2025-001 – Reporting – Internal Control and Compliance over Reporting (Material Weakness) Information of the Federal Program(s): Assistance Listing Number: 14.218 Federal Program Name: Community Development Block Grants-Entitlement Grants Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: B-24-MC-06-0554 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): The OMB Compliance Supplement requires that reports submitted to the Federal awarding agency include all activity of the reporting period, are supported by underlying accounting information and are presented in accordance with program requirements. Pursuant to the Guidance on Cash on Hand Quarterly Report (replaced the Federal Financial Report, SF-425) and financial reporting requirements in the cooperative agreement provisions, and 2 CFR 200.327: Quarterly reports: Program award recipients must submit Cash on Hand Quarterly Report reports to HUD quarterly, 30 days after the reporting period end date. Each report must cover all expenditures on the cooperative agreement from the start date of the reporting period to the reporting period end date. The following federal fiscal year quarter reporting period will be used for all quarterly reports, are due to HUD 30 days after the period end dates noted below: Reporting Period Due Date of Report Quarter 1: 7/1-9/30 October 30 Quarter 2: 10/1-12/31 January 30 Quarter 3: 1/1-3/31 April 30 Quarter 4: 4/1-6/30 July 30 Condition: The City did not submit the required Cash on Hand Quarterly Report in a timely manner. The quarterly Cash on Hand Quarterly Report for three (3) of the four (4) reporting periods were submitted past deadline. Report Report Submission Submission Report Type Reporting Period Deadline Date Federal Financial Report 10/01/2024-12/31/2024 1/30/2025 8/7/2025 Federal Financial Report 01/01/2025 - 03/31/2025 4/30/2025 8/7/2025 Federal Financial Report 04/01/2025 - 06/30/2025 7/30/2025 8/7/2025 Additionally, the City was unable to provide any record of internal approval on all four (4) quarterly reports prior to submission. Cause: Due to staff turnover, the City did not to consistently follow the program’s procedures to ensure that reports were submitted in a timely manner, in accordance with the timelines outlined in the Uniform Guidance. In addition, the City did not maintain documentation of internal review and approval for quarterly reports prior to submission. Effect or Potential Effect: Delays in filing the quarterly reports resulted in noncompliance with the compliance requirements. The internal approvals on the reports were not available, which increased risk of errors or incomplete reporting. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2024-002. Recommendation: We recommend that the City strengthen its reporting submission procedures to ensure that all required federal reports are reviewed, approved, and submitted in accordance with federal reporting deadlines. In addition, the City should maintain written documentation of supervisory review and approval for all required federal reports prior to submission. Views of Responsible Officials: Management concurs.
2025-002 – Subrecipient Monitoring – Internal Control and Compliance over Subrecipient Monitoring (Material Weakness) Identification of the Federal Program: Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: Department of Treasury Pass-Through Entity: N/A Federal Award Number and Award Year: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): C.F.R. § 200.332 prescribes that the pass-through entity must conduct monitoring activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Passthrough entity monitoring of the subrecipient must include: 1. Reviewing financial and performance reports required by the pass-through entity. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. 3. Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. 4. The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. The City’s Subrecipient Monitoring Policy and Procedures, effective April 17, 2024, requires departments to monitor subrecipients to ensure compliance with Uniform Guidance. The policy requires that prior to award, the department shall evaluate the subrecipient’s risk of noncompliance with the Uniform Guidance, and the terms and conditions of the subaward, which risk assessment shall be documented, 2 CFR § 200.332(b). The policy also states that the City shall monitor subrecipients on a quarterly basis (90 days) throughout the term of the agreement (department should establish a regular monitoring schedule and document all monitoring), to ensure all subrecipients comply with the Uniform Guidance, that the subaward is used for authorized purposes, and that the subaward performance goals are achieved, as follows 2 CFR § 200.332(d): Reviewing subrecipient’s financial and performance reports. Ensuring subrecipients provide timely reports and information, as required by the federal awards. Following up and ensuring the subrecipient takes timely and appropriate action on all deficiencies as detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings. Issuing a management decision on Audit Findings, as required by 2 CFR § 200.521 (Management Decision). Condition: During the review of subrecipient monitoring records, we tested all two (2) existing subrecipients during the fiscal year ended June 30, 2025, and noted the following: The fully executed subrecipient agreements were not provided. One subrecipient agreement was executed via internal resolution and email approval; another subrecipient’s agreement does not have sufficient identification and award details, omitting key funding terminology. The documentation of the review of Financial and Performance Reports, the Pre-Award Risk Assessments, or the performance of the required subrecipient monitoring procedures were not provided. Cause: These conditions resulted from staffing capacity constraints, which led to subrecipient monitoring procedures not being performed consistently since the implementation of the City’s new Monitoring Policy on April 17, 2024. Additionally, formal documentation processes were not fully established, resulting in informal approvals and incomplete documentation of Pre-Award Risk Assessments. Effect or Potential Effect: The City’s insufficient monitoring of the necessary subrecipient activities resulted to internal control and compliance requirement finding. Questioned Costs: None. Context: See condition above for context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2024-003. Recommendation: We recommended the City to fully implement its Monitoring Policy by formalizing subrecipient agreements, strengthening internal controls, and establishing consistent processes for documenting Pre-Award Risk Assessments and Financial and Performance Reports. Views of Responsible Officials: Management concurs.
2025-003 – Special Tests – Internal Control and Compliance over National Standards for the Physical Inspection of Real Estate (NSPIRE) / Housing Quality Standards Inspections (Material Weakness) Information on the Federal Program: Assistance Listing Number: 14.871 Federal Program Name: Housing Voucher Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: CA120 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to 24 CFR 982.405(b), the Public PHA (PHA) must inspect the unit leased to a family prior to the initial term of the lease, at least biennially during assisted occupancy, and at other times as needed, to determine if the unit meets Housing Quality Standards (HQS). Pursuant to 2025 Compliance Supplement: The PHA must inspect the unit leased to a family at least biennially to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality control re-inspections. The PHA must prepare a unit inspection report (24 CFR sections 982.158(d) and 982.405(b)). However, NSPIRE for HCV and Project Based Vouchers (PBV) programs, referred to as NSPIRE-V during HUD’s demonstration, was effective October 1, 2023, and replaced HQS, as previously defined in 24 CFR 982.401, as the inspection standards for these programs. As announced in the Federal Register, “Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE); Extension of NSPIRE Compliance Date for HCV Programs,” HUD extended the compliance date for HCV and PBV programs until October 1, 2024. This applies to all Public Housing Agencies (PHAs), including MTW PHAs, administering Section 8 Housing Choice Voucher programs. For units under HAP contract that fail to meet HQS, if the reported deficiency is life-threatening, the PHA must, within 24 hours of notification, both inspect the housing unit and notify the owner if the life-threatening deficiency is confirmed. The owner must then make the repairs within 24 hours of PHA notification. If the reported deficiency is non-life-threatening, the PHA must, within 15 days of notification, both inspect the unit and notify the owner if the deficiency is confirmed. The owner must then make the repairs within 30 days of notification from the PHA or within any PHA-approved extension. (24 CFR section 982.405(d)). If the owner does not correct the cited HQS deficiencies within the specified correction period, the PHA must stop (abate) HAPs beginning no later than the first of the month following the specified correction period or must terminate the HAP contract. The owner is not responsible for a breach of HQS as a result of the family’s failure to pay for utilities for which the family is responsible under the lease or for tenant damage. For family-caused defects, if the family does not correct the cited HQS deficiencies within the specified correction period, the PHA must take prompt and vigorous action to enforce the family obligations (24 CFR sections 982.158(d) and 982.404). Condition: During the Housing Quality Standards (HQS) inspection testing, we tested twenty-three (23) samples and identified several instances in which the City did not comply with HUD inspection requirements. Specifically: For seven (7) of twenty-three (23) inspections tested, required re-inspections were not completed within 30 days of the failed inspections, and the City was unable to provide documentation evidencing that an extension had been granted, as required by HUD program regulations. For three (3) of twenty-three (23) inspections tested, re-inspections were either not performed or were performed without adequate supporting documentation to demonstrate compliance with HUD’s re inspection requirements. For ten (10) samples out of twenty-three (23) samples, inspections were performed more than 24 months apart, exceeding HUD’s required inspection frequency. For one (1) of twenty-three (23) inspections tested, the City was unable to locate prior inspection records to verify whether inspections were completed within the required 24-month inspection cycle. For one (1) of twenty-three (23) inspections tested, the City was unable to locate documentation supporting issuance of the initial inspection notice letter to the participant. For five (5) of twenty-three (23) inspections tested, the City was unable to locate documentation supporting issuance of failed inspection notice letters, as required to notify participants of deficiencies and required corrective actions. Additionally, in the forty (40) samples we tested for eligibility, ten (10) samples had failed inspection documented and out of which six (6) re-inspections were not performed within 30 days of the failed inspections. These instances indicate that the City did not consistently perform and document HQS inspections and reinspections in accordance with HUD program requirements. Cause: The deficiencies occurred due to weaknesses in the City’s internal control procedures over the monitoring and documentation of Housing Quality Standards inspections. Specifically, the City did not maintain adequate tracking procedures to ensure inspections and re-inspections were completed within required timeframes, and supporting documentation for certain inspection activities was not consistently retained. Effect or Potential Effect: The City has not complied with the requirements of 24 CFR 982.405(b) – Housing Quality Standards Inspections. Questioned Costs: None. Context: See condition above for the context of the finding. Repeat Finding from Prior Year, If Applicable: Yes. See prior year finding 2024-004. Recommendation: We recommend that the City strengthen its internal control procedures over HQS inspections by implementing a formal tracking and monitoring process to ensure inspections and re-inspections are completed within HUDrequired timeframes. In addition, the City should maintain complete documentation of inspection activities, including inspection dates and supporting records, to demonstrate compliance with program requirements. Views of Responsible Officials: Management concurs.