2024-002 [2022‐002]—PREPARATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFederal Agency: All presented in the Schedule of Expenditures of Federal Awards. Program Name: All presented in the Schedule of Expenditures of Federal Awards. Assistance Listing Nos. and Program Expenditures: All presented in Schedule of Expenditures of Federal Awards. Award Number and Program Award Year: All awards presented in Schedule of Expenditures of Federal Awards. Compliance Requirement: Other – Schedule of Expenditures of Federal Awards preparation Type of Finding: (F) Significant Deficiency in Internal Control over Compliance of Federal Awards. Questioned Costs: None Statement of Condition During our audit, we reviewed the Coalition’s federal-grants report for the fiscal year and identified the grants, Assistance-Listing numbers (AL #s), expenditure amounts, and all other items required to properly present the Schedule of Expenditures of Federal Awards (SEFA). Finance staff subsequently confirmed the SEFA; however, additional federal expenditures and mis-grouped grant costs were found during later reviews. Criteria2 CFR 200.510 indicates that the auditee must prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total federal awards expended as determined in accordance with 2 CFR 200.502, Basis for Determining Federal Awards Expended. Per 2 CFR 200.502, the determination of when a federal award is expended should be based on when the activity related to the federal award occurs. Generally, the activity pertains to events that require the non-federal entity to comply with federal statutes, regulations, and the terms and conditions of federal awards, such as expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program to establish and maintain effective internal controls over federal awards that provides reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of federal awards. Effect Without an established process governed by effective internal controls, the Coalition may not prevent or detect material misstatements on its SEFA in a timely manner. In addition, errors in SEFA preparation could affect the major federal program determination and lead to noncompliance with 2 CFR 200 Subpart F, which in turn could result in a substandard single audit. Cause Historically, the Coalition has requested the auditor assist in identifying accruals related to federal grant expenditures as the organization has maintained these records on a cash basis. As the organization has taken more responsibility on maintaining its federal grant expenditures on an accrual basis, an incomplete SEFA has been provided. Recommendation We recommend the Coalition prepare the Schedule of Expenditures of Federal Awards and submit this to the auditor for testing. The SEFA should include the name of the grant, name of grantor, the AL #, the pass-through number if applicable and a reconciliation of the federal revenues and expenditures to the Coalition’s general ledger. The Coalition staff should perform more detailed reviews of the reports to ensure they properly reflect grant receipts and expenditures. This review should be performed by someone other than the preparer and should include documented evidence of agreeing the reported data to the accounting records. We further recommend training for those individuals involved in the preparation and review of the reports to ensure they are fully aware of the requirements. View of Responsible Officials and Corrective Action Plan: The corrective Action Plan will be carried out in the 2025 Fiscal Year and information will be given to the auditors when requested for the next audit. The Coalition will ensure that all information needed for the SEFA is kept and entered accurately (this process has already begun). When the fiscal year closes out, the Coalition will provide the auditors with a test SEFA to confirm that the information we are collecting throughout the year and are asserting are the correct numbers for our federal grants, is indeed the correct information. Corrective Action Plan Timeline: Completed by December 19, 2025 (Final copy of the SEFA will not be given to the auditors until requested for the Audit).Designation Of Employee Position Responsible For Meeting Deadline: Executive Director will oversee this project and work directly with NMCEH finance staff work closely with the auditors to make sure that the information saved and shared is correct.
