Audit 373038

Federal Program: Community Development Block Grants – Non Entitlement (Assistance Listing 14.228) Criteria: In accordance with Title 2 of the Code of Federal Regulations (2 CFR) § 200.303, the City must establish and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award. Additionally, 2 CFR § 200.328 requires the City to ensure that reports submitted to the pass-through entity are accurate, complete, and supported by adequate review and oversight. The U.S. Department of Housing and Urban Development’s (HUD) Section 3 regulations at 24 CFR Part 75 require recipients to prepare and submit quarterly and cumulative annual Section 3 reports documenting efforts to provide employment, training, and contracting opportunities to low- and moderate-income persons and businesses within the project area. Condition: During single audit testing for reporting, it was noted that management could not provide documentation for review of performance and Section 3 reports for the Community Development Block Grant – State’s Program grant. The grant administrator performs and submits all required reports. Cause: The City has not established procedures requiring City management to review and document approval of the Section 3 reports prepared and submitted to the Texas General Land Office. Effect or Potential Effect: The absence of documented reviews increases the risk that errors or irregularities in financial reporting or compliance with federal program requirements may not be detected and corrected in a timely manner. Recommendations: The City should strengthen internal controls over federal reporting by establishing and documenting procedures to ensure City management reviews and approves all Section 3 reports prepared and submitted by the grant administrator. Evidence of this review, such as sign-offs or approval correspondence, should be retained in the grant files to demonstrate compliance with Uniform Guidance and HUD Section 3 reporting requirements. Repeat Finding: No Views of Responsible Officials: See Corrective Action Plan.