Finding Reference Number: SA2022-002 - Federal Funding Accountability and Transparency Act (FFATA) Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252 that are codified in 2 CFR Part 170, direct recipients of grants are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Subawards that are entered into the FSRS System should be maintained so that any amendments to the subawards are also reflected in the system. Condition: We selected two of the City?s subawards for testing of the reporting on the FSRS. The two subawards tested were both more than $30,000. City staff was not able to provide documentation that the subawards were reported in the FSRS. Cause: We understand that program staff were not familiar with the FFATA reporting requirements. Effect: The City is not in compliance with the FFATA reporting requirements. Recommendation: The City should review all first-tier subaward agreements of $30,000 or more to ensure that FFATA reporting is completed. In addition, the City should develop procedures to ensure that FFATA reporting is accurate at all times and reflects any contract amendments and final subaward funding amounts. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-002 - Federal Funding Accountability and Transparency Act (FFATA) Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252 that are codified in 2 CFR Part 170, direct recipients of grants are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Subawards that are entered into the FSRS System should be maintained so that any amendments to the subawards are also reflected in the system. Condition: We selected two of the City?s subawards for testing of the reporting on the FSRS. The two subawards tested were both more than $30,000. City staff was not able to provide documentation that the subawards were reported in the FSRS. Cause: We understand that program staff were not familiar with the FFATA reporting requirements. Effect: The City is not in compliance with the FFATA reporting requirements. Recommendation: The City should review all first-tier subaward agreements of $30,000 or more to ensure that FFATA reporting is completed. In addition, the City should develop procedures to ensure that FFATA reporting is accurate at all times and reflects any contract amendments and final subaward funding amounts. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-002 - Federal Funding Accountability and Transparency Act (FFATA) Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252 that are codified in 2 CFR Part 170, direct recipients of grants are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Subawards that are entered into the FSRS System should be maintained so that any amendments to the subawards are also reflected in the system. Condition: We selected two of the City?s subawards for testing of the reporting on the FSRS. The two subawards tested were both more than $30,000. City staff was not able to provide documentation that the subawards were reported in the FSRS. Cause: We understand that program staff were not familiar with the FFATA reporting requirements. Effect: The City is not in compliance with the FFATA reporting requirements. Recommendation: The City should review all first-tier subaward agreements of $30,000 or more to ensure that FFATA reporting is completed. In addition, the City should develop procedures to ensure that FFATA reporting is accurate at all times and reflects any contract amendments and final subaward funding amounts. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-003 - Monitoring of CDBG Program Activities For Compliance with Program Rules and Regulations Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: 24 CFR part 570 details the various rules and regulations of the Community Development Block Grant (CDBG) Program. These regulations include specific program requirements for timing of activities, eligible and prohibited activities, project and subrecipient monitoring requirements, as well as other provisions. If the City does not adhere to the requirements of 24 CFR part 570 both before disbursement for eligible activities and on an ongoing basis to ensure continued compliance with the income eligibility requirements of the program, costs incurred under the program may be deemed ineligible and need to be returned to the grantor. Condition: The City underwent a monitoring review by the grantor in January 2023 related to the fiscal year 2019 CDBG Program, the results of which were issued in March 2023. The monitoring review results found that the City staff had not utilized the program and financial policies and procedures and resulted in three overall management and financial management findings along with the several sub-findings as follows: ? Finding Number 2023-01: CDBG Overall Management System o 2023-01-A ? Lack of eligibility determination of activity and national objective for three activities - no determination of its CDBG eligible activity and national objective with the actual evaluation records o 2023-01-B ? Recordkeeping - no actual evaluation records to support the City?s CDBG funded eligible activity determination and selections o 2023-01-C ? Reporting - the City reported the inconsistent information to HUD in the Integrated Disbursement and Information System (IDIS) and its completed Consolidated Annual Performance and Evaluation Report (CAPER) for the activity?s accomplishments. In addition, the last three program years? CAPERs were not submitted accurately and HUD had to request several corrections. ? Finding Number 2023-02: Financial Management System ? The City provided HUD with the ?Project Accounting Reporting Claims for Grant Reimbursement? and ?Purchasing Procedures? as its financial management policies and procedures, but the first document was not used and the Purchasing Procedures policies were not consistent with the CDBG Program Procedures Manual. o 2023-02-A - No Grant-based Accounting System Used to Manage the CDBG grant o 2023-02-B - City?s Financial Management System/Internal Control - The City did not maintain sufficient records to demonstrate compliance with CDBG requirements o 2023-02-C - Public Service and Planning and Administration Caps ? the City missed the Program Year 2019 public services (PS) Cap in the IDIS. The City requested a waiver, but the City must take action to correct the reporting in the IDIS system. o 2023-02-D - No Debarment and Suspension Verification - The City did not ensure that the CDBG funded activities were not made to any subawards, contracts, or any party excluded, disqualified, or otherwise ineligible (e.g., suspension, debarment, or limited denial of participation). ? Finding Number 2023-03: Environmental Review and Record - A review of three selected CDBG-funded activity?s environmental review and records (ERRs) found that City conducted the environmental review after these activities commenced and were completed. In addition, during our testing of project expenditures, we noted that the Environmental Review for Activity/Project that is Categorically Excluded Subject to Section 58.5 form for the Downtown Breezeway Improvements Project was signed on April 7, 2022. However, that date was subsequent to two payments to the contractor that we tested dated March 21, 2022 and April 8, 2022 that were for work performed in February and March, respectively. Cause: HUD determined the City staff lacked experience and knowledge of the CDBG program/project requirements and did not maintain the required documents. Although the City had its CDBG Procedures Manual since 2018 and is in the process of updating it with CDBG and CDBG-CV programs, the contents were not organized or utilized as an active manual by its staff. In addition, HUD found that City did not have CDBG-specific financial management policies and procedures and managed the CDBG funds with one chart of accounts without its grant-based accounting requirement. The City did not have an internal control system to enforce meeting the CDBG requirements. When the activities were carried out, the Parks and Recreation Department and the Finance staff made the reimbursements from IDIS without review of the CDBG eligible costs. For the environmental review finding, City staff could not locate the environmental review records to demonstrate compliance with the requirements. Effect: The City is not in full compliance with the program/project rules and regulatory requirements and according to HUD may incur a sanction, including repayment of ineligible costs. Recommendation: The City must develop policies and procedures to ensure that all grant program activities are in compliance with the provisions of 24 CFR part 570 and 24 CFR Part 92 and ensure that all the findings are resolved with the grantor in a timely manner. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-003 - Monitoring of CDBG Program Activities For Compliance with Program Rules and Regulations Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: 24 CFR part 570 details the various rules and regulations of the Community Development Block Grant (CDBG) Program. These regulations include specific program requirements for timing of activities, eligible and prohibited activities, project and subrecipient monitoring requirements, as well as other provisions. If the City does not adhere to the requirements of 24 CFR part 570 both before disbursement for eligible activities and on an ongoing basis to ensure continued compliance with the income eligibility requirements of the program, costs incurred under the program may be deemed ineligible and need to be returned to the grantor. Condition: The City underwent a monitoring review by the grantor in January 2023 related to the fiscal year 2019 CDBG Program, the results of which were issued in March 2023. The monitoring review results found that the City staff had not utilized the program and financial policies and procedures and resulted in three overall management and financial management findings along with the several sub-findings as follows: ? Finding Number 2023-01: CDBG Overall Management System o 2023-01-A ? Lack of eligibility determination of activity and national objective for three activities - no determination of its CDBG eligible activity and national objective with the actual evaluation records o 2023-01-B ? Recordkeeping - no actual evaluation records to support the City?s CDBG funded eligible activity determination and selections o 2023-01-C ? Reporting - the City reported the inconsistent information to HUD in the Integrated Disbursement and Information System (IDIS) and its completed Consolidated Annual Performance and Evaluation Report (CAPER) for the activity?s accomplishments. In addition, the last three program years? CAPERs were not submitted accurately and HUD had to request several corrections. ? Finding Number 2023-02: Financial Management System ? The City provided HUD with the ?Project Accounting Reporting Claims for Grant Reimbursement? and ?Purchasing Procedures? as its financial management policies and procedures, but the first document was not used and the Purchasing Procedures policies were not consistent with the CDBG Program Procedures Manual. o 2023-02-A - No Grant-based Accounting System Used to Manage the CDBG grant o 2023-02-B - City?s Financial Management System/Internal Control - The City did not maintain sufficient records to demonstrate compliance with CDBG requirements o 2023-02-C - Public Service and Planning and Administration Caps ? the City missed the Program Year 2019 public services (PS) Cap in the IDIS. The City requested a waiver, but the City must take action to correct the reporting in the IDIS system. o 2023-02-D - No Debarment and Suspension Verification - The City did not ensure that the CDBG funded activities were not made to any subawards, contracts, or any party excluded, disqualified, or otherwise ineligible (e.g., suspension, debarment, or limited denial of participation). ? Finding Number 2023-03: Environmental Review and Record - A review of three selected CDBG-funded activity?s environmental review and records (ERRs) found that City conducted the environmental review after these activities commenced and were completed. In addition, during our testing of project expenditures, we noted that the Environmental Review for Activity/Project that is Categorically Excluded Subject to Section 58.5 form for the Downtown Breezeway Improvements Project was signed on April 7, 2022. However, that date was subsequent to two payments to the contractor that we tested dated March 21, 2022 and April 8, 2022 that were for work performed in February and March, respectively. Cause: HUD determined the City staff lacked experience and knowledge of the CDBG program/project requirements and did not maintain the required documents. Although the City had its CDBG Procedures Manual since 2018 and is in the process of updating it with CDBG and CDBG-CV programs, the contents were not organized or utilized as an active manual by its staff. In addition, HUD found that City did not have CDBG-specific financial management policies and procedures and managed the CDBG funds with one chart of accounts without its grant-based accounting requirement. The City did not have an internal control system to enforce meeting the CDBG requirements. When the activities were carried out, the Parks and Recreation Department and the Finance staff made the reimbursements from IDIS without review of the CDBG eligible costs. For the environmental review finding, City staff could not locate the environmental review records to demonstrate compliance with the requirements. Effect: The City is not in full compliance with the program/project rules and regulatory requirements and according to HUD may incur a sanction, including repayment of ineligible costs. Recommendation: The City must develop policies and procedures to ensure that all grant program activities are in compliance with the provisions of 24 CFR part 570 and 24 CFR Part 92 and ensure that all the findings are resolved with the grantor in a timely manner. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-003 - Monitoring of CDBG Program Activities For Compliance with Program Rules and Regulations Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: 24 CFR part 570 details the various rules and regulations of the Community Development Block Grant (CDBG) Program. These regulations include specific program requirements for timing of activities, eligible and prohibited activities, project and subrecipient monitoring requirements, as well as other provisions. If the City does not adhere to the requirements of 24 CFR part 570 both before disbursement for eligible activities and on an ongoing basis to ensure continued compliance with the income eligibility requirements of the program, costs incurred under the program may be deemed ineligible and need to be returned to the grantor. Condition: The City underwent a monitoring review by the grantor in January 2023 related to the fiscal year 2019 CDBG Program, the results of which were issued in March 2023. The monitoring review results found that the City staff had not utilized the program and financial policies and procedures and resulted in three overall management and financial management findings along with the several sub-findings as follows: ? Finding Number 2023-01: CDBG Overall Management System o 2023-01-A ? Lack of eligibility determination of activity and national objective for three activities - no determination of its CDBG eligible activity and national objective with the actual evaluation records o 2023-01-B ? Recordkeeping - no actual evaluation records to support the City?s CDBG funded eligible activity determination and selections o 