2024-002 [2022‐002]—PREPARATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFederal Agency: All presented in the Schedule of Expenditures of Federal Awards. Program Name: All presented in the Schedule of Expenditures of Federal Awards. Assistance Listing Nos. and Program Expenditures: All presented in Schedule of Expenditures of Federal Awards. Award Number and Program Award Year: All awards presented in Schedule of Expenditures of Federal Awards. Compliance Requirement: Other – Schedule of Expenditures of Federal Awards preparation Type of Finding: (F) Significant Deficiency in Internal Control over Compliance of Federal Awards. Questioned Costs: None Statement of Condition During our audit, we reviewed the Coalition’s federal-grants report for the fiscal year and identified the grants, Assistance-Listing numbers (AL #s), expenditure amounts, and all other items required to properly present the Schedule of Expenditures of Federal Awards (SEFA). Finance staff subsequently confirmed the SEFA; however, additional federal expenditures and mis-grouped grant costs were found during later reviews. Criteria2 CFR 200.510 indicates that the auditee must prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total federal awards expended as determined in accordance with 2 CFR 200.502, Basis for Determining Federal Awards Expended. Per 2 CFR 200.502, the determination of when a federal award is expended should be based on when the activity related to the federal award occurs. Generally, the activity pertains to events that require the non-federal entity to comply with federal statutes, regulations, and the terms and conditions of federal awards, such as expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program to establish and maintain effective internal controls over federal awards that provides reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of federal awards. Effect Without an established process governed by effective internal controls, the Coalition may not prevent or detect material misstatements on its SEFA in a timely manner. In addition, errors in SEFA preparation could affect the major federal program determination and lead to noncompliance with 2 CFR 200 Subpart F, which in turn could result in a substandard single audit. Cause Historically, the Coalition has requested the auditor assist in identifying accruals related to federal grant expenditures as the organization has maintained these records on a cash basis. As the organization has taken more responsibility on maintaining its federal grant expenditures on an accrual basis, an incomplete SEFA has been provided. Recommendation We recommend the Coalition prepare the Schedule of Expenditures of Federal Awards and submit this to the auditor for testing. The SEFA should include the name of the grant, name of grantor, the AL #, the pass-through number if applicable and a reconciliation of the federal revenues and expenditures to the Coalition’s general ledger. The Coalition staff should perform more detailed reviews of the reports to ensure they properly reflect grant receipts and expenditures. This review should be performed by someone other than the preparer and should include documented evidence of agreeing the reported data to the accounting records. We further recommend training for those individuals involved in the preparation and review of the reports to ensure they are fully aware of the requirements. View of Responsible Officials and Corrective Action Plan: The corrective Action Plan will be carried out in the 2025 Fiscal Year and information will be given to the auditors when requested for the next audit. The Coalition will ensure that all information needed for the SEFA is kept and entered accurately (this process has already begun). When the fiscal year closes out, the Coalition will provide the auditors with a test SEFA to confirm that the information we are collecting throughout the year and are asserting are the correct numbers for our federal grants, is indeed the correct information. Corrective Action Plan Timeline: Completed by December 19, 2025 (Final copy of the SEFA will not be given to the auditors until requested for the Audit).Designation Of Employee Position Responsible For Meeting Deadline: Executive Director will oversee this project and work directly with NMCEH finance staff work closely with the auditors to make sure that the information saved and shared is correct.
2024-002 [2022‐002]—PREPARATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFederal Agency: All presented in the Schedule of Expenditures of Federal Awards. Program Name: All presented in the Schedule of Expenditures of Federal Awards. Assistance Listing Nos. and Program Expenditures: All presented in Schedule of Expenditures of Federal Awards. Award Number and Program Award Year: All awards presented in Schedule of Expenditures of Federal Awards. Compliance Requirement: Other – Schedule of Expenditures of Federal Awards preparation Type of Finding: (F) Significant Deficiency in Internal Control over Compliance of Federal Awards. Questioned Costs: None Statement of Condition During our audit, we reviewed the Coalition’s federal-grants report for the fiscal year and identified the grants, Assistance-Listing numbers (AL #s), expenditure amounts, and all other items required to properly present the Schedule of Expenditures of Federal Awards (SEFA). Finance staff subsequently confirmed the SEFA; however, additional federal expenditures and mis-grouped grant costs were found during later reviews. Criteria2 CFR 200.510 indicates that the auditee must prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total federal awards expended as determined in accordance with 2 CFR 200.502, Basis for Determining Federal Awards Expended. Per 2 CFR 200.502, the determination of when a federal award is expended should be based on when the activity related to the federal