Audit 396544

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Title: Economic Development Initiative, Community Project Funding, and Miscellaneous Grants Program Assistance Listing Number: 14.251 Federal Award Identification Number and Year: B-22-CP-CA-0133 Award Period: July 1, 2024 – June 30, 2025 Compliance Requirement Affected: L. Reporting Type of Finding: Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria or Specific Requirements: The requirements of 24 CFR Part 75.25 Reporting requires grantees to submit annual reports of Section 3 accomplishment performance measures in DRGR in January of the Calendar year. The grant agreement also requires grantees to submit a performance report on a semi-annual basis and must include a completed federal financial report as an attachment to each performance report in DRGR. During the Period of Performance, the Grantee must submit these reports no later than 30 calendar days after the end of the 6-month reporting period. Condition: The City did not submit any reports required under Section 3 of the Housing and Urban Development Act of 1968. Additionally, the financial portion of the semi-annual reporting was not complete as it lacked financial activity for the period under audit consisting of $2.1million in expenditures and was submitted four months after the due date Questioned Costs: None noted. Context: The City was required to submit one annual Section 3 report and one semi-annual performance report during the audit period. Cause: The omission resulted from a combination of administrative and timing factors present when the bid documents were prepared. At that time, the City was experiencing limited internal staffing capacity and was utilizing contract staff to assist with program administration. Concurrently, the City was in the process of transitioning and delegating certain administrative responsibilities both internally and externally. During this period of transition, there was some uncertainty regarding the specific reporting requirements that were required to be incorporated into the construction bid documentation. Additionally, the City was administering multiple grant awards received at different times, each with distinct compliance and reporting requirements issued on varying timelines. The overlap of these requirements created administrative complexity in tracking and incorporating all applicable provisions into the bid documentation. Effect: The City did not comply with the reporting requirements of the grant agreement Repeat Finding: This is not a repeat finding. Recommendation: We recommend the City review and update internal controls to ensure that the City submits accurate and timely reporting Views of Responsible Officials and Corrective Action: Based on the City’s review, the omission of this specific requirement from the bid documentation and subsequent reporting process appears to have been inadvertent and the result of the circumstances described above, rather than the result of intentional noncompliance. The City has since reviewed its procedures and is implementing additional internal review measures to help ensure that all applicable grant requirements are incorporated into future procurement and reporting processes.