Audit 362316

FINDING 2024-001 Subject: CDBG - Entitlement/Special Purpose Grants Cluster - Reporting, Special Tests and Provisions - Environmental Reviews, Special Tests and Provisions - Rehabilitation Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-19-MC-18-0021, B-20-MC-18-0021, B-21-MC-18-0021, B-22-MC-18-0021, B-23-MC-18-0021 Compliance Requirements: Reporting, Special Tests and Provisions - Environmental Reviews Special Tests and Provisions - Rehabilitation Audit Finding: Material Weakness Condition and Context An effective internal control system was not in place to ensure compliance with requirements related to the grant agreement and the Reporting, Special Tests and Provisions - Environmental Reviews, and Special Tests and Provisions - Rehabilitation compliance requirements. Reporting The Community Development Block Grant (CDBG) recipients are required to submit a Financial Summary Report (PR26) annually. The report is generated from information entered by the City into the U.S. Department of Housing and Urban Development (HUD) Integrated Disbursement Information System (IDIS). The Financial Summary Report (PR26) was prepared with supporting documentation attached and submitted by one employee without evidence of an oversight or review process to ensure that the report was accurate and complete. Special Tests and Provisions - Environmental Reviews CDBG recipients are required to prepare an environmental review over projects that are deemed necessary and maintain written documentation for the projects that are deemed not necessary to have an environmental review. The CDBG Program Manager prepared environmental reviews when necessary and prepared documentation when the project was exempt from the requirement; however, there was no review or oversight process in place to ensure that the environmental reviews were completed and the required documentation was completed or being maintained. Special Tests and Provisions - Rehabilitation CDBG recipients are required to conduct onsite inspections prior to rehabilitation work being completed to document the deficiencies of the residential property and include that information in a scope of work contract with the homeowner. INDIANA STATE BOARD OF ACCOUNTS 14 CITY OF LA PORTE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The CDBG Program Manager conducted onsite inspections of the rehabilitation projects and maintained the case files where required documentation was maintained. However, there was no oversight or review process in place to ensure that the inspections were completed or that the required information was properly included in the contract with the homeowner. The lack of internal controls was systemic throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls was not designed or implemented by management of the City to ensure that policies and procedures were in place related to the Reporting, Special Tests and Provisions - Environmental Reviews, and Special Tests and Provisions - Rehabilitation compliance requirements to ensure the amounts reported were accurate and the proper documentation that was to be maintained was maintained properly. Effect Without the proper implementation of an effectively designed system of internal controls over the Reporting, Special Tests and Provisions - Environmental Reviews, and Special Tests and Provisions - Rehabilitation compliance requirements, the City cannot ensure that the reports submitted are materially accurate and correct and that the proper documentation is properly being maintained. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City establish a proper system of internal controls over the Financial Summary Report (PR26), environmental reviews and supporting documentation, and inspections for rehabilitation work to ensure the inspections are completed and the required information is included in the Scope of Work Contracts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2024-001 Subject: CDBG - Entitlement/Special Purpose Grants Cluster - Reporting, Special Tests and Provisions - Environmental Reviews, Special Tests and Provisions - Rehabilitation Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-19-MC-18-0021, B-20-MC-18-0021, B-21-MC-18-0021, B-22-MC-18-0021, B-23-MC-18-0021 Compliance Requirements: Reporting, Special Tests and Provisions - Environmental Reviews Special Tests and Provisions - Rehabilitation Audit Finding: Material Weakness Condition and Context An effective internal control system was not in place to ensure compliance with requirements related to the grant agreement and the Reporting, Special Tests and Provisions - Environmental Reviews, and Special Tests and Provisions - Rehabilitation compliance requirements. Reporting The Community Development Block Grant (CDBG) recipients are required to submit a Financial Summary Report (PR26) annually. The report is generated from information entered by the City into the U.S. Department of Housing and Urban Development (HUD) Integrated Disbursement Information System (IDIS). The Financial Summary Report (PR26) was prepared with supporting documentation attached and submitted by one employee without evidence of an oversight or review process to ensure that the report was accurate and complete. Special Tests and Provisions - Environmental Reviews CDBG recipients are required to prepare an environmental review over projects that are deemed necessary and maintain written documentation for the projects that are deemed not necessary to have an environmental review. The CDBG Program Manager prepared environmental reviews when necessary and prepared documentation when the project was exempt from the requirement; however, there was no review or oversight process in place to ensure that the environmental reviews were completed and the required documentation was completed or being maintained. Special Tests and Provisions - Rehabilitation CDBG recipients are required to conduct onsite inspections prior to rehabilitation work being completed to document the deficiencies of the residential property and include that information in a scope of work contract with the homeowner. INDIANA STATE BOARD OF ACCOUNTS 14 CITY OF LA PORTE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The CDBG Program Manager conducted onsite inspections of the rehabilitation projects and maintained the case files where required documentation was maintained. However, there was no oversight or review process in place to ensure that the inspections were completed or that the required information was properly included in the contract with the homeowner. The lack of internal controls was systemic throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls was not designed or implemented by management of the City to ensure that policies and procedures were in place related to the Reporting, Special Tests and Provisions - Environmental Reviews, and Special Tests and Provisions - Rehabilitation compliance requirements to ensure the amounts reported were accurate and the proper documentation that was to be maintained was maintained properly. Effect Without the proper implementation of an effectively designed system of internal controls over the Reporting, Special Tests and Provisions - Environmental Reviews, and Special Tests and Provisions - Rehabilitation compliance requirements, the City cannot ensure that the reports submitted are materially accurate and correct and that the proper documentation is properly being maintained. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City establish a proper system of internal controls over the Financial Summary Report (PR26), environmental reviews and supporting documentation, and inspections for rehabilitation work to ensure the inspections are completed and the required information is included in the Scope of Work Contracts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.