award occurs. Generally, the activity pertains to events that require the non-federal entity to comply with federal statutes, regulations, and the terms and conditions of federal awards, such as expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program to establish and maintain effective internal controls over federal awards that provides reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of federal awards. Effect Without an established process governed by effective internal controls, the Coalition may not prevent or detect material misstatements on its SEFA in a timely manner. In addition, errors in SEFA preparation could affect the major federal program determination and lead to noncompliance with 2 CFR 200 Subpart F, which in turn could result in a substandard single audit. Cause Historically, the Coalition has requested the auditor assist in identifying accruals related to federal grant expenditures as the organization has maintained these records on a cash basis. As the organization has taken more responsibility on maintaining its federal grant expenditures on an accrual basis, an incomplete SEFA has been provided. Recommendation We recommend the Coalition prepare the Schedule of Expenditures of Federal Awards and submit this to the auditor for testing. The SEFA should include the name of the grant, name of grantor, the AL #, the pass-through number if applicable and a reconciliation of the federal revenues and expenditures to the Coalition’s general ledger. The Coalition staff should perform more detailed reviews of the reports to ensure they properly reflect grant receipts and expenditures. This review should be performed by someone other than the preparer and should include documented evidence of agreeing the reported data to the accounting records. We further recommend training for those individuals involved in the preparation and review of the reports to ensure they are fully aware of the requirements. View of Responsible Officials and Corrective Action Plan: The corrective Action Plan will be carried out in the 2025 Fiscal Year and information will be given to the auditors when requested for the next audit. The Coalition will ensure that all information needed for the SEFA is kept and entered accurately (this process has already begun). When the fiscal year closes out, the Coalition will provide the auditors with a test SEFA to confirm that the information we are collecting throughout the year and are asserting are the correct numbers for our federal grants, is indeed the correct information. Corrective Action Plan Timeline: Completed by December 19, 2025 (Final copy of the SEFA will not be given to the auditors until requested for the Audit).Designation Of Employee Position Responsible For Meeting Deadline: Executive Director will oversee this project and work directly with NMCEH finance staff work closely with the auditors to make sure that the information saved and shared is correct.
2024-002 [2022‐002]—PREPARATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFederal Agency: All presented in the Schedule of Expenditures of Federal Awards. Program Name: All presented in the Schedule of Expenditures of Federal Awards. Assistance Listing Nos. and Program Expenditures: All presented in Schedule of Expenditures of Federal Awards. Award Number and Program Award Year: All awards presented in Schedule of Expenditures of Federal Awards. Compliance Requirement: Other – Schedule of Expenditures of Federal Awards preparation Type of Finding: (F) Significant Deficiency in Internal Control over Compliance of Federal Awards. Questioned Costs: None Statement of Condition During our audit, we reviewed the Coalition’s federal-grants report for the fiscal year and identified the grants, Assistance-Listing numbers (AL #s), expenditure amounts, and all other items required to properly present the Schedule of Expenditures of Federal Awards (SEFA). Finance staff subsequently confirmed the SEFA; however, additional federal expenditures and mis-grouped grant costs were found during later reviews. Criteria2 CFR 200.510 indicates that the auditee must prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total federal awards expended as determined in accordance with 2 CFR 200.502, Basis for Determining Federal Awards Expended. Per 2 CFR 200.502, the determination of when a federal award is expended should be based on when the activity related to the federal award occurs. Generally, the activity pertains to events that require the non-federal entity to comply with federal statutes, regulations, and the terms and conditions of federal awards, such as expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program to establish and maintain effective internal controls over federal awards that provides reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of federal awards. Effect Without an established process governed by effective internal controls, the Coalition may not prevent or detect material misstatements on its SEFA in a timely manner. In addition, errors in SEFA preparation could affect the major federal program determination and lead to noncompliance with 2 CFR 200 Subpart F, which in turn could result in a substandard single audit. Cause Historically, the Coalition has requested the auditor assist in identifying accruals related to federal grant expenditures as the organization has maintained these records on a cash basis. As the organization has taken more responsibility on maintaining its federal grant expenditures on an accrual basis, an incomplete SEFA has been provided. Recommendation We recommend the Coalition prepare the Schedule of Expenditures of Federal Awards and submit this to the auditor for testing. The SEFA should include the name of the grant, name of grantor, the AL #, the pass-through number if applicable and a reconciliation of the federal revenues and expenditures to the Coalition’s