Identification of the Federal Programs:
Assistance Listing Number:21.027
Assistance Listing Title:Coronavirus State and Local Fiscal Recovery Funds
Federal Agency: Department of Treasury
Federal Award Number:N/A
Federal Award Year:FY 2024
Criteria or Specific Requirements:
Non-federal entities must comply with the Suspension and Debarment compliance requirement, which prohibits entering into covered transactions with parties that are suspended, debarred, or otherwise excluded. Covered transactions include procurement contracts for goods and services under nonprocurement transactions (e.g., grants or cooperative agreements) that are expected to equal or exceed $25,000, or as specified in 2 CFR § 180.220. Additionally, all subawards to subrecipients are considered covered transactions, regardless of the award amount, unless exempt per 2 CFR § 180.215.
To verify vendor eligibility, non-federal entities must confirm that lower-tier entities are not suspended, debarred, or excluded, as defined in 2 CFR § 180.995. This can be achieved through one of the following methods:
1. Checking the SAM: Use the SAM Exclusions database, managed by the General Services Administration (GSA), at SAM.gov.
2. Collecting a Certification: Obtain a certification directly from the entity confirming their eligibility to participate.
3. Including Contractual Clauses: Add a clause or condition to the transaction that requires the entity to comply with suspension and debarment requirements.
Identified Condition:
During the audit, the City was unable to provide evidence demonstrating that vendor eligibility had been verified prior to entering into contracts with two of the eight sampled vendors. This lapse in documentation raises concerns regarding compliance with the suspension and debarment requirements and highlights the need for strengthened internal controls over vendor verification processes.
Cause:
Lack of knowledge regarding alternative procedures for verifying the suspension and debarment status of vendors not registered in the SAM.
Effect or Potential Effect:
The City’s lack of knowledge regarding alternative procedures to verify the suspension and debarment status of vendors not registered in SAM increases the risk of engaging vendors who may be suspended or debarred. This could result in noncompliance with federal regulations, jeopardize the integrity of procurement processes, and expose the City to potential financial and reputational consequences.
Questioned Costs:
None
Recommendation:
We recommend that the City:
1. Implement Alternative Verification Procedures
• Establish clear alternative methods, such as obtaining vendor certifications or including suspension and debarment compliance clauses in contracts, to verify vendors not listed in SAM.
2. Provide Staff Training
• Educate staff on the suspension and debarment requirements and alternative verification options to ensure consistent compliance practices.
3. Develop Internal Policies
• Create formal policies outlining the verification process, including steps for handling vendors not registered in SAM, to standardize procedures across all departments.
4. Enhance Monitoring and Oversight
• Implement regular monitoring and oversight mechanisms to ensure verification processes are consistently followed for all covered transactions.
5. Document Verification Efforts
• Maintain detailed records of vendor eligibility verification to provide evidence of compliance during audits.
By adopting these measures, the City can address the issue, mitigate risks, and ensure adherence to suspension and debarment requirements.
Views of Responsible Officials and Planned Corrective Action Plan:
Former City Manager Ernie Hernandez has instructed department heads and grant analysts to enhance the City’s practice in the suspension/debarment verification process starting Quarter 4, FY2023 -24. However, the two service providers noted for not having proper debarment search in the current fiscal year 2023-24 Single Audit were MiSalud, a healthcare service provider, which normally does not warrant a search, and Tanner, whose service was acquired by the City prior to the previous year’s audit.
Julian Lee, Interim City Manager, will ensure staff better adhering to the Uniform Guidance in the suspension/debarment verification process. For existing vendors that the City has not verified debarment or for vendors who do not register with SAM.gov, the City would accomplish the verification by (1) collecting a certification from the entity, or (2) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300).
