Lompoc Flowers May 14, 2014 Ted Sten, Foreman Grand Jury Room/County Courthouse*

STATEMENT OF PURPOSE The City of Lompoc recognizes the value provided to the community by Sub- recipients (as defined below) and the wider policy goal of Federal and State regulations and laws that promote the use of Federal, State and Local resources to extend the affordability of housing for residents, and fund organizations that provide community resources and services that improve the quality of life for area residents. This Sub-recipient Financial, Programmatic, and Monitoring Reporting Requirement Policy (Policy) provides guidance and direction to decision makers and staff on methods and procedures to increase adherence and compliance to rules and regulations governing the use of public funds, provided by or passed through the City of Lompoc to the Sub-recipients. The Policy encourages adherence to the applicable provisions of the State Health and Safety Code and all other applicable laws, rules, and regulations of the associated funding sources used to assist an organization or project, and the Lompoc Municipal Code. The Policy strives to mitigate the risks of loss, both financial and material, to improve enforcement of contractual terms and conditions, and to determine if organizations and providers adequately adhere to their contracts and agreements by providing the services in accordance with those agreements. The Policy will establish the guidelines and requirements of contract and grant compliance management, for those Sub-recipients affected by this Policy and provides direction in evaluating and reporting instances of non-compliance.

Audits shall be conducted by an independent auditor qualified to conduct audits of Sub-recipients. The Sub-recipient shall provide the necessary authorization to its independent auditor to allow the City to determine the auditor's qualifications or to discuss the Sub-recipient's financial condition.

The financial cost of audits shall not be directly borne by the City. The organization requesting funds from the City must utilize any resources available to it to complete the audit, including resources received from the City.

It is the responsibility of each Sub-recipient to notify the City if it becomes aware of any change in circumstances that would delay or negate the obligation to report under this Policy, including approval of a downgraded financial report as a substitute for the audit requirement by the Compliance Committee.

In addition to the annual reporting requirements, the applicable Sub- recipient organization subject to the audit, IRS tax return form, or Certified Financial Statements submittal, is required to submit those documents to the City in conjunction with any application for funding. The specific application for funds may indicate the specific reporting requirements. B. City Financial Reporting Responsibilities Sub-recipients subject to the Policy will be provided a courtesy notice from the City if the required reports are not received 30 days prior to the date due for that Sub-recipient's annual or financial report (generally due March 15). Chapter 45 Issue 1 Sub-recipients who fail to submit their required audits, annual reports, financial reports, or tax returns by the March 15 deadline will receive a First Notice from the ECD Department reiterating the requirement for submittal of the appropriate report and providing notice it must be received on or before April 15. Those Sub-recipients that have not submitted the required reports by April 15 will then be provided a Second Notice to comply on or before April 30. The Second Notice will include the final due date of April 30 and language that Sub-recipient's deficient status will be reported to the City Council if a response is not received on or before April 30. (If any of the dates set forth in this Subsection B. is a day City Hall is closed to the public, then that date will be extended to the next immediate date City Hall is open to the public.) Sub-recipients subject to the Policy that do not comply with the Second Notice will be deemed to be non-compliant. Staff will then request all non- compliant Sub-recipients submit a compliance plan outlining the steps and timeframe necessary to bring their organization into compliance with the Policy within 10 days after the date of compliance with the Second Notice. All plans will need to be approved by City staff and must bring the Sub- recipient into compliance no later than June 30. Failure to meet this requirement will expose the organization to the options listed in Section V.B.7. below.

The City Administrator, upon receiving notification from the City's Management Services Department and/or the ECD Department of any non-compliant findings, will notify Council of those findings and provide recommended options for consideration. Consideration and possible action regarding the findings report will then be scheduled (within 60 days of the date Council is notified), as an agenda item for discussion. Council will take appropriate action unless a super majority vote of the Council agrees to not take action. Recommended options include, but are not limited to: a. Forfeiture of any remaining unpaid grant or loan funds; Repayment of previously paid grant or loan funds; Prohibition from applying for, or receiving funds from the City in the future, until such time that the City deems the Sub-recipient to be compliant with the conditions of the Policy; d. Any other legal actions available to the City; and e. Any other legal actions as outlined in the original agreement (loan documents, contracts, applications, etc.) for funding. The Human Services Commission Compliance Policy is incorporated into 8. this Policy and reads as follows: "All agencies, which are entering into contracts with the City of Lompoc whether financial or service based, must be in compliance with all City of Lompoc conditions as outlined in the contract in order to qualify for City Human Services funding. An agency designated to receive funding but deemed non-compliant in any contract with the City of Lompoc, will have said human services funding withheld until compliance is achieved, as determined by City staff. Compliance must be achieved no later than the 3rd quarter of the City's fiscal year in which funding was awarded. Forfeiture of any funding by the end of the 3rd quarter will be reallocated in the 4th quarter by the City Council based on recommendations by the Human Services Commission." Chapter 45 Issue 1 Incorporation of the Human Services Commission policy does not bind nor make the Human Services Commission responsible for any portion of this Policy. For the purpose of incorporation of the Human Service Policy to this policy note that the term Agency has the same meaning as Sub- recipient in this policy, and to qualify for City funding the same requirements exist as with the Human Service funding in regard to withholding funds and qualifying for those funds. The Compliance Committee will make a recommendation to the City Council for action based on the reallocation of funding as listed in the Human Services Commission policy above, recommended options as listed in Section V.B.7. of this Policy, or other appropriate options that may be available for consideration.