2023-01-C ? Reporting - the City reported the inconsistent information to HUD in the Integrated Disbursement and Information System (IDIS) and its completed Consolidated Annual Performance and Evaluation Report (CAPER) for the activity?s accomplishments. In addition, the last three program years? CAPERs were not submitted accurately and HUD had to request several corrections. ? Finding Number 2023-02: Financial Management System ? The City provided HUD with the ?Project Accounting Reporting Claims for Grant Reimbursement? and ?Purchasing Procedures? as its financial management policies and procedures, but the first document was not used and the Purchasing Procedures policies were not consistent with the CDBG Program Procedures Manual. o 2023-02-A - No Grant-based Accounting System Used to Manage the CDBG grant o 2023-02-B - City?s Financial Management System/Internal Control - The City did not maintain sufficient records to demonstrate compliance with CDBG requirements o 2023-02-C - Public Service and Planning and Administration Caps ? the City missed the Program Year 2019 public services (PS) Cap in the IDIS. The City requested a waiver, but the City must take action to correct the reporting in the IDIS system. o 2023-02-D - No Debarment and Suspension Verification - The City did not ensure that the CDBG funded activities were not made to any subawards, contracts, or any party excluded, disqualified, or otherwise ineligible (e.g., suspension, debarment, or limited denial of participation). ? Finding Number 2023-03: Environmental Review and Record - A review of three selected CDBG-funded activity?s environmental review and records (ERRs) found that City conducted the environmental review after these activities commenced and were completed. In addition, during our testing of project expenditures, we noted that the Environmental Review for Activity/Project that is Categorically Excluded Subject to Section 58.5 form for the Downtown Breezeway Improvements Project was signed on April 7, 2022. However, that date was subsequent to two payments to the contractor that we tested dated March 21, 2022 and April 8, 2022 that were for work performed in February and March, respectively. Cause: HUD determined the City staff lacked experience and knowledge of the CDBG program/project requirements and did not maintain the required documents. Although the City had its CDBG Procedures Manual since 2018 and is in the process of updating it with CDBG and CDBG-CV programs, the contents were not organized or utilized as an active manual by its staff. In addition, HUD found that City did not have CDBG-specific financial management policies and procedures and managed the CDBG funds with one chart of accounts without its grant-based accounting requirement. The City did not have an internal control system to enforce meeting the CDBG requirements. When the activities were carried out, the Parks and Recreation Department and the Finance staff made the reimbursements from IDIS without review of the CDBG eligible costs. For the environmental review finding, City staff could not locate the environmental review records to demonstrate compliance with the requirements. Effect: The City is not in full compliance with the program/project rules and regulatory requirements and according to HUD may incur a sanction, including repayment of ineligible costs. Recommendation: The City must develop policies and procedures to ensure that all grant program activities are in compliance with the provisions of 24 CFR part 570 and 24 CFR Part 92 and ensure that all the findings are resolved with the grantor in a timely manner. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-004 - Financial Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Grantees may include reports generated by Integrated Disbursement and Information System (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. The reports to be included in the annual performance and evaluation report include the PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report. In addition, the City files a quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) that includes the quarterly IDIS program drawdowns and disbursements. Finally, section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding (CDBG-CV) 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. All of the above reports should include accurate information and reconcile to the amounts reported on the SEFA. Condition: We obtained the City?s PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report for program year 2021 (fiscal year ended June 30, 2022), which reported program expenditures of $628,872 and $549,498, respectively. We requested a reconciliation of the amounts reported on the PR26?s to the program expenditures reported on the SEFA of $707,133 and $106,354, respectively, but City staff could not reconcile the amounts reported. For the quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) for both the CDBG and CDBG-CV programs, we were also unable to reconcile the activity in the reports to the activity reported in the the SEFA As for the section 15011 reporting, City staff was not able to confirm whether the quarterly reports had been filed. Cause: We understand that City staff and consultants hired to assist City staff with the CDBG program have been working to reconcile the financial reports to the general ledger activity, but it has not been completed. We also understand that City staff was not aware of the section 15011 reporting requirement for the CDBG-CV program. Effect: The City is not in compliance with the financial reporting requirements of the CDBG Program. Recommendation: The City should develop procedures to ensure that financial reports filed in the IDIS system reconcile with general ledger activity and amounts reported on the SEFA. The City should also work with the grantor to determine if the delinquent section 15011 reports need to be filed, or if the reporting can be prepared prospectively. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-004 - Financial Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Grantees may include reports generated by Integrated Disbursement and Information System (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. The reports to be included in the annual performance and evaluation report include the PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report. In addition, the City files a quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) that includes the quarterly IDIS program drawdowns and disbursements. Finally, section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding (CDBG-CV) 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. All of the above reports should include accurate information and reconcile to the amounts reported on the SEFA. Condition: We obtained the City?s PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report for program year 2021 (fiscal year ended June 30, 2022), which reported program expenditures of $628,872 and $549,498, respectively. We requested a reconciliation of the amounts reported on the PR26?s to the program expenditures reported on the SEFA of $707,133 and $106,354, respectively, but City staff could not reconcile the amounts reported. For the quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) for both the CDBG and CDBG-CV programs, we were also unable to reconcile the activity in the reports to the activity reported in the the SEFA As for the section 15011 reporting, City staff was not able to confirm whether the quarterly reports had been filed. Cause: We understand that City staff and consultants hired to assist City staff with the CDBG program have been working to reconcile the financial reports to the general ledger activity, but it has not been completed. We also understand that City staff was not aware of the section 15011 reporting requirement for the CDBG-CV program. Effect: The City is not in compliance with the financial reporting requirements of the CDBG Program. Recommendation: The City should develop procedures to ensure that financial reports filed in the IDIS system reconcile with general ledger activity and amounts reported on the SEFA. The City should also work with the grantor to determine if the delinquent section 15011 reports need to be filed, or if the reporting can be prepared prospectively. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-004 - Financial Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Grantees may include reports generated by Integrated Disbursement and Information System (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. The reports to be included in the annual performance and evaluation report include the PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report. In addition, the City files a quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) that includes the quarterly IDIS program drawdowns and disbursements. Finally, section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding (CDBG-CV) 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. All of the above reports should include accurate information and reconcile to the amounts reported on the SEFA. Condition: We obtained the City?s PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report for program year 2021 (fiscal year ended June 30, 2022), which reported program expenditures of $628,872 and $549,498, respectively. We requested a reconciliation of the amounts reported on the PR26?s to the program expenditures reported on the SEFA of $707,133 and $106,354, respectively, but City staff could not reconcile the amounts reported. For the quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) for both the CDBG and CDBG-CV programs, we were also unable to reconcile the activity in the reports to the activity reported in the the SEFA As for the section 15011 reporting, City staff was not able to confirm whether the quarterly reports had been filed. Cause: We understand that City staff and consultants hired to assist City staff with the CDBG program have been working to reconcile the financial reports to the general ledger activity, but it has not been completed. We also understand that City staff was not aware of the section 15011 reporting requirement for the CDBG-CV program. Effect: The City is not in compliance with the financial reporting requirements of the CDBG Program. Recommendation: The City should develop procedures to ensure that financial reports filed in the IDIS system reconcile with general ledger activity and amounts reported on the SEFA. The City should also work with the grantor to determine if the delinquent section 15011 reports need to be filed, or if the reporting can be prepared prospectively. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-005 - Cash Management ? Draw Down of Community Development Block Grant Funds in Advance of Expenditures Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted one disbursement in April 2022 in the amount of $142,431 had been charged to the CDBG program in the amount of $149,927. The difference of $7,496 was the retention payable to the vendor, which was not paid in cash until after June 30, 2022. However, the City included the retention payable in the grant drawdown filed and received in April 2022. Cause: We understand that the retention was included in the grant drawdown due to staff oversight. Questioned Costs: We question costs in the amount of $7,496. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program. Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. The City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-005 - Cash Management ? Draw Down of Community Development Block Grant Funds in Advance of Expenditures Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted one disbursement in April 2022 in the amount of $142,431 had been charged to the CDBG program in the amount of $149,927. The difference of $7,496 was the retention payable to the vendor, which was not paid in cash until after June 30, 2022. However, the City included the retention payable in the grant drawdown filed and received in April 2022. Cause: We understand that the retention was included in the grant drawdown due to staff oversight. Questioned Costs: We question costs in the amount of $7,496. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program. Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. The City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-005 - Cash Management ? Draw Down of Community Development Block Grant Funds in Advance of Expenditures Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted one disbursement in April 2022 in the amount of $142,431 had been charged to the CDBG program in the amount of $149,927. The difference of $7,496 was the retention payable to the vendor, which was not paid in cash until after June 30, 2022. However, the City included the retention payable in the grant drawdown filed and received in April 2022. Cause: We understand that the retention was included in the grant drawdown due to staff oversight. Questioned Costs: We question costs in the amount of $7,496. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program. Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. The City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-006 - Subrecipient Monitoring Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 ? Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Federal Award Identification Number: EES4XJFTXC28 Criteria: 2 CFR sections 200.332(d) through (f) require that a pass-through entity identify the award and applicable requirements to each subrecipient, as well as evaluate each subrecipient?s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward, and monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals. As part of those requirements, Section 200.332(f) requires that the City as a pass through entity ?Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in ? 200.501.? In addition, section VI, Transfer, of the Interim Final Rule and section D, Transfer, of the Final Rule for the Coronavirus State and Local Fiscal Recovery Funds indicates that the recipient remains responsible for monitoring and overseeing the subrecipient?s use of Fiscal Recovery Funds and other activities related to the award to ensure that the subrecipient complies with the statutory and regulatory requirements and the terms and conditions of the award. Recipients also remain responsible for reporting to Treasury on their subrecipients? use of payments from the Fiscal Recovery Funds for the duration of the award. Condition: The City passed through grant funding of $1,000,000 to a nonprofit during fiscal year 2022 and although the City did perform monitoring procedures during the fiscal year, those procedures did not include seeing that the entity underwent a Single Audit. Since the City alone provided the nonprofit funding in excess of the $750,000 threshold, the City should have expected that a Single Audit was completed. Cause: We understand that City staff was not aware of the requirement to review the entity?s Single Audit. Effect: The City is not in compliance with the subrecipient monitoring requirements of 2 CFR section 200.332(f) or with section VI, Transfer, of the Interim Final Rule and section D, Transfer, of the Final Rule for the Coronavirus State and Local Fiscal Recovery Funds. Recommendation: The City should develop procedures to determine if subrecipients are subject to Single Audit each fiscal year, regardless of the level of funding provided by the City, and review the applicable Single Audit reports for the audit results. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-002 - Federal Funding Accountability and Transparency Act (FFATA) Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252 that are codified in 2 CFR Part 170, direct recipients of grants are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Subawards that are entered into the FSRS System should be maintained so that any amendments to the subawards are also reflected in the system. Condition: We selected two of the City?s subawards for testing of the reporting on the FSRS. The two subawards tested were both more than $30,000. City staff was not able to provide documentation that the subawards were reported in the FSRS. Cause: We understand that program staff were not familiar with the FFATA reporting requirements. Effect: The City is not in compliance with the FFATA reporting requirements. Recommendation: The City should review all first-tier subaward agreements of $30,000 or more to ensure that FFATA reporting is completed. In addition, the City should develop procedures to ensure that FFATA reporting is accurate at all times and reflects any contract amendments and final subaward funding amounts. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-002 - Federal Funding Accountability and Transparency Act (FFATA) Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252 that are codified in 2 CFR Part 170, direct recipients of grants are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Subawards that are entered into the FSRS System should be maintained so that any amendments to the subawards are also reflected in the system. Condition: We selected two of the City?s subawards for testing of the reporting on the FSRS. The two subawards tested were both more than $30,000. City staff was not able to provide documentation that the subawards were reported in the FSRS. Cause: We understand that program staff were not familiar with the FFATA reporting requirements. Effect: The City is not in compliance with the FFATA reporting requirements. Recommendation: The City should review all first-tier subaward agreements of $30,000 or more to ensure that FFATA reporting is completed. In addition, the City should develop procedures to ensure that FFATA reporting is accurate at all times and reflects any contract amendments and final subaward funding amounts. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-002 - Federal Funding Accountability and Transparency Act (FFATA) Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252 that are codified in 2 CFR Part 170, direct recipients of grants are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Subawards that are entered into the FSRS System should be maintained so that any amendments to the subawards are also reflected in the system. Condition: We selected two of the City?s subawards for testing of the reporting on the FSRS. The two subawards tested were both more than $30,000. City staff was not able to provide documentation that the subawards were reported in the FSRS. Cause: We understand that program staff were not familiar with the FFATA reporting requirements. Effect: The City is not in compliance with the FFATA reporting requirements. Recommendation: The City should review all first-tier subaward agreements of $30,000 or more to ensure that FFATA reporting is completed. In addition, the City should develop procedures to ensure that FFATA reporting is accurate at all times and reflects any contract amendments and final subaward funding amounts. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-003 - Monitoring of CDBG Program Activities For Compliance with Program Rules and Regulations Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: 24 CFR part 570 details the various rules and regulations of the Community Development Block Grant (CDBG) Program. These regulations include specific program requirements for timing of activities, eligible and prohibited activities, project and subrecipient monitoring requirements, as well as other provisions. If the City does not adhere to the requirements of 24 CFR part 570 both before disbursement for eligible activities and on an ongoing basis to ensure continued compliance with the income eligibility requirements of the program, costs incurred under the program may be deemed ineligible and need to be returned to the grantor. Condition: The City underwent a monitoring review by the grantor in January 2023 related to the fiscal year 2019 CDBG Program, the results of which were issued in March 2023. The monitoring review results found that the City staff had not utilized the program and financial policies and procedures and resulted in three overall management and financial management findings along with the several sub-findings as follows: ? Finding Number 2023-01: CDBG Overall Management System o 2023-01-A ? Lack of eligibility determination of activity and national objective for three activities - no determination of its CDBG eligible activity and national objective with the actual evaluation records o 2023-01-B ? Recordkeeping - no actual evaluation records to support the City?s CDBG funded eligible activity determination and selections o 2023-01-C ? Reporting - the City reported the inconsistent information to HUD in the Integrated Disbursement and Information System (IDIS) and its completed Consolidated Annual Performance and Evaluation Report (CAPER) for the activity?s accomplishments. In addition, the last three program years? CAPERs were not submitted accurately and HUD had to request several corrections. ? Finding Number 2023-02: Financial Management System ? The City provided HUD with the ?Project Accounting Reporting Claims for Grant Reimbursement? and ?Purchasing Procedures? as its financial management policies and procedures, but the first document was not used and the Purchasing Procedures policies were not consistent with the CDBG Program Procedures Manual. o 2023-02-A - No Grant-based Accounting System Used to Manage the CDBG grant o 2023-02-B - City?s Financial Management System/Internal Control - The City did not maintain sufficient records to demonstrate compliance with CDBG requirements o 2023-02-C - Public Service and Planning and Administration Caps ? the City missed the Program Year 2019 public services (PS) Cap in the IDIS. The City requested a waiver, but the City must take action to correct the reporting in the IDIS system. o 2023-02-D - No Debarment and Suspension Verification - The City did not ensure that the CDBG funded activities were not made to any subawards, contracts, or any party excluded, disqualified, or otherwise ineligible (e.g., suspension, debarment, or limited denial of participation). ? Finding Number 2023-03: Environmental Review and Record - A review of three selected CDBG-funded activity?s environmental review and records (ERRs) found that City conducted the environmental review after these activities commenced and were completed. In addition, during our testing of project expenditures, we noted that the Environmental Review for Activity/Project that is Categorically Excluded Subject to Section 58.5 form for the Downtown Breezeway Improvements Project was signed on April 7, 2022. However, that date was subsequent to two payments to the contractor that we tested dated March 21, 2022 and April 8, 2022 that were for work performed in February and March, respectively. Cause: HUD determined the City staff lacked experience and knowledge of the CDBG program/project requirements and did not maintain the required documents. Although the City had its CDBG Procedures Manual since 2018 and is in the process of updating it with CDBG and CDBG-CV programs, the contents were not organized or utilized as an active manual by its staff. In addition, HUD found that City did not have CDBG-specific financial management policies and procedures and managed the CDBG funds with one chart of accounts without its grant-based accounting requirement. The City did not have an internal control system to enforce meeting the CDBG requirements. When the activities were carried out, the Parks and Recreation Department and the Finance staff made the reimbursements from IDIS without review of the CDBG eligible costs. For the environmental review finding, City staff could not locate the environmental review records to demonstrate compliance with the requirements. Effect: The City is not in full compliance with the program/project rules and regulatory requirements and according to HUD may incur a sanction, including repayment of ineligible costs. Recommendation: The City must develop policies and procedures to ensure that all grant program activities are in compliance with the provisions of 24 CFR part 570 and 24 CFR Part 92 and ensure that all the findings are resolved with the grantor in a timely manner. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-003 - Monitoring of CDBG Program Activities For Compliance with Program Rules and Regulations Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: 24 CFR part 570 details the various rules and regulations of the Community Development Block Grant (CDBG) Program. These regulations include specific program requirements for timing of activities, eligible and prohibited activities, project and subrecipient monitoring requirements, as well as other provisions. If the City does not adhere to the requirements of 24 CFR part 570 both before disbursement for eligible activities and on an ongoing basis to ensure continued compliance with the income eligibility requirements of the program, costs incurred under the program may be deemed ineligible and need to be returned to the grantor. Condition: The City underwent a monitoring review by the grantor in January 2023 related to the fiscal year 2019 CDBG Program, the results of which were issued in March 2023. The monitoring review results found that the City staff had not utilized the program and financial policies and procedures and resulted in three overall management and financial management findings along with the several sub-findings as follows: ? Finding Number 2023-01: CDBG Overall Management System o 2023-01-A ? Lack of eligibility determination of activity and national objective for three activities - no determination of its CDBG eligible activity and national objective with the actual evaluation records o 2023-01-B ? Recordkeeping - no actual evaluation records to support the City?s CDBG funded eligible activity determination and selections o 2023-01-C ? Reporting - the City reported the inconsistent information to HUD in the Integrated Disbursement and Information System (IDIS) and its completed Consolidated Annual Performance and Evaluation Report (CAPER) for the activity?s accomplishments. In addition, the last three program years? CAPERs were not submitted accurately and HUD had to request several corrections. ? Finding Number 2023-02: Financial Management System ? The City provided HUD with the ?Project Accounting Reporting Claims for Grant Reimbursement? and ?Purchasing Procedures? as its financial management policies and procedures, but the first document was not used and the Purchasing Procedures policies were not consistent with the CDBG Program Procedures Manual. o 2023-02-A - No Grant-based Accounting System Used to Manage the CDBG grant o 2023-02-B - City?s Financial Management System/Internal Control - The City did not maintain sufficient records to demonstrate compliance with CDBG requirements o 2023-02-C - Public Service and Planning and Administration Caps ? the City missed the Program Year 2019 public services (PS) Cap in the IDIS. The City requested a waiver, but the City must take action to correct the reporting in the IDIS system. o 2023-02-D - No Debarment and Suspension Verification - The City did not ensure that the CDBG funded activities were not made to any subawards, contracts, or any party excluded, disqualified, or otherwise ineligible (e.g., suspension, debarment, or limited denial of participation). ? Finding Number 2023-03: Environmental Review and Record - A review of three selected CDBG-funded activity?s environmental review and records (ERRs) found that City conducted the environmental review after these activities commenced and were completed. In addition, during our testing of project expenditures, we noted that the Environmental Review for Activity/Project that is Categorically Excluded Subject to Section 58.5 form for the Downtown Breezeway Improvements Project was signed on April 7, 2022. However, that date was subsequent to two payments to the contractor that we tested dated March 21, 2022 and April 8, 2022 that were for work performed in February and March, respectively. Cause: HUD determined the City staff lacked experience and knowledge of the CDBG program/project requirements and did not maintain the required documents. Although the City had its CDBG Procedures Manual since 2018 and is in the process of updating it with CDBG and CDBG-CV programs, the contents were not organized or utilized as an active manual by its staff. In addition, HUD found that City did not have CDBG-specific financial management policies and procedures and managed the CDBG funds with one chart of accounts without its grant-based accounting requirement. The City did not have an internal control system to enforce meeting the CDBG requirements. When the activities were carried out, the Parks and Recreation Department and the Finance staff made the reimbursements from IDIS without review of the CDBG eligible costs. For the environmental review finding, City staff could not locate the environmental review records to demonstrate compliance with the requirements. Effect: The City is not in full compliance with the program/project rules and regulatory requirements and according to HUD may incur a sanction, including repayment of ineligible costs. Recommendation: The City must develop policies and procedures to ensure that all grant program activities are in compliance with the provisions of 24 CFR part 570 and 24 CFR Part 92 and ensure that all the findings are resolved with the grantor in a timely manner. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-003 - Monitoring of CDBG Program Activities For Compliance with Program Rules and Regulations Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: 24 CFR part 570 details the various rules and regulations of the Community Development Block Grant (CDBG) Program. These regulations include specific program requirements for timing of activities, eligible and prohibited activities, project and subrecipient monitoring requirements, as well as other provisions. If the City does not adhere to the requirements of 24 CFR part 570 both before disbursement for eligible activities and on an ongoing basis to ensure continued compliance with the income eligibility requirements of the program, costs incurred under the program may be deemed ineligible and need to be returned to the grantor. Condition: The City underwent a monitoring review by the grantor in January 2023 related to the fiscal year 2019 CDBG Program, the results of which were issued in March 2023. The monitoring review results found that the City staff had not utilized the program and financial policies and procedures and resulted in three overall management and financial management findings along with the several sub-findings as follows: ? Finding Number 2023-01: CDBG Overall Management System o 2023-01-A ? Lack of eligibility determination of activity and national objective for three activities - no determination of its CDBG eligible activity and national objective with the actual evaluation records o 2023-01-B ? Recordkeeping - no actual evaluation records to support the City?s CDBG funded eligible activity determination and selections o 2023-01-C ? Reporting - the City reported the inconsistent information to HUD in the