CITY OF FORT COLLINS, COLORADO

Assistance Listing Number, Federal Agency, and Program Name - ALN 20.205, Department of Transportation, Highway Planning and Construction - ALN 21.027, Department of the Treasury, COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number and Year - ALN 20.205: SHO M455- 136 (2024), STU M455-129 (2024), STU 2873-215 (2024), CRP M455-164 (2024), SHO M455-137 (2024), SHO M455-135 (2024), and STU M455-125 (2024) - ALN 21.027: N/A Pass-through Entity - ALN 20.205: Colorado Department of Transportation - ALN 21.027: N/A Finding Type - Material weakness Repeat Finding - Yes 2023-003 Criteria - According to 2 CFR 200.502, the determination of when a federal award is expended must be based on when the activity related to the federal award occurs. Generally, the activity pertains to the events that require the nonfederal entity to comply with federal status, regulations, and the terms and conditions of federal awards, such as expenditure/expense transactions associated with awards including grants. Condition - The fiscal year 2024 schedule of expenditures of federal awards (SEFA) that was initially provided to the auditors was incorrect because it included expenditures related to fiscal years 2023 and 2025. Questioned Costs - N/A If Questioned Costs are not Determinable, Description of why Known Questioned Costs Were Undetermined or Otherwise Could not be Reported - N/A Identification of How Questioned Costs Were Computed - N/A Context - Within Highway Planning and Construction, the expenditures reported on the initial SEFA included $142,724 that related to expenditures incurred in fiscal year 2023. There was also $16,128 that related to expenditures incurred in fiscal year 2024 that was not reported on the initial SEFA. Within Coronavirus State and Local Fiscal Recovery Funds, the expenditures reported on the initial SEFA included $15,921 that related to expenditures incurred in fiscal year 2023 and $99,200 that related to expenditures incurred in fiscal year 2025. Cause and Effect - The City reported federal expenditures in congruence with requests for reimbursement from the federal agency, rather than when the expenditures was incurred. Recommendation - The City should implement controls to ensure that the SEFA is prepared in accordance with applicable rules and regulations. Views of Responsible Officials and Corrective Action Plan - The City of Fort Collins, Colorado has determined that two separate and identifiable root causes led to the inclusion of expenditures from fiscal years 2023 and 2025 in the initial fiscal year 2024 SEFA. 1. Improper Accrual of Prepayments: A small number of transactions involving partial prepayments were not properly accrued in accordance with accounting standards. To address this issue, the City will implement a formal review process where all reimbursement requests are reviewed by the grant accountant prior to submission. This review will include a targeted examination of expenditure listings to identify and ensure appropriate treatment of any transactions requiring accrual as prepayments. 2. Inconsistencies Between Reimbursement Packets and the General Ledger: For the Highway Planning and Construction Cluster, the SEFA preparation process previously relied on reimbursement request packets compiled by departmental staff. In some cases, these packets did not accurately reflect the timing of expenditures recorded in the general ledger. To enhance accuracy, the City will implement a reconciliation procedure requiring the grant accountant to cross-reference reimbursement packet data with the general ledger during SEFA preparation. This step will help ensure that all expenditures are properly reported in the appropriate fiscal year. The City is confident that these corrective actions will strengthen internal controls over SEFA preparation and prevent recurrence of similar issues in future reporting periods.

Assistance Listing Number, Federal Agency, and Program Name ALN 20.205, Department of Transportation, Highway Planning and Construction Federal Transit Cluster, ALNs 20.500 (Federal Transit Capital Investment Grants), 20.507 (Federal Transit Formula Grants), 20.507 (COVID 19, Federal Transit Formula Grants), and 20.526 (Bus and Bus Facilities Formula Program & Discretionary Programs), Department of Transportation Federal Award Identification Number and Year ALN 20.205: STU M455 125, SHO M455 124, and STU CO60 086 ALN 20.500: 1138 2022 1 ALN 20.507: CO 2023 015 00, CO 2021 031, CO 2023 015 00, and CO 2023 014 (COVID 19) ALN 20.526: CO 2023 013 00, 1138 2023 4, 1138 2023 7, 1138 2023 3, CO 2022 003 00, and CO 2023 001 Pass through Entity ALN 20.205 Colorado Department of Transportation ALNs 20.500, 20.507, and 20.526 N/A Finding Type Material weakness Repeat Finding No Criteria According to 2 CFR 200.502, the determination of when a federal award is expended must be based on when the activity related to the federal award occurs. Generally, the activity pertains to the events that require the nonfederal entity to comply with federal status, regulations, and the terms and conditions of federal awards, such as expenditure/expense transactions associated with awards including grants. Per GASB Implementation Guide 2019 1 Question 4.7, in the absence of an executed grant agreement before the end of the reporting period, a government cannot establish that it has incurred allowable costs. Additionally, the applicable FTA section of the federal register for the grants in question indicates that "pre award authority is not a legal or implied commitment that the subject project will be approved for FTA assistance or that FTA will obligate federal funds." Condition The fiscal year 2023 schedule of expenditures of federal awards (SEFA) that was initially provided to the auditors was incorrect because it included expenditures related to fiscal year 2022, as well as expenditures that were incurred before an executed grant agreement was in place. Questioned Costs None Identification of How Questioned Costs Were Computed N/A Context The expenditures on the City's SEFA were misreported as follows: ALN 20.205, Highway Planning and Construction The expenditures reported on the initial SEFA included $641,174 that related to expenditures incurred in fiscal year 2022. ALNs 20.500, 20.507, and 20.526, Federal Transit Cluster The expenditures reported on the initial SEFA included $5,250,990 that related to expenditures incurred in prior fiscal years, or for which an executed grant agreement had not yet been received as of December 31, 2023. ALNs 20.507, 20.507 (COVID 19), and 20.526, Federal Transit Cluster The expenditures reported on the initial SEFA excluded $9,103,948 that related to expenditures incurred in fiscal year 2022, during which an executed grant agreement had not yet been received, but was received during the year ended December 31, 2023. Cause and Effect Related to the instance where fiscal year 2022 expenditures were reported on the fiscal year 2023 SEFA, the City reported federal expenditures in congruence with requests for reimbursement from the federal agency, rather than when the expenditures was incurred. Related to the Federal Transit Cluster, the City has historically interpreted pre award authority granted by the FTA as the trigger to recognized federal expenditures, even without an executed grant agreement. As a result, the SEFA in fiscal year 2023 was initially misstated requiring a restatement of the 2022 SEFA. These errors did impact major program determination, wherein ALN 20.205, Highway Planning and Construction, which was originally required to be tested in fiscal year 2023, did not need to be assessed as a major program based on the reissued 2022 SEFA. The final SEFA for fiscal year 2023 has been corrected for these errors. Recommendation The City should implement controls to ensure that the SEFA is prepared in accordance with applicable rules and regulations. Views of Responsible Officials and Corrective Action Plan Expenditures will be reported on the SEFA only for grant programs with an executed award regardless of the year incurred. SEFA preparation procedures have been updated to ensure analysis of grant execution date.