Audit 45798

Finding #2022-001 ? Material Weakness U. S. Department of Housing and Urban Development Passed through: City of Houston Hurricane Sandy Community Development Block Grant Disaster Recovery Assistance Listing #: 14.269 Contract #: 21-134-000-C788 Contract Period: 06/28/22 ? 12/22/24 Criteria: Under Title 2 U. S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities receiving federal awards must establish and maintain internal control over the federal awards that provide reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, state regulations, and the terms and conditions of the federal award. Condition and context: In June of 2022, the Partnership was awarded a grant from the City of Houston to provide construction funding for an affordable housing project. The City of Houston participated in the closing for the affordable housing project on December 22, 2022, which included approving the grant payment for acquisition costs of $2,250,000. At the time of the commencement of the contract period, procedures were not in place to identify allowable acquisition costs. While allowable costs were subsequently identified for the contract period that met the definition of allowable acquisition costs under the Uniform Guidance, the Partnership nor its co-developer, who is responsible for the accounting for the development of the affordable housing, had put in place internal controls related to the submission and approval of the costs being reimbursed under the grant. Cause: The grantee had not established policies and procedures to track and monitor allowable costs in accordance with the Uniform Guidance at the inception of the contract period. Effect: The Partnership and the co-developer may have had insufficient allowable acquisition costs to apply toward the $2,250,000 at closing. Recommendation: The Partnership in coordination with the project co-developer should develop procedures for approving and identifying allowable costs. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2022-001 ? Material Weakness U. S. Department of Housing and Urban Development Passed through: City of Houston Hurricane Sandy Community Development Block Grant Disaster Recovery Assistance Listing #: 14.269 Contract #: 21-134-000-C788 Contract Period: 06/28/22 ? 12/22/24 Criteria: Under Title 2 U. S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities receiving federal awards must establish and maintain internal control over the federal awards that provide reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, state regulations, and the terms and conditions of the federal award. Condition and context: In June of 2022, the Partnership was awarded a grant from the City of Houston to provide construction funding for an affordable housing project. The City of Houston participated in the closing for the affordable housing project on December 22, 2022, which included approving the grant payment for acquisition costs of $2,250,000. At the time of the commencement of the contract period, procedures were not in place to identify allowable acquisition costs. While allowable costs were subsequently identified for the contract period that met the definition of allowable acquisition costs under the Uniform Guidance, the Partnership nor its co-developer, who is responsible for the accounting for the development of the affordable housing, had put in place internal controls related to the submission and approval of the costs being reimbursed under the grant. Cause: The grantee had not established policies and procedures to track and monitor allowable costs in accordance with the Uniform Guidance at the inception of the contract period. Effect: The Partnership and the co-developer may have had insufficient allowable acquisition costs to apply toward the $2,250,000 at closing. Recommendation: The Partnership in coordination with the project co-developer should develop procedures for approving and identifying allowable costs. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.