Personnel Responsible for Implementation: Julian Lee
Position of Responsible Personnel: Interim City Manager
Expected Date of Implementation: March 31, 2026
Identification of the Federal Programs:
Assistance Listing Number: 14.239
Assistance Listing Title: HOME Investment Partnership Program
Federal Agency: Department of Housing and Urban Development
Federal Award Number: M-21-MC-060521;M-22-MC-060521;M-23-MC-060521
Federal Award Year: FY 2024
Criteria or Specific Requirements:
Under 24 CFR 92.254, Qualifications for Affordable Housing: Homeownership, participating jurisdictions utilizing HOME funds for homebuyer assistance or the rehabilitation of owner-occupied single-family properties must adhere to the affordable homeownership limits established by the United States Department of Housing and Urban Development (HUD). These limits are determined separately for newly constructed and existing housing.
For housing that is currently owned by a family to qualify as affordable, it must meet the following criteria:
(1) The estimated value of the property, after rehabilitation, does not exceed 95 percent of the median purchase price for the area, described in paragraph (a)(2)(iii) of this section; and
(2) The housing is the principal residence of an owner whose family qualifies as a low-income family at the time HOME funds are committed to the housing. In determining the income eligibility of the family, the participating jurisdiction must include the income of all persons living in the housing.
Identified Condition:
During the audit, we noted that two of the sampled properties received HOME funds, even though their after-rehabilitation values exceeded 95 percent of the median purchase price for the area.
Cause:
Lack of proper oversight and review processes to ensure compliance with HUD’s requirements. Specifically, there appears to be an absence of controls to verify that the after-rehabilitation values of properties receiving HOME funds remain within the allowable limits of 95% of the median purchase price for the area.
Effect or Potential Effect:
The improper allocation of HOME funds to properties exceeding the after-rehabilitation value limit could result in noncompliance with HUD regulations. This may lead to financial penalties, grant disallowances, or the need to repay the misallocated funds. Additionally, such instances undermine the program’s goal of promoting affordable housing and may erode trust in the City’s ability to manage federal funds responsibly.
Questioned Costs:
The known questioned cost is $78,921.
Recommendation:
We recommend that the City:
1. Strengthen Verification Processes
• Implement stricter controls to verify that after-rehabilitation property values align with HUD’s requirement of not exceeding 95% of the median purchase price for the area.
2. Provide Training on Compliance Requirements
• Conduct regular training sessions for staff involved in administering HOME funds to ensure they fully understand HUD’s regulations and limits.
3. Enhance Documentation Standards
• Require thorough documentation of eligibility verification, including evidence of compliance with the after-rehabilitation value threshold, to maintain audit readiness.
4. Develop Oversight Mechanisms
• Establish internal review or monitoring procedures to identify and address noncompliance issues promptly.
5. Consult HUD for Guidance
• Engage with HUD for clarification or support in applying the 95% rule to ensure the City’s procedures align with federal expectations.
These measures will help the City ensure compliance, avoid financial penalties, and maintain the integrity of the HOME program.
View of Responsible Officials:
Gabriel Linares, Director of Community Development, will enhance the department’s HOME assistance rules to ensure the value of the HOME-assisted property after rehabilitation will not exceed 95 percent of the median purchase price for the area starting Quarter 4, FY2024 -25.
Personnel Responsible for Implementation: Gabriel Linares
Position of Responsible Personnel: Director of Community Development
Expected Date of Implementation: June 30, 2025
dentification of the Federal Programs:
Assistance Listing Number: 14.218
Assistance Listing Title: Community Development Block Grants (CDBG) –
Entitlement Grants Cluster
Federal Agency: Department of Housing and Urban Development
Federal Award Number: B-20-MW-060559; B-23-MC-060559
Federal Award Year: FY 2024
Criteria or Specific Requirements:
Pursuant to the Guidance on Consolidated Annual Performance and Evaluation Report (CAPER) (24 CFR 91.520). Integrated Disbursement and Information System (IDIS) (OMB No. 2506-0077) – Grantees may include reports generated by IDIS as part of their annual performance and evaluation report that must be submitted for the CDBG Entitlement program 90 days after the end of a grantee’s program year.
