Audit 396513

Finding 2025-001 Special Tests and Provision – Internal Control and Compliance over Environmental Reviews (Significant Deficiency) Information on the Federal Program: Assistance Listing Number: 14.218 Federal Program Name: CDBG‐Entitlement Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: B-20-MW-06-0053 – FY20-21 B-21-MC-06-0053 – FY21-22 B-22-MC-06-0053 – FY22-23 B-23-MC-06-0053 – FY23-24 B-24-MC-06-0053 – FY24-25 Criteria: Title 24 U.S. Code of Federal Regulations sections 58.1, 58.22, 58.34, 58.35, and 570.604 require projects to have an environmental review unless they meet criteria specified in the regulations that would exempt or exclude them from environmental certification requirements. For projects where the environmental review was not performed, a written documentation that the review was not required must be prepared. Condition and Context: The City could not provide support that there was pre-award or post-award review of grant projects to determine if a project requires an environmental review or is categorically excluded from the environmental review requirements. The City did not have adequate internal controls to ensure compliance with the special test – environmental review requirements. Testing was performed over each requirement for the City. Out of a total population of twelve (12) projects, we selected a sample of four (4) projects to test for environmental reviews. Four (4) out of the four (4) projects tested did not have an exemption report prepared in a timely manner. The sample was not intended to be, and was not, a statistically valid sample. Cause: The Planning Department experienced turnover and vacancies in key positions responsible for performing the environmental reviews and determination of exception as required by the grant for the fiscal year 2025. The required HUD document ‘Environmental Review for Activity/Project that is Exempt or Categorically Excluded Not Subject to Section 58.5’ was not completed timely for all CDBG Projects with expenditures during the grant year. The document and related supporting documentation were not retained on file by the Responsible Entity in an Environmental Review Record (ERR) for the activity/project (24 CFR Part 58.38) and in accordance with recordkeeping requirements for the HUD program. Section III – Federal Award Findings (Continued) Finding 2025-001 Special Tests and Provision – Internal Control and Compliance over Environmental Reviews (Significant Deficiency) (Continued) Effect: The City was not in compliance with 24 CFR §58.1, 58.22, 58.34, 58.35, and 570.604. Questioned Costs: None noted. Identification as a Repeat Finding, If Applicable: Yes. See finding 2024-002. Recommendation: The City should dedicate time and resources to the Planning Department to ensure that key compliance documents are prepared and maintained as required by the program. Management’s View and Corrective Action Plan: The City concurs with the auditor’s finding. The City will reinforce its standard operating procedure concerning Environmental Reviews (ER) and will reinsure that environmental reviews are properly completed for every awarded grant project.