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HomeMy WebLinkAboutStaff Report 2412-3952CITY OF PALO ALTO Policy & Services Committee Special Meeting Tuesday, February 11, 2025 7:00 PM     Agenda Item     1.Office of the City Auditor Presentation of the Grant Management Audit Report Staff Presentation 6 2 0 6 Policy & Services Committee Staff Report From: City Manager Report Type: ACTION ITEMS Lead Department: City Auditor Meeting Date: February 11, 2025 Report #:2412-3952 TITLE Office of the City Auditor Presentation of the Grant Management Audit Report RECOMMENDATION The Office of the City Auditor recommends the Policy and Services Committee approve the results of the Grant Management Audit Report. BACKGROUND Baker Tilly, in its capacity serving as the Office of the City Auditor (OCA), performed a citywide risk assessment that assessed a wide range of risk areas, including strategic, financial, operational, compliance, technological, and reputation risks. The purpose of the assessment was to identify and prioritize risks to develop the annual audit plan. During the FY23 risk assessment, the OCA identified grant management processes as a potential area of risk and included this audit on the FY24 Audit Plan. ANALYSIS The objective of the Grant Management Audit was to: Determine whether the City has adequate internal controls to manage the grant lifecycle efficiently and effectively. The City receives incoming grant funding from various sources to support its services, including federal, state, and local grants. Most of the City’s grant funding comes from federal agencies. The OCA assessed the City’s efforts to date on the grant management lifecycle through interviewing key staff, analyzing policies and procedures, and selecting a sample of FY22-FY24 grants to assess whether grant performance standards, procurement, and reporting complied with grant requirements, City policies, and best practices. Audit findings and recommendations focused on three areas of improvement: 6 2 0 6 •The City’s lacks coordinated oversight of the City’s grant management efforts, resulting in inconsistent management across departments and the potential for non-compliance with grant requirements •While the City is actively pursuing grant opportunities, there is insufficient recordkeeping and internal reporting of active grants, resulting in limited monitoring and visibility of grant performance; and •The City does not consistently assess and track efforts in pursuit and management of grant opportunities to measure its return on investment. The attached report summarizes the analysis, audit findings, and recommendations. FISCAL/RESOURCE IMPACT The timeline and resource needs for implementation of management’s corrective action plans are identified by management within the attached report. STAKEHOLDER ENGAGEMENT The Office of the City Auditor worked with and would like to thank several departments for their assistance in conducting this audit including: Administrative Services, City Manager’s Office, Public Works, Planning & Development Services, Office of Transportation, Community Services, City of Palo Alto Utilities, Library, Police and Office of Emergency Services. ENVIRONMENTAL REVIEW Council action on this item is not a project as defined by CEQA because contracting for auditing services is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. CEQA Guidelines section 15378(b)(5). ATTACHMENTS Attachment A: Grant Management Audit Report, January 29, 2025 APPROVED BY: Kate Murdock, City Auditor Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms. City of Palo AltoOffice of the City Auditor (OCA) Policy & Services Committee Meeting Grant Management Audit, January 29, 2025 Presenter: Claire Veazey, Senior Consultant, Baker Tilly February 11, 2025 2 Audit Objective •Determine whether the City has adequate internal controls to manage the grant lifecycle efficiently and effectively. 3 Background •The City receives federal, state, and local grant funding from a variety of agencies. •The City prepares an annual Schedule of Expenditures of Federal Awards (SEFA) listing as part of the Single Audit. •The City uses Townsend Public Affairs to provide grant pursuit and management activities. •The City has recently hired a Grant Analyst position. 4 Finding 1: Coordinated Oversight Finding The City’s grant management lacks coordinated oversight, resulting in inconsistent management across departments and the potential for non-compliance with grant requirements. •The grant policy is not consistently implemented and enforced across departments: A Grant Application Authorization Checklist was not completed for 11 of 15 sampled grants. Copies of acceptance and/or cooperative agreements were not provided to all the relevant sponsoring departments for all samples tested. •The grant policy does not govern the complete grant lifecycle 5 Finding 1: Coordinated Oversight Recommendation We recommend the City update the grant policy to outline departmental management of grant activities, including tracking, monitoring, and closing. Additionally, ensure all departments receive training on the updated policy and determine if it applies to all grants or only those actively applied for by the City. Lastly, utilize the Grant Analyst position for coordinated oversight of grant administration from application to closure. 6 Finding 2: Recordkeeping and Internal Reporting Finding The City lacks sufficient recordkeeping and internal reporting, leading to limited monitoring and visibility of grant performance. We observed the following: There is not a complete, central repository of all active City grants. Grants do not have formalized internal tracking and reporting in place. Grant milestones are not formally communicated by departments The City has not formally tracked which grants have been applied for versus awarded. 7 Finding 2: Recordkeeping and Internal Reporting Recommendation We recommend that the City: •Establish a central repository for all grants, detailing the number of active grants, their sources (federal or local), and dollar amounts. •Consider setting up separate accounts or cost centers for each grant in the financial system (SAP) for easier tracking. •For non-recurring grants, track and monitor milestones, and notify relevant departments upon award or closure to improve recordkeeping. •Utilize the Grant Analyst position to enhance tracking and reporting, helping the City gauge trends and review grant applications versus awards. 8 Finding 3: Grant opportunities Finding The City does not consistently assess and track efforts in pursuing and managing grant opportunities to measure return on investment. •The City does not assess potential grants based on the required effort, time, and complexity. •While Townsend Public Affairs has provided some valuable services to the City, they have not provided all contract deliverables. •The Grant Analyst plans to work with Townsend to clarify deliverables and incorporate a strategic funding plan and a grant dashboard. 9 Finding 3: Grant Opportunities Recommendation We recommend that the City consider establishing a system to assess grant pursuit, application, and administration efforts. The City should determine if tracking staff time spent pursuing and managing grants would be beneficial. Finally, we recommend that City continue to explore and implement strategies to make the most effective use and reporting of the external contract for grant application, tracking and monitoring services. Questions? Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, operate under an alternative practice structure and are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms. The name Baker Tilly and its associated logo is used under license from Baker Tilly International limited. 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