Integrated Disbursement and Information System (IDIS) and its completed Consolidated Annual Performance and Evaluation Report (CAPER) for the activity?s accomplishments. In addition, the last three program years? CAPERs were not submitted accurately and HUD had to request several corrections. ? Finding Number 2023-02: Financial Management System ? The City provided HUD with the ?Project Accounting Reporting Claims for Grant Reimbursement? and ?Purchasing Procedures? as its financial management policies and procedures, but the first document was not used and the Purchasing Procedures policies were not consistent with the CDBG Program Procedures Manual. o 2023-02-A - No Grant-based Accounting System Used to Manage the CDBG grant o 2023-02-B - City?s Financial Management System/Internal Control - The City did not maintain sufficient records to demonstrate compliance with CDBG requirements o 2023-02-C - Public Service and Planning and Administration Caps ? the City missed the Program Year 2019 public services (PS) Cap in the IDIS. The City requested a waiver, but the City must take action to correct the reporting in the IDIS system. o 2023-02-D - No Debarment and Suspension Verification - The City did not ensure that the CDBG funded activities were not made to any subawards, contracts, or any party excluded, disqualified, or otherwise ineligible (e.g., suspension, debarment, or limited denial of participation). ? Finding Number 2023-03: Environmental Review and Record - A review of three selected CDBG-funded activity?s environmental review and records (ERRs) found that City conducted the environmental review after these activities commenced and were completed. In addition, during our testing of project expenditures, we noted that the Environmental Review for Activity/Project that is Categorically Excluded Subject to Section 58.5 form for the Downtown Breezeway Improvements Project was signed on April 7, 2022. However, that date was subsequent to two payments to the contractor that we tested dated March 21, 2022 and April 8, 2022 that were for work performed in February and March, respectively. Cause: HUD determined the City staff lacked experience and knowledge of the CDBG program/project requirements and did not maintain the required documents. Although the City had its CDBG Procedures Manual since 2018 and is in the process of updating it with CDBG and CDBG-CV programs, the contents were not organized or utilized as an active manual by its staff. In addition, HUD found that City did not have CDBG-specific financial management policies and procedures and managed the CDBG funds with one chart of accounts without its grant-based accounting requirement. The City did not have an internal control system to enforce meeting the CDBG requirements. When the activities were carried out, the Parks and Recreation Department and the Finance staff made the reimbursements from IDIS without review of the CDBG eligible costs. For the environmental review finding, City staff could not locate the environmental review records to demonstrate compliance with the requirements. Effect: The City is not in full compliance with the program/project rules and regulatory requirements and according to HUD may incur a sanction, including repayment of ineligible costs. Recommendation: The City must develop policies and procedures to ensure that all grant program activities are in compliance with the provisions of 24 CFR part 570 and 24 CFR Part 92 and ensure that all the findings are resolved with the grantor in a timely manner. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-004 - Financial Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Grantees may include reports generated by Integrated Disbursement and Information System (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. The reports to be included in the annual performance and evaluation report include the PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report. In addition, the City files a quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) that includes the quarterly IDIS program drawdowns and disbursements. Finally, section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding (CDBG-CV) 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. All of the above reports should include accurate information and reconcile to the amounts reported on the SEFA. Condition: We obtained the City?s PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report for program year 2021 (fiscal year ended June 30, 2022), which reported program expenditures of $628,872 and $549,498, respectively. We requested a reconciliation of the amounts reported on the PR26?s to the program expenditures reported on the SEFA of $707,133 and $106,354, respectively, but City staff could not reconcile the amounts reported. For the quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) for both the CDBG and CDBG-CV programs, we were also unable to reconcile the activity in the reports to the activity reported in the the SEFA As for the section 15011 reporting, City staff was not able to confirm whether the quarterly reports had been filed. Cause: We understand that City staff and consultants hired to assist City staff with the CDBG program have been working to reconcile the financial reports to the general ledger activity, but it has not been completed. We also understand that City staff was not aware of the section 15011 reporting requirement for the CDBG-CV program. Effect: The City is not in compliance with the financial reporting requirements of the CDBG Program. Recommendation: The City should develop procedures to ensure that financial reports filed in the IDIS system reconcile with general ledger activity and amounts reported on the SEFA. The City should also work with the grantor to determine if the delinquent section 15011 reports need to be filed, or if the reporting can be prepared prospectively. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-004 - Financial Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Grantees may include reports generated by Integrated Disbursement and Information System (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. The reports to be included in the annual performance and evaluation report include the PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report. In addition, the City files a quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) that includes the quarterly IDIS program drawdowns and disbursements. Finally, section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding (CDBG-CV) 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. All of the above reports should include accurate information and reconcile to the amounts reported on the SEFA. Condition: We obtained the City?s PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report for program year 2021 (fiscal year ended June 30, 2022), which reported program expenditures of $628,872 and $549,498, respectively. We requested a reconciliation of the amounts reported on the PR26?s to the program expenditures reported on the SEFA of $707,133 and $106,354, respectively, but City staff could not reconcile the amounts reported. For the quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) for both the CDBG and CDBG-CV programs, we were also unable to reconcile the activity in the reports to the activity reported in the the SEFA As for the section 15011 reporting, City staff was not able to confirm whether the quarterly reports had been filed. Cause: We understand that City staff and consultants hired to assist City staff with the CDBG program have been working to reconcile the financial reports to the general ledger activity, but it has not been completed. We also understand that City staff was not aware of the section 15011 reporting requirement for the CDBG-CV program. Effect: The City is not in compliance with the financial reporting requirements of the CDBG Program. Recommendation: The City should develop procedures to ensure that financial reports filed in the IDIS system reconcile with general ledger activity and amounts reported on the SEFA. The City should also work with the grantor to determine if the delinquent section 15011 reports need to be filed, or if the reporting can be prepared prospectively. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-004 - Financial Reporting Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Grantees may include reports generated by Integrated Disbursement and Information System (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. The reports to be included in the annual performance and evaluation report include the PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report. In addition, the City files a quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) that includes the quarterly IDIS program drawdowns and disbursements. Finally, section 15011 of the CARES Act requires that recipients of $150,000 or more of CARES Act funding (CDBG-CV) 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. All of the above reports should include accurate information and reconcile to the amounts reported on the SEFA. Condition: We obtained the City?s PR26 ? CDBG Financial Summary Report and the PR26 ? CDBG-CV Financial Summary Report for program year 2021 (fiscal year ended June 30, 2022), which reported program expenditures of $628,872 and $549,498, respectively. We requested a reconciliation of the amounts reported on the PR26?s to the program expenditures reported on the SEFA of $707,133 and $106,354, respectively, but City staff could not reconcile the amounts reported. For the quarterly SF-425 Federal Financial Report (IDIS PR29 Cash on Hand Quarterly Report) for both the CDBG and CDBG-CV programs, we were also unable to reconcile the activity in the reports to the activity reported in the the SEFA As for the section 15011 reporting, City staff was not able to confirm whether the quarterly reports had been filed. Cause: We understand that City staff and consultants hired to assist City staff with the CDBG program have been working to reconcile the financial reports to the general ledger activity, but it has not been completed. We also understand that City staff was not aware of the section 15011 reporting requirement for the CDBG-CV program. Effect: The City is not in compliance with the financial reporting requirements of the CDBG Program. Recommendation: The City should develop procedures to ensure that financial reports filed in the IDIS system reconcile with general ledger activity and amounts reported on the SEFA. The City should also work with the grantor to determine if the delinquent section 15011 reports need to be filed, or if the reporting can be prepared prospectively. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-005 - Cash Management ? Draw Down of Community Development Block Grant Funds in Advance of Expenditures Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted one disbursement in April 2022 in the amount of $142,431 had been charged to the CDBG program in the amount of $149,927. The difference of $7,496 was the retention payable to the vendor, which was not paid in cash until after June 30, 2022. However, the City included the retention payable in the grant drawdown filed and received in April 2022. Cause: We understand that the retention was included in the grant drawdown due to staff oversight. Questioned Costs: We question costs in the amount of $7,496. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program. Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. The City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-005 - Cash Management ? Draw Down of Community Development Block Grant Funds in Advance of Expenditures Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted one disbursement in April 2022 in the amount of $142,431 had been charged to the CDBG program in the amount of $149,927. The difference of $7,496 was the retention payable to the vendor, which was not paid in cash until after June 30, 2022. However, the City included the retention payable in the grant drawdown filed and received in April 2022. Cause: We understand that the retention was included in the grant drawdown due to staff oversight. Questioned Costs: We question costs in the amount of $7,496. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program. Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. The City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-005 - Cash Management ? Draw Down of Community Development Block Grant Funds in Advance of Expenditures Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted one disbursement in April 2022 in the amount of $142,431 had been charged to the CDBG program in the amount of $149,927. The difference of $7,496 was the retention payable to the vendor, which was not paid in cash until after June 30, 2022. However, the City included the retention payable in the grant drawdown filed and received in April 2022. Cause: We understand that the retention was included in the grant drawdown due to staff oversight. Questioned Costs: We question costs in the amount of $7,496. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program. Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. The City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.
Finding Reference Number: SA2022-006 - Subrecipient Monitoring Assistance Listing Number: 21.027 Assistance Listing Title: COVID-19 ? Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Federal Award Identification Number: EES4XJFTXC28 Criteria: 2 CFR sections 200.332(d) through (f) require that a pass-through entity identify the award and applicable requirements to each subrecipient, as well as evaluate each subrecipient?s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward, and monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals. As part of those requirements, Section 200.332(f) requires that the City as a pass through entity ?Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in ? 200.501.? In addition, section VI, Transfer, of the Interim Final Rule and section D, Transfer, of the Final Rule for the Coronavirus State and Local Fiscal Recovery Funds indicates that the recipient remains responsible for monitoring and overseeing the subrecipient?s use of Fiscal Recovery Funds and other activities related to the award to ensure that the subrecipient complies with the statutory and regulatory requirements and the terms and conditions of the award. Recipients also remain responsible for reporting to Treasury on their subrecipients? use of payments from the Fiscal Recovery Funds for the duration of the award. Condition: The City passed through grant funding of $1,000,000 to a nonprofit during fiscal year 2022 and although the City did perform monitoring procedures during the fiscal year, those procedures did not include seeing that the entity underwent a Single Audit. Since the City alone provided the nonprofit funding in excess of the $750,000 threshold, the City should have expected that a Single Audit was completed. Cause: We understand that City staff was not aware of the requirement to review the entity?s Single Audit. Effect: The City is not in compliance with the subrecipient monitoring requirements of 2 CFR section 200.332(f) or with section VI, Transfer, of the Interim Final Rule and section D, Transfer, of the Final Rule for the Coronavirus State and Local Fiscal Recovery Funds. Recommendation: The City should develop procedures to determine if subrecipients are subject to Single Audit each fiscal year, regardless of the level of funding provided by the City, and review the applicable Single Audit reports for the audit results. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.