general ledger. The Coalition staff should perform more detailed reviews of the reports to ensure they properly reflect grant receipts and expenditures. This review should be performed by someone other than the preparer and should include documented evidence of agreeing the reported data to the accounting records. We further recommend training for those individuals involved in the preparation and review of the reports to ensure they are fully aware of the requirements. View of Responsible Officials and Corrective Action Plan: The corrective Action Plan will be carried out in the 2025 Fiscal Year and information will be given to the auditors when requested for the next audit. The Coalition will ensure that all information needed for the SEFA is kept and entered accurately (this process has already begun). When the fiscal year closes out, the Coalition will provide the auditors with a test SEFA to confirm that the information we are collecting throughout the year and are asserting are the correct numbers for our federal grants, is indeed the correct information. Corrective Action Plan Timeline: Completed by December 19, 2025 (Final copy of the SEFA will not be given to the auditors until requested for the Audit).Designation Of Employee Position Responsible For Meeting Deadline: Executive Director will oversee this project and work directly with NMCEH finance staff work closely with the auditors to make sure that the information saved and shared is correct.
2024-002 [2022‐002]—PREPARATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFederal Agency: All presented in the Schedule of Expenditures of Federal Awards. Program Name: All presented in the Schedule of Expenditures of Federal Awards. Assistance Listing Nos. and Program Expenditures: All presented in Schedule of Expenditures of Federal Awards. Award Number and Program Award Year: All awards presented in Schedule of Expenditures of Federal Awards. Compliance Requirement: Other – Schedule of Expenditures of Federal Awards preparation Type of Finding: (F) Significant Deficiency in Internal Control over Compliance of Federal Awards. Questioned Costs: None Statement of Condition During our audit, we reviewed the Coalition’s federal-grants report for the fiscal year and identified the grants, Assistance-Listing numbers (AL #s), expenditure amounts, and all other items required to properly present the Schedule of Expenditures of Federal Awards (SEFA). Finance staff subsequently confirmed the SEFA; however, additional federal expenditures and mis-grouped grant costs were found during later reviews. Criteria2 CFR 200.510 indicates that the auditee must prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total federal awards expended as determined in accordance with 2 CFR 200.502, Basis for Determining Federal Awards Expended. Per 2 CFR 200.502, the determination of when a federal award is expended should be based on when the activity related to the federal award occurs. Generally, the activity pertains to events that require the non-federal entity to comply with federal statutes, regulations, and the terms and conditions of federal awards, such as expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program to establish and maintain effective internal controls over federal awards that provides reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of federal awards. Effect Without an established process governed by effective internal controls, the Coalition may not prevent or detect material misstatements on its SEFA in a timely manner. In addition, errors in SEFA preparation could affect the major federal program determination and lead to noncompliance with 2 CFR 200 Subpart F, which in turn could result in a substandard single audit. Cause Historically, the Coalition has requested the auditor assist in identifying accruals related to federal grant expenditures as the organization has maintained these records on a cash basis. As the organization has taken more responsibility on maintaining its federal grant expenditures on an accrual basis, an incomplete SEFA has been provided. Recommendation We recommend the Coalition prepare the Schedule of Expenditures of Federal Awards and submit this to the auditor for testing. The SEFA should include the name of the grant, name of grantor, the AL #, the pass-through number if applicable and a reconciliation of the federal revenues and expenditures to the Coalition’s general ledger. The Coalition staff should perform more detailed reviews of the reports to ensure they properly reflect grant receipts and expenditures. This review should be performed by someone other than the preparer and should include documented evidence of agreeing the reported data to the accounting records. We further recommend training for those individuals involved in the preparation and review of the reports to ensure they are fully aware of the requirements. View of Responsible Officials and Corrective Action Plan: The corrective Action Plan will be carried out in the 2025 Fiscal Year and information will be given to the auditors when requested for the next audit. The Coalition will ensure that all information needed for the SEFA is kept and entered accurately (this process has already begun). When the fiscal year closes out, the Coalition will provide the auditors with a test SEFA to confirm that the information we are collecting throughout the year and are asserting are the correct numbers for our federal grants, is indeed the correct information. Corrective Action Plan Timeline: Completed by December 19, 2025 (Final copy of the SEFA will not be given to the auditors until requested for the Audit).Designation Of Employee Position Responsible For Meeting Deadline: Executive Director will oversee this project and work directly with NMCEH finance staff work closely with the auditors to make sure that the information saved and shared is correct.
