Oxnard audit flags CDBG and SAFER compliance lapses; staff outlines corrective action plan

The Finance and Governance Committee on April 22 received the City of Oxnard's 2024 single audit and an update on the city's corrective action plan, and approved forwarding both presentations to the full City Council.

Auditors told the committee the city's federal-expenditures schedule for fiscal 2024 totaled about $26.3 million and that three major programs were tested: the American Rescue Plan Act/local fiscal recovery fund (ARPA), Community Development Block Grants (CDBG) and the Staffing for Adequate Fire and Emergency Response (SAFER) grant. Auditor Brandon Farrell of ED & Payne said the three major programs accounted for roughly $17 million in expenditures, with about $5.2 million flowing to subrecipients.

The single audit produced no new financial-statement opinion issues, Farrell said, but identified four compliance-related findings across major programs and one lingering prior-year IT control item. "We had no new current year findings for 02/2024," Farrell said, and added that the remaining prior-year IT issue relates to formalizing a process to install computer updates and service systems.

The three compliance findings included two for the CDBG program and two for SAFER. The CDBG issues were (1) program-income accounting: auditors said staff "had not properly or accurately or timely reconciled the program income and had been making requests for additional funds and not using the program income, before making those requests," and (2) late filing of required reports (auditors characterized the late filings as a significant deficiency in internal controls over compliance). Farrell explained the program-income rule: earnings derived from grant funds must be used for program purposes before requesting additional federal funds.

Interim Housing Director Bridal Lopez told the committee that subrecipients are required to submit reports on a quarterly basis and that the city's CDBG report in this case "was being submitted on an annual basis, should have been on a quarterly basis." Lopez and auditors cited staff turnover and misunderstanding of reporting schedules as contributing factors; auditors and staff said a corrective-action plan, additional training and consultant support are under way.

SAFER-related findings centered on timekeeping and charge-code allocation. Auditors noted a risk that automatic approvals in the rostering/timekeeping process could allow hours to be charged to the wrong federal program unless a timely manual review occurs. Fire Chief Hamilton described the department's daily roster system and the multiple supervisory checks that precede payroll: "So for us it's incredibly important that we know exactly who's where and when," he said, explaining why the roster doubles as a time and accountability record. Chief Hamilton and staff said retraining and a daily supervisory review have been implemented to reduce the risk.

A prior IT-control finding dating back to 2020 remains open: auditors said one outstanding item concerns a formal process for installing system updates. "They are currently in the process of working through that, and it should be clear in that area in the near future," Farrell said. City staff noted many IT details are sensitive and that a fuller update is scheduled for the April 29 City Council meeting.

A member of the public, identified as Ms. Purcell, urged the committee not to dismiss internal-control weaknesses and said some oversight functions previously held by the elected city treasurer had been diminished. "This finding might not have occurred had the city administration not prevented the elected treasurer from doing his job," Purcell said during public comment.

Committee members pressed staff on whether the findings reflected new problems or the effects of turnover and on steps to prevent repeat findings. Staff described newly implemented checklists, consultant support, retraining, and ongoing monitoring; a new enterprise resource planning payroll/time system (implemented in January) will be reviewed by auditors in the next audit cycle.

Motions: The committee voted 3-0 to forward the 2024 single audit report and the staff's corrective-action update to the full City Council. Committee member Rodriguez, Committee member Starr and Chair McArthur recorded aye votes on both motions.

Why it matters: Single-audit findings affect the city's compliance with federal grant terms and could affect future grant administration if not corrected. Staff described immediate steps to address reconciliation, reporting cadence, rostering/timekeeping reviews and IT controls, and told the committee they will return with updates as corrective actions are implemented.

What's next: The city will present the IT update to the full City Council on April 29. Auditors and staff said they will monitor implementation of corrective actions and auditors will test the new timekeeping and payroll controls in the next audit period.