Funding requirements to carry out the provisions of the Policy shall be requested by the City's Economic Development Director/Assistant City Administrator and Management Services Director through the standard biennial budgeting process. Funding sources may include: federal housing grant funding, if available; loan servicing fees collected from housing loans, if available; other housing funds, such as the administrative allowance in the Housing Trust Fund, if available; and other sources identified in the budgeting process. Monitoring funding may also be derived through future affordable housing project fees assessed at the time of funding approval to offset affordability monitoring costs and costs related to the management and enforcement of the Policy. VI. PROGRAMMATIC PROCEDURES Reporting obligations of City funded Sub-recipients are drafted in accordance with, but not limited to, U.S. Department of Housing and Urban Development's (HUD) Community Development Block Grant (CDBG) and HOME program, the State of California's Department of Housing and Community Development (HCD), and other local, state and federal programmatic requirements. A. Compliance Reviews: Compliance reviews will be conducted in accordance with the terms of the applicable agreement and adherence to applicable regulations. Sub-recipient compliance is determined by City staff by providing in-house reviews, annual report reviews, financial reporting reviews and compliance, and site monitoring visits. The Management Services Director will be ultimately responsible for the compliance of financial reporting contained in the Policy. The Economic and Community Development Director/Assistant City Chapter 45 Issue 1 Administrator will be ultimately responsible for programmatic, contractual, and compliance monitoring decisions.

SCOPE The procedures contained in the Policy are established to provide general instructions for comprehensive reporting, tracking and review of existing and potential non-profit partners, affordable housing providers, and affordable housing developers (collectively, Sub-recipients) funded by the City, who provide services that are not core to the nature of local government, but promote the wider community goals and those of the associated Federal and State housing agencies. Chapter 45 Issue 1 City assistance to Sub-recipients involves specific service delivery standards, financial commitments, and other legal terms and conditions. The complexity of those relationships requires contracts and grants that clearly outline the specific obligations to all parties, as well as management oversight, reporting, and compliance processes that ensure programmatic and financial accountability. Standardized language identifying requirements of the Policy should be incorporated into all future applicable contracts, agreements, and documents, along with any required program or contractual compliance requirements. The Policy identifies essential City practices that will ensure that when the City enters into a contract or awards a grant to a Sub-recipient, the terms, conditions, financial responsibility, and performance outcomes are met in a way the public can be satisfied is of the highest legal and ethical standard. The following areas identify three different aspects of funding to Sub-recipients: A. The financial conditions the Sub-recipient must meet to be reimbursed by the City for existing or potential expenses incurred currently and/or in the future; B. The compliance of Sub-recipients with any and all contractual obligations required of the entity for the term of the contract or agreement, and the delivery of the services or products per contract; and C. The general topics related to City finance and compliance. These three aspects are further defined and expanded upon in the following sections. SUB-RECIPIENT DEFINED III. For the purposes of this Policy a Sub-recipient is defined as an affordable housing organization organized primarily to provide for lower-income residential, transitional, and homeless housing needs, non-profit agencies providing community services, and organizations that receive funding through the City by way of grants or loans. Affordable housing is a general term applied to public- and private-sector efforts designed to assist lower-income people with access to available government and privately-funded housing programs and other services that meet their unique needs, including shelters and transitional housing. Some City funded Sub- recipients offer housing-related assistance to people of lower incomes, thereby augmenting the City's overall objective of meeting its affordable housing priorities. Chapter 45 Issue 1 IV. APPLICABILITY All Sub-recipients funded by the City are subject to the requirements of their individual City contracts, agreements, and funding sources. The Policy contains requirements that may fully or partially apply to those Sub-recipients as part of their program and contract compliance measures. The Policy contains additional financial reporting requirements for those Sub-recipients that receive more than $50,000 of City funding in any single fiscal year. For those organizations subject to the audit requirement of this Policy, there is an opportunity to apply for a downgraded financial reporting submittal (such as certified financial statements prepared by a Certified Public Accountant or signed tax returns), if the organization can demonstrate that providing an audit in the time period required would cause an economic hardship. The downgraded financial reporting request would be submitted on an annual basis, and would be approved or denied by a Compliance Committee. The Compliance Committee shall be comprised of five members: one member of the City's Economic and Community Development Department; one member from the City's Management Services Department; an annually rotating member from the Human Services Commission; an annually rotating member of the City Council; and the City Administrator or designee. The Committee is subject to the Brown Act and Public Records Act. The audit downgrade does not dismiss other contractual obligations of this Policy or the individual contracts and agreements between the organization and the City of Lompoc. The audit submittal requirement of this Policy does not apply to entities or Sub- recipients receiving funds for City services obtained through standard procurement procedures or those organizations contracted by the City to provide services that would otherwise be required to be carried out by the City. For example, contracts for services or purchase orders for materials or professional services by the City would not be subject to the Policy. V. FINANCIAL PROCEDURES Reporting obligations of City funded Sub-recipients meeting the financial reporting requirements identified by this Policy, must submit either an audit, certified financial statements prepared by a Certified Public Accountant, or a signed completed IRS tax return form with an information release. According to the amount of funding received and the requirements of the individual contracts or agreements, any Sub-recipient, whose grant or loan exceeds $50,000 in any fiscal year, is required to submit an independent audit, unless a lesser reporting requirement is approved by the Compliance Committee, as discussed in Section IV. above. Chapter 45 Issue 1 A. Sub-recipient Financial Reporting Responsibilities 1. To be a valid current report, the date of the audited financial statements shall be within the time requirements of the Office of Management and Budget Circular 133 (OMB-133). Generally, those timeframes are as follows: The Sub-recipient is required to submit two copies of the annual audit report, certified financial statements, or signed IRS tax return form, one to the City of Lompoc's Management Services Department and one to the Economic and Community Development (ECD) Department (100 Civic Plaza, Lompoc, CA 93436), electronically (preferred) or in hard copy. Required reports are due within 90 days after the close of the organization's reporting period, but no later than March 31 of the following year.