF 8,721 -
Total U.S. Department of Homeland Security 56,833 -
U.S. Department of Transportation
Passed through the State of California:
Highway Planning and Construction Cluster:
Storm Drain and Slope Repairs 20.205 ER 32L0(334)282,562 -
Hazard Elimination Safety 20.205 HSIP-5446(018-20)334,228 -
Total Highway Planning and Construction Cluster 616,790 -
Total U.S. Department of Transportation 616,790 -
Total Expenditures of Federal Awards 2,393,389$ 66,439$
Year Ended June 30, 2019
CITY OF ENCINITAS
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Federal Grantor/Pass - Through
Grantor/Program Title
See accompanying Notes to the Schedule of Expenditures of Federal Awards.
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CITY OF ENCINITAS
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year ended June 30, 2019
(1)Summary of Significant Accounting Policies Applicable to the Schedule of
Expenditures of Federal Awards
a)Scope of Presentation
The accompanying Schedule of Expenditures of Federal Awards (the “Schedule”)
includes the federal grant activity of the City of Encinitas’major program of the federal
government for the year ended June 30, 2019. The information in the 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 of Encinitas, it is not
intended to and does not present the financial position, changes in net position or
cash flows of the City of Encinitas.The City did not use the 10% de minimis indirect
cost rate as covered in section 200.414 of the Uniform Guidance.
b)Basis of Accounting
Expenditures reported on the Schedule are reported on the accrual basis of
accounting. Such expenditures are recognized following the cost principles contained
in Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards wherein certain types of expenditures are not allowable or are limited
as to reimbursement.
c)Subrecipient Expenditures
Payments to subrecipients totaled $66,439 for the Community Development Block
Grant for the fiscal year ended June 30, 2019.
Meals on Wheels $ 9,704
San Dieguito for a Drug Free Youth 6,707
CRC Homeless Programs 13,407
Catholic Charities 6,707
Fair Housing Services 16,500
Interfaith Shelter 6,707
Interfaith Community Services 6,707
Total $ 66,439
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CITY OF ENCINITAS
SUMMARY OF FINDINGS AND QUESTIONED COSTS
Year ended June 30, 2019
(1)Summary of Auditor’s Results
a)An unmodified report was issued by the auditors on the financial statements of the
auditee.
b)No material weaknesses in internal control over financial reporting were reported.
c)There was one significant deficiency in internal control over financial reporting reported
as Finding 2019-001.
d)The audit disclosed no instances of noncompliance material to the financial statements
of the auditee.
e)No material weaknesses or significant deficiencies in internal control over major
programs of the auditee were reported.
f)An unmodified report was issued by the auditors on compliance for major programs.
g)The audit disclosed no audit findings required by the auditors to be reported under
2CFR 200.516(a) of Uniform Guidance.
h)The program tested as major program of the auditee was:
U.S. Department of Housing and Urban Development, Section 8 Housing
Choice Voucher, CFDA No. 14.871.
i)The dollar threshold used to distinguish Type A and Type B programs was $750,000.
j)The auditee met the criteria to be classified as a low risk auditee for the year ended
June 30, 2019, for purposes of major program determination.
(2)Financial Statement Findings
There was one audit finding required to be reported in accordance with GAGAS.
(2019-001)Material Audit Adjustments
Auditing standards require the auditors to include an internal control recommendation
when audit adjustments are detected during the audit process. During our audit, we noted
errors in recording grant receivables for allowable expenditures incurred through June 30,
2019. As these expenditures were incurred, the City had earned the revenue and thus
should have a receivable recorded.
We also noted the City had certain projects classified as construction in progress that
should have been moved to depreciable classifications as they were substantially
complete or already in service.
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Recommendation
We recommend management review grant expenditures to ensure they are billed in a
timely manner. In addition, we recommend management review construction in progress
at the end of every year and move completed projects out of construction in progress when
they are substantially complete and begin accounting for depreciation.
Management’s Response Regarding Corrective Action Plan
The city has put additional procedures in place requiring that grant expenditures are billed
monthly. Management will review grant expenditures and billings every month to ensure
that this new procedure is in place. Additionally, management will review construction in
progress at the end of every year and will move completed projects out of construction in
progress when projects are substantially complete.
(3)Federal Award Findings and Questioned Costs
None noted.
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CITY OF ENCINITAS
STATUS OF PRIOR AUDIT FINDINGS
Year ended June 30, 2019
There were no findings noted in the Single Audit Report for the year ended June 30,2018.