2024-002 [2022‐002]—PREPARATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFederal Agency: All presented in the Schedule of Expenditures of Federal Awards. Program Name: All presented in the Schedule of Expenditures of Federal Awards. Assistance Listing Nos. and Program Expenditures: All presented in Schedule of Expenditures of Federal Awards. Award Number and Program Award Year: All awards presented in Schedule of Expenditures of Federal Awards. Compliance Requirement: Other – Schedule of Expenditures of Federal Awards preparation Type of Finding: (F) Significant Deficiency in Internal Control over Compliance of Federal Awards. Questioned Costs: None Statement of Condition During our audit, we reviewed the Coalition’s federal-grants report for the fiscal year and identified the grants, Assistance-Listing numbers (AL #s), expenditure amounts, and all other items required to properly present the Schedule of Expenditures of Federal Awards (SEFA). Finance staff subsequently confirmed the SEFA; however, additional federal expenditures and mis-grouped grant costs were found during later reviews. Criteria2 CFR 200.510 indicates that the auditee must prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total federal awards expended as determined in accordance with 2 CFR 200.502, Basis for Determining Federal Awards Expended. Per 2 CFR 200.502, the determination of when a federal award is expended should be based on when the activity related to the federal award occurs. Generally, the activity pertains to events that require the non-federal entity to comply with federal statutes, regulations, and the terms and conditions of federal awards, such as expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program to establish and maintain effective internal controls over federal awards that provides reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of federal awards. Effect Without an established process governed by effective internal controls, the Coalition may not prevent or detect material misstatements on its SEFA in a timely manner. In addition, errors in SEFA preparation could affect the major federal program determination and lead to noncompliance with 2 CFR 200 Subpart F, which in turn could result in a substandard single audit. Cause Historically, the Coalition has requested the auditor assist in identifying accruals related to federal grant expenditures as the organization has maintained these records on a cash basis. As the organization has taken more responsibility on maintaining its federal grant expenditures on an accrual basis, an incomplete SEFA has been provided. Recommendation We recommend the Coalition prepare the Schedule of Expenditures of Federal Awards and submit this to the auditor for testing. The SEFA should include the name of the grant, name of grantor, the AL #, the pass-through number if applicable and a reconciliation of the federal revenues and expenditures to the Coalition’s general ledger. The Coalition staff should perform more detailed reviews of the reports to ensure they properly reflect grant receipts and expenditures. This review should be performed by someone other than the preparer and should include documented evidence of agreeing the reported data to the accounting records. We further recommend training for those individuals involved in the preparation and review of the reports to ensure they are fully aware of the requirements. View of Responsible Officials and Corrective Action Plan: The corrective Action Plan will be carried out in the 2025 Fiscal Year and information will be given to the auditors when requested for the next audit. The Coalition will ensure that all information needed for the SEFA is kept and entered accurately (this process has already begun). When the fiscal year closes out, the Coalition will provide the auditors with a test SEFA to confirm that the information we are collecting throughout the year and are asserting are the correct numbers for our federal grants, is indeed the correct information. Corrective Action Plan Timeline: Completed by December 19, 2025 (Final copy of the SEFA will not be given to the auditors until requested for the Audit).Designation Of Employee Position Responsible For Meeting Deadline: Executive Director will oversee this project and work directly with NMCEH finance staff work closely with the auditors to make sure that the information saved and shared is correct.
Item 2024-002 Reporting (Repeat 2023-002) Head Start and Early Head Start Assistance Listing #93.600 Head Start Grant No. 04CH01121 U.S. Department of Health and Human Services Federal Award Year - 2024 Condition – Adequate controls were not in place to review and approve grant reports prior to their submission to the grantor. The Federal Financial Reports (SF-425) for the Head Start Cluster grants were not reviewed and approved prior to submission to the Payment Management System. Criteria – Grantees should have controls in place to ensure that grant reports are being reviewed and approved by management prior to being submitted to the grantor. 2 CFR 200.303 requires the non‐Federal entity to “(a) establish and maintain effective internal controls over the Federal award that provides reasonable assurance that the non‐Federal entity is managing the Federal statutes, regulations, and the terms and conditions of the Federal award.” Cause – Lack of sufficient controls over the review and approval of grant reports to ensure the accuracy and completeness of the report being submitted to the grantor. Questioned Costs – Not applicable. Effect – Lack of proper review and approval could result in improper reporting which could lead to disallowed costs. However, our audit disclosed no instances of unallowable costs. Recommendation – We recommend the implementation of controls to ensure there is evidence of review and approval of the quarterly grant reports prior to submission to the grantor. Management’s Response – The Agency will implement controls to ensure proper review and approval is obtained on required grant reports prior to submission to the grantor.
Finding Number: 2024-001 Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects Compliance Requirement(s): Eligibility Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) 24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion. (1) The affordability requirements: (i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership. (ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and (iii) Must be recorded in accordance with State recordation laws. (2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability. (3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. (4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b). (h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1). 24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations (1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h): (i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family. (ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request. (iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals. Cause The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information. Effect or potential effect The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria. Questioned costs None Context The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances. Identification as a repeat finding if applicable 2023-002 Recommendation We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements. Views of responsible officials and planned corrective actions The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway. The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001 Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects Compliance Requirement(s): Eligibility Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) 24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion. (1) The affordability requirements: (i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership. (ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and (iii) Must be recorded in accordance with State recordation laws. (2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability. (3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. (4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b). (h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1). 24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations (1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h): (i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family. (ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request. (iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals. Cause The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information. Effect or potential effect The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria. Questioned costs None Context The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances. Identification as a repeat finding if applicable 2023-002 Recommendation We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements. Views of responsible officials and planned corrective actions The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway. The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001 Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects Compliance Requirement(s): Eligibility Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) 24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion. (1) The affordability requirements: (i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership. (ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and (iii) Must be recorded in accordance with State recordation laws. (2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability. (3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. (4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b). (h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1). 24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations (1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h): (i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family. (ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request. (iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals. Cause The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information. Effect or potential effect The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria. Questioned costs None Context The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances. Identification as a repeat finding if applicable 2023-002 Recommendation We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements. Views of responsible officials and planned corrective actions The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway. The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001 Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects Compliance Requirement(s): Eligibility Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) 24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion. (1) The affordability requirements: (i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership. (ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and (iii) Must be recorded in accordance with State recordation laws. (2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability. (3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. (4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b). (h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1). 24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations (1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h): (i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family. (ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request. (iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals. Cause The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information. Effect or potential effect The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria. Questioned costs None Context The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances. Identification as a repeat finding if applicable 2023-002 Recommendation We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements. Views of responsible officials and planned corrective actions The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway. The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001 Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects Compliance Requirement(s): Eligibility Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) 24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion. (1) The affordability requirements: (i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership. (ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and (iii) Must be recorded in accordance with State recordation laws. (2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability. (3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. (4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b). (h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1). 24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations (1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h): (i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family. (ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request. (iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals. Cause The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information. Effect or potential effect The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria. Questioned costs None Context The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances. Identification as a repeat finding if applicable 2023-002 Recommendation We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements. Views of responsible officials and planned corrective actions The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway. The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001 Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects Compliance Requirement(s): Eligibility Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) 24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion. (1) The affordability requirements: (i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership. (ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and (iii) Must be recorded in accordance with State recordation laws. (2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability. (3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. (4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b). (h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1). 24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations (1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h): (i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family. (ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request. (iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit. Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals. Cause The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information. Effect or potential effect The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria. Questioned costs None Context The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances. Identification as a repeat finding if applicable 2023-002 Recommendation We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements. Views of responsible officials and planned corrective actions The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway. The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-002 Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections Compliance Requirement(s): Special Tests – Housing Quality Standards Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) § 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements: … (iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units. HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected? A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows: Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually. Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule. Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards. The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209. 2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented. Condition The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late. In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251. Cause The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year. Effect or potential effect Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process. Questioned costs None Context The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log. Identification as a repeat finding if applicable 2023-003 Recommendation We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections. Views of responsible officials and planned corrective actions Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections. The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays. The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002 Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections Compliance Requirement(s): Special Tests – Housing Quality Standards Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) § 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements: … (iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units. HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected? A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows: Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually. Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule. Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards. The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209. 2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented. Condition The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late. In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251. Cause The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year. Effect or potential effect Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process. Questioned costs None Context The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log. Identification as a repeat finding if applicable 2023-003 Recommendation We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections. Views of responsible officials and planned corrective actions Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections. The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays. The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002 Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections Compliance Requirement(s): Special Tests – Housing Quality Standards Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) § 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements: … (iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units. HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected? A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows: Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually. Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule. Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards. The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209. 2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented. Condition The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late. In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251. Cause The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year. Effect or potential effect Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process. Questioned costs None Context The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log. Identification as a repeat finding if applicable 2023-003 Recommendation We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections. Views of responsible officials and planned corrective actions Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections. The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays. The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002 Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections Compliance Requirement(s): Special Tests – Housing Quality Standards Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) § 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements: … (iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units. HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected? A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows: Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually. Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule. Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards. The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209. 2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented. Condition The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late. In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251. Cause The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year. Effect or potential effect Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process. Questioned costs None Context The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log. Identification as a repeat finding if applicable 2023-003 Recommendation We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections. Views of responsible officials and planned corrective actions Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections. The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays. The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002 Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections Compliance Requirement(s): Special Tests – Housing Quality Standards Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) § 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements: … (iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units. HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected? A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows: Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually. Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule. Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards. The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209. 2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented. Condition The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late. In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251. Cause The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year. Effect or potential effect Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process. Questioned costs None Context The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log. Identification as a repeat finding if applicable 2023-003 Recommendation We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections. Views of responsible officials and planned corrective actions Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections. The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays. The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002 Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections Compliance Requirement(s): Special Tests – Housing Quality Standards Classification: Material Weakness Programs: Home Investment Partnerships Program ALN #: 14.239 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518 Federal Award Year: 2020, 2021, 2022, 2023 Criteria or specific requirement (including statutory, regulatory, or other citation) § 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements: … (iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units. HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected? A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows: Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually. Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule. Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards. The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209. 2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented. Condition The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late. In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251. Cause The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year. Effect or potential effect Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process. Questioned costs None Context The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log. Identification as a repeat finding if applicable 2023-003 Recommendation We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections. Views of responsible officials and planned corrective actions Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections. The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays. The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-005 Finding Title: Internal Controls over Compliance of Reinspection’s to Enforce Housing Quality Standards Compliance Requirement(s): Special Tests – Housing Quality Standards Enforcement Classification: Material Weakness Programs: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year Federal Award Year: 2024 Criteria or specific requirement (including statutory, regulatory, or other citation PART 982—SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM 24 CFR 982.54(d)(21) Procedural guidelines and performance standards for conducting required HQS inspections, including: (i) Any deficiency that the Public Housing Authority (PHA) has adopted as a life-threatening deficiency that is not a HUD-required life-threatening deficiency (ii) For PHAs that adopt the initial inspection non-life-threatening deficiency option: a. The PHA's policy on whether the provision will apply to all initial inspections or a portion of initial inspections. b. The PHA's policy on whether the provision will be applied to only some inspections and how the units will be selected. c. The PHA's policy on using withheld HAP funds to repay an owner once the unit is in compliance with HQS. (iii) For PHAs that adopt the alternative inspection provision: a. The PHA's policy on how it will apply the provision to initial and periodic inspections. b. he specific alternative inspection method used by the PHA. c. The specific properties or types of properties where the alternative inspection method will be employed. d. For initial inspections, the maximum amount of time the PHA will withhold HAP if the owner does not correct the HQS deficiencies within the cure period, and the period of time after which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract. (iv) The PHA's policy on charging a reinspection fee to owners. 24 CFR 982.54(d)(22) The PHA's policy on withholding HAP for units that do not meet HQS (see § 982.404(d)(1)) 24 CFR 982.406(e)(5) The PHA may commence housing assistance payments to the owner and make housing assistance payments retroactive to the effective date of the HAP contract only after the unit passes the PHA's HQS inspection. If the unit does not pass the HQS inspection, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected. If a deficiency is life-threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within no more than 30 calendar days (or any PHA-approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract. PHA POLICY 8-II.F. INSPECTION RESULTS AND REINSPECTIONS FOR UNITS UNDER HAP CONTRACT The city of Long Beach PHA Admin Plan requires that each deficiency is identified in the NPSIRE standards as either life-threatening, severe, moderate, or low. Further indicating that units under HAP contract, must correct for life-threatening deficiencies within 24 hours after notice has been provided and all others must be corrected within 30 days (or a PHA-approved extension) after notice has been provided. Life-threatening deficiencies require notifying both parties by telephone or email immediately while Severe or moderate deficiencies will be provided through a written notification within five business days of the inspection. Both will include specifying who is responsible for correcting the violation and the time frame within which the failure must be corrected. If low deficiencies are identified, these deficiencies will only be noted for informational purposes. The notice will inform the party which caused the deficiencies, whether owner or family, that if life-threatening conditions are not corrected within 24 hours, and non-life-threatening conditions are not corrected within the specified time frame (or any PHA-approved extension), the owner’s HAP will be abated in accordance with PHA policy (Section 8-II.G.) or the family’s assistance will be terminated in accordance with PHA policy (Chapter 12). 2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The PHA did not have sufficient internal controls in place to ensure timely reinspection of initial inspections for housing quality standard enforcement leading to eighteen re-inspections which were not completed within the required time frames set by PHA policy, created in accordance with federal requirements. The inspections selected were categorized as severe or moderate deficiencies, allowing for a 30 day period starting after providing notification of inspection results which must occur within 5 days of the inspection completion (or effectively 35 days), the eighteen samples mentioned were completed after this window causing the PHA to be noncompliant with PHA policy 8-II.F and 24 CFR 982.406(e)(5). Additionally, one tenant failed inspection in October 2023 before failing a subsequent reinspection in December 2023. No further action was taken by the PHA, and the case was closed without resolving the deficiencies that caused the inspections to fail leading to noncompliance with 24 CFR 982.406(e)(5) and PHA policy 8-II.F. Cause The delayed reinspection’s and mistakenly closed inspection were due to constraints on resources and a change in the system utilized by the authority to administer the program during the year. Effect or potential effect The PHA did not perform necessary procedures to enforce owner and/or family obligations to correct deficiencies, which if unresolved, could lead to housing assistance payments to either party which should have been abated. Questioned costs None Context Sixty inspections requiring reinspection were selected for testing, eighteen were found to be completed after the required reinspection date. Late reinspection’s ranged from 1 day late to over a year late. One of the failed re-inspections cases was closed by management prior to resolution of identified deficiencies. None of the 60 samples selected were categorized as “life threatening”. Identification as a repeat finding if applicable 2023-008 Recommendation We recommend the Authority enhance internal controls over the timeliness