Pursuant to Guidance on Section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding submit, not later than 10 days after the end of each calendar quarter, a report containing: information regarding the amount of funds received; the amount of funds obligated or expended for each project or activity; a detailed list of all such projects or activities, including a description of the project or activity; and detailed information on any subcontracts or subgrants awarded by the recipient. This report is limited to CDBG-CV funding and does not include other CDBG funds that may be used to address coronavirus. Grantees and subrecipients have reported data meeting the Section 15011 requirements at usaspending.gov. The Pandemic Response Accountability Committee (PRAC), an independent oversight committee within the Council of the Inspectors General on Integrity and Efficiency, has determined that the data reported in usaspending.gov has fulfilled these reporting requests. (“Section 15011 Report”).
Identified Condition:
The City did not submit the CAPER within the required timeframe, resulting in a delayed submission on October 17, 2024, which was 17 days past the deadline. Furthermore, three of the four required quarterly Section 15011 Reports for the fiscal year 2024 were not prepared or submitted. The only report submitted, the third quarterly report for the fiscal year 2024, was submitted late on April 15, 2024, which was 5 days past the deadline.
Cause:
The delay in submission and non-submission of the reports was attributed to inadequate internal processes and a lack of oversight, which hindered the timely completion and submission of the required documentation.
Effect or Potential Effect:
The delayed submission of the reports could result in noncompliance with federal reporting requirements, potentially jeopardizing future funding opportunities. It may also lead to increased scrutiny from oversight agencies and diminish confidence in the City’s ability to meet critical deadlines and manage federal programs effectively.
Questioned Costs:
None.
Recommendation:
We recommend that the City establish clear internal timelines and accountability measures, ensuring all responsible staff are aware of reporting deadlines. The City should proactively request an extension from the relevant federal agency if circumstances arise that might impact the timely submission of the reports. This includes providing a clear justification for the delay, outlining the steps being taken to complete the report, and proposing a revised timeline. Regular communication with the agency during the extension period will demonstrate accountability and commitment to compliance.
Views of Responsible Officials and Planned Corrective Action Plan:
Gabriel Linares, Director of Community Development, will enhance the department’s policy/desk procedure to ensure timely filing of the CAPER and Section 15011 reports starting Quarter Four, FY2024 -25.
Personnel Responsible for Implementation: Gabriel Linares
Position of Responsible Personnel: Director of Community Development
Expected Date of Implementation: June 30, 2025
Identification of the Federal Programs:
Assistance Listing Number:21.027
Assistance Listing Title:Coronavirus State and Local Fiscal Recovery Funds
Federal Agency: Department of Treasury
Federal Award Number:N/A
Federal Award Year:FY 2024
Criteria or Specific Requirements:
Non-federal entities must comply with the Suspension and Debarment compliance requirement, which prohibits entering into covered transactions with parties that are suspended, debarred, or otherwise excluded. Covered transactions include procurement contracts for goods and services under nonprocurement transactions (e.g., grants or cooperative agreements) that are expected to equal or exceed $25,000, or as specified in 2 CFR § 180.220. Additionally, all subawards to subrecipients are considered covered transactions, regardless of the award amount, unless exempt per 2 CFR § 180.215.
To verify vendor eligibility, non-federal entities must confirm that lower-tier entities are not suspended, debarred, or excluded, as defined in 2 CFR § 180.995. This can be achieved through one of the following methods:
1. Checking the SAM: Use the SAM Exclusions database, managed by the General Services Administration (GSA), at SAM.gov.
2. Collecting a Certification: Obtain a certification directly from the entity confirming their eligibility to participate.
3. Including Contractual Clauses: Add a clause or condition to the transaction that requires the entity to comply with suspension and debarment requirements.
Identified Condition:
During the audit, the City was unable to provide evidence demonstrating that vendor eligibility had been verified prior to entering into contracts with two of the eight sampled vendors. This lapse in documentation raises concerns regarding compliance with the suspension and debarment requirements and highlights the need for strengthened internal controls over vendor verification processes.
Cause:
Lack of knowledge regarding alternative procedures for verifying the suspension and debarment status of vendors not registered in the SAM.
Effect or Potential Effect:
The City’s lack of knowledge regarding alternative procedures to verify the suspension and debarment status of vendors not registered in SAM increases the risk of engaging vendors who may be suspended or debarred. This could result in noncompliance with federal regulations, jeopardize the integrity of procurement processes, and expose the City to potential financial and reputational consequences.
Questioned Costs:
None
Recommendation:
We recommend that the City:
1. Implement Alternative Verification Procedures
• Establish clear alternative methods, such as obtaining vendor certifications or including suspension and debarment compliance clauses in contracts, to verify vendors not listed in SAM.
2. Provide Staff Training
• Educate staff on the suspension and debarment requirements and alternative verification options to ensure consistent compliance practices.
3. Develop Internal Policies
• Create formal policies outlining the verification process, including steps for handling vendors not registered in SAM, to standardize procedures across all departments.
4. Enhance Monitoring and Oversight
• Implement regular monitoring and oversight mechanisms to ensure verification processes are consistently followed for all covered transactions.
5. Document Verification Efforts
• Maintain detailed records of vendor eligibility verification to provide evidence of compliance during audits.
By adopting these measures, the City can address the issue, mitigate risks, and ensure adherence to suspension and debarment requirements.
Views of Responsible Officials and Planned Corrective Action Plan:
Former City Manager Ernie Hernandez has instructed department heads and grant analysts to enhance the City’s practice in the suspension/debarment verification process starting Quarter 4, FY2023 -24. However, the two service providers noted for not having proper debarment search in the current fiscal year 2023-24 Single Audit were MiSalud, a healthcare service provider, which normally does not warrant a search, and Tanner, whose service was acquired by the City prior to the previous year’s audit.
Julian Lee, Interim City Manager, will ensure staff better adhering to the Uniform Guidance in the suspension/debarment verification process. For existing vendors that the City has not verified debarment or for vendors who do not register with SAM.gov, the City would accomplish the verification by (1) collecting a certification from the entity, or (2) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300).
Personnel Responsible for Implementation: Julian Lee
Position of Responsible Personnel: Interim City Manager
Expected Date of Implementation: March 31, 2026
Identification of the Federal Programs:
Assistance Listing Number: 14.239
Assistance Listing Title: HOME Investment Partnership Program
Federal Agency: Department of Housing and Urban Development
Federal Award Number: M-21-MC-060521;M-22-MC-060521;M-23-MC-060521
Federal Award Year: FY 2024
Criteria or Specific Requirements:
Under 24 CFR 92.254, Qualifications for Affordable Housing: Homeownership, participating jurisdictions utilizing HOME funds for homebuyer assistance or the rehabilitation of owner-occupied single-family properties must adhere to the affordable homeownership limits established by the United States Department of Housing and Urban Development (HUD). These limits are determined separately for newly constructed and existing housing.
For housing that is currently owned by a family to qualify as affordable, it must meet the following criteria:
(1) The estimated value of the property, after rehabilitation, does not exceed 95 percent of the median purchase price for the area, described in paragraph (a)(2)(iii) of this section; and
(2) The housing is the principal residence of an owner whose family qualifies as a low-income family at the time HOME funds are committed to the housing. In determining the income eligibility of the family, the participating jurisdiction must include the income of all persons living in the housing.
Identified Condition:
During the audit, we noted that two of the sampled properties received HOME funds, even though their after-rehabilitation values exceeded 95 percent of the median purchase price for the area.
Cause:
Lack of proper oversight and review processes to ensure compliance with HUD’s requirements. Specifically, there appears to be an absence of controls to verify that the after-rehabilitation values of properties receiving HOME funds remain within the allowable limits of 95% of the median purchase price for the area.
Effect or Potential Effect:
The improper allocation of HOME funds to properties exceeding the after-rehabilitation value limit could result in noncompliance with HUD regulations. This may lead to financial penalties, grant disallowances, or the need to repay the misallocated funds. Additionally, such instances undermine the program’s goal of promoting affordable housing and may erode trust in the City’s ability to manage federal funds responsibly.
Questioned Costs:
The known questioned cost is $78,921.
Recommendation:
We recommend that the City:
1. Strengthen Verification Processes
• Implement stricter controls to verify that after-rehabilitation property values align with HUD’s requirement of not exceeding 95% of the median purchase price for the area.
2. Provide Training on Compliance Requirements
• Conduct regular training sessions for staff involved in administering HOME funds to ensure they fully understand HUD’s regulations and limits.
3. Enhance Documentation Standards
• Require thorough documentation of eligibility verification, including evidence of compliance with the after-rehabilitation value threshold, to maintain audit readiness.
4. Develop Oversight Mechanisms
• Establish internal review or monitoring procedures to identify and address noncompliance issues promptly.
5. Consult HUD for Guidance
• Engage with HUD for clarification or support in applying the 95% rule to ensure the City’s procedures align with federal expectations.
These measures will help the City ensure compliance, avoid financial penalties, and maintain the integrity of the HOME program.
View of Responsible Officials:
Gabriel Linares, Director of Community Development, will enhance the department’s HOME assistance rules to ensure the value of the HOME-assisted property after rehabilitation will not exceed 95 percent of the median purchase price for the area starting Quarter 4, FY2024 -25.
Personnel Responsible for Implementation: Gabriel Linares
Position of Responsible Personnel: Director of Community Development
Expected Date of Implementation: June 30, 2025
dentification of the Federal Programs:
Assistance Listing Number: 14.218
Assistance Listing Title: Community Development Block Grants (CDBG) –
Entitlement Grants Cluster
Federal Agency: Department of Housing and Urban Development
Federal Award Number: B-20-MW-060559; B-23-MC-060559
Federal Award Year: FY 2024
Criteria or Specific Requirements:
Pursuant to the Guidance on Consolidated Annual Performance and Evaluation Report (CAPER) (24 CFR 91.520). Integrated Disbursement and Information System (IDIS) (OMB No. 2506-0077) – Grantees may include reports generated by IDIS as part of their annual performance and evaluation report that must be submitted for the CDBG Entitlement program 90 days after the end of a grantee’s program year.
Pursuant to Guidance on Section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding submit, not later than 10 days after the end of each calendar quarter, a report containing: information regarding the amount of funds received; the amount of funds obligated or expended for each project or activity; a detailed list of all such projects or activities, including a description of the project or activity; and detailed information on any subcontracts or subgrants awarded by the recipient. This report is limited to CDBG-CV funding and does not include other CDBG funds that may be used to address coronavirus. Grantees and subrecipients have reported data meeting the Section 15011 requirements at usaspending.gov. The Pandemic Response Accountability Committee (PRAC), an independent oversight committee within the Council of the Inspectors General on Integrity and Efficiency, has determined that the data reported in usaspending.gov has fulfilled these reporting requests. (“Section 15011 Report”).
Identified Condition:
The City did not submit the CAPER within the required timeframe, resulting in a delayed submission on October 17, 2024, which was 17 days past the deadline. Furthermore, three of the four required quarterly Section 15011 Reports for the fiscal year 2024 were not prepared or submitted. The only report submitted, the third quarterly report for the fiscal year 2024, was submitted late on April 15, 2024, which was 5 days past the deadline.
Cause:
The delay in submission and non-submission of the reports was attributed to inadequate internal processes and a lack of oversight, which hindered the timely completion and submission of the required documentation.
Effect or Potential Effect:
The delayed submission of the reports could result in noncompliance with federal reporting requirements, potentially jeopardizing future funding opportunities. It may also lead to increased scrutiny from oversight agencies and diminish confidence in the City’s ability to meet critical deadlines and manage federal programs effectively.
Questioned Costs:
None.
Recommendation:
We recommend that the City establish clear internal timelines and accountability measures, ensuring all responsible staff are aware of reporting deadlines. The City should proactively request an extension from the relevant federal agency if circumstances arise that might impact the timely submission of the reports. This includes providing a clear justification for the delay, outlining the steps being taken to complete the report, and proposing a revised timeline. Regular communication with the agency during the extension period will demonstrate accountability and commitment to compliance.
Views of Responsible Officials and Planned Corrective Action Plan:
Gabriel Linares, Director of Community Development, will enhance the department’s policy/desk procedure to ensure timely filing of the CAPER and Section 15011 reports starting Quarter Four, FY2024 -25.
Personnel Responsible for Implementation: Gabriel Linares
Position of Responsible Personnel: Director of Community Development
Expected Date of Implementation: June 30, 2025