CDBG Performance Reporting Type of Finding Material Weakness - Internal Control Over Compliance Material Noncompliance - Material to the Major Program New or Repeat Finding New Federal Program(s) Community Development Block Grant/State's Program (ALN 14.228) Federal Agency U.S. Department of Housing and Urban Development Pass-through Entity and Identifying Numbers Texas General Land Office (22-119-003-D373, 22-085-017-D253) Compliance Requirement(s) L. Reporting Criteria The City is required to submit the CDBG PR28 Performance and Evaluation Report (PER) to HUD through the Integrated Disbursement and Information System (IDIS). The PR28 must also be attached to the Consolidated Annual Performance and Evaluation Report (CAPER). HUD requires the PR28 and related attachments to be submitted by deadlines established in CPD Notice 21 11. Timely submission is a direct and material compliance requirement for the CDBG State Program. Condition The City did not prepare or submit the required PR28 Performance and Evaluation Report (PER) for open CDBG State Program grants for the fiscal year ended September 30, 2024. Because the PR28 is required to be submitted as an attachment to the CAPER, failure to complete the PR28 resulted in the CAPER submission also being incomplete and untimely. The PR28 and CAPER were required to be submitted by December 31, 2024, and were not submitted until November 20, 2025. This is the second consecutive year in which the City failed to submit required HUD reports by the established deadline. The recurrence of the issue demonstrates that internal controls were not implemented, not operating effectively, and not sufficient to ensure timely PR28 reporting. Cause The City did not have sufficiently formalized internal controls or a centralized compliance calendar to ensure timely PR28 preparation and submission. Responsibilities for PR28 reporting were not clearly assigned and staff were not fully trained on PR28 requirements. Effect or Potential Effect Noncompliance with HUD PR28 reporting requirements, resulting in incomplete and untimely submission of federally required performance information. Untimely or missing PR28 reports limit HUD’s ability to evaluate program performance, assess expenditure activity, and monitor compliance with program objectives, and may result in delayed reimbursements or additional oversight. Given the recurrence of the issue, the lack of effective corrective actions, and the significance of the PR28 reporting requirement, there is a reasonable possibility that material noncompliance with the major program would not be prevented or detected. Accordingly, this condition represents a material weakness in internal control and material noncompliance. Questioned Costs None Context During the audit period, the City continued to experience resource constraints within its finance and grants management functions. These conditions contributed to delays in compiling the information needed to complete the PR28 report. Because the PR28 was not completed, the CAPER package was also incomplete and submitted well after HUD deadlines. A similar issue was reported in the fiscal year 2023 single audit report dated May 15, 2024, and although the City developed a corrective action plan, the fiscal year 2024 PR28 report was not submitted timely. The recurrence of this issue indicates that the City’s reporting controls were not operating as intended. Recommendation Establish written procedures for preparing and submitting the PR28, designate personnel responsible for completing required HUD reporting, and implement a compliance calendar to track reporting deadlines. Provide training on PR28 requirements and implement review procedures to ensure the PR28 and supporting attachments are completed and submitted on time. Views of Responsible Officials City officials agree with the finding. The City will enhance internal controls over HUD reporting, designate personnel responsible for PR28 preparation, and cross train staff to provide additional coverage. Management is developing written procedures and providing training on PR28 requirements to improve reporting accuracy and timeliness.
Duplicate Payments to Vendors Type of Finding Material Weakness - Internal Control Over Financial Reporting Material Noncompliance - Material to the Financial Statements Material Weakness - Internal Control Over Compliance Material Noncompliance - Material to the Major Program New or Repeat Finding New Federal Program Community Development Block Grant/State's Program (ALN 14.228) Federal Agency U.S. Department of Housing and Urban Development Pass-through Entity and Identifying Number(s) Texas General Land Office (22-119-003-D373, 22-085-017-D253) Compliance Requirement(s) A. Activities allowed or unallowed B. Allowable costs/cost principles Criteria 2 CFR 200.303(a) requires entities to maintain effective internal control over federal awards. 2 CFR 200.302(b)(3) requires entities to maintain accountability over funds to ensure they are used for authorized purposes and safeguarded against loss or misuse. Condition The City paid a vendor twice for the same invoices and also submitted duplicate reimbursement requests to the pass through entity for the same expenditures. These errors resulted in a material misstatement of expenditures recorded in the City’s accounting records and in federal reimbursement requests. Cause The same individual entered invoices and released them for payment without secondary review. Inconsistent invoice naming prevented the accounting system’s duplicate invoice controls from identifying previously processed and paid invoices. Effect or Potential Effect Duplicate payments may occur or go undetected, and duplicate reimbursement requests may be submitted to the grantor. Questioned Costs $721,272 Context During the audit period, the City experienced significant turnover within the finance department. Reduced staffing and inconsistent invoice entry practices prevented system controls from recognizing duplicate invoices, resulting in duplicate vendor payments. Because the City relied on these records when requesting grant reimbursements, duplicate requests were also submitted. The errors were identified by the auditors and corrected by the City prior to September 30, 2024. Recommendation The City should segregate duties so one individual enters invoices and another reviews and releases payments. The City should also adopt a standardized invoice naming convention to allow system controls to identify potential duplicates. Views of Responsible Officials City management agrees with the finding. Duplicate payments and reimbursement requests occurred during a period of financial department turnover, compounded by insufficient segregation of duties and inconsistent invoice referencing. The City has recovered the duplicate payments, returned the duplicate reimbursements, implemented a standardized invoice numbering convention, and revised procedures to ensure appropriate review before payments are released. Management is also evaluating additional system controls to prevent recurrence.
CSLFRF Performance Reporting Type of Finding Significant Deficiency - Internal Control Over Compliance New or Repeat Finding New Federal Program(s) COVID-19 - Coronavirus State and Local Fiscal Recovery Fund (ALN 21.027) Federal Agency U.S. Department of Treasury Pass-through Entity and Identifying Numbers N/A Compliance Requirement(s) L. Reporting Criteria The 2024 OMB Compliance Supplement for Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) requires recipients to submit the Project and Expenditure Report (P&E Report) on a quarterly or annual cycle, as applicable, pursuant to 2 CFR 200.328 and 31 CFR §35.4(c). The Department of Treasury’s reporting guidance specifies the required content and deadlines for each reporting cycle. Quarterly reporters must submit each P&E Report by the due date established in Treasury guidance to ensure timely oversight of obligations, expenditures, and project activity. Condition During our audit of the City’s CSLFRF (ALN 21.027), we noted that the City submitted the quarterly P&E Reports for December 31, 2023; March 31, 2024; and June 30, 2024, but did not submit the required report for the period ended September 30, 2024. As a result, activity for this period was not reported in the U.S. Department of the Treasury’s reporting portal as required. Cause The City did not have sufficiently formalized internal controls to consistently track CSLFRF reporting due dates and ensure timely preparation and submission of the quarterly P&E Report. Limited familiarity with Treasury’s reporting guidance and competing operational priorities contributed to the missed reporting deadline. Effect or Potential Effect Failure to submit required performance reports constitutes noncompliance with federal reporting requirements. Untimely or missing reports reduce transparency over program activity and may limit the Department of Treasury’s ability to evaluate obligations, expenditures, and project status. Although we did not identify questioned costs, the absence of timely reporting indicates that internal controls over compliance were not operating effectively, which supports a significant deficiency. Questioned Costs None Context The City submitted the first three quarterly reports for calendar year 2024; however, the September 30, 2024 report was not submitted. The City explained that staff turnover and transitions within the grants and finance functions contributed to challenges in tracking federal grant reporting deadlines. Recommendation We recommend the City put a simple process in place to track CSLFRF reporting deadlines, assign staff to prepare and review each quarterly report, and ensure staff have the guidance and training needed to submit complete and timely reports through the Department of Treasury’s portal. Views of Responsible Officials City officials agree with the finding. The City will strengthen internal controls over CSLFRF reporting, refine monitoring procedures for quarterly deadlines, and provide additional training to staff involved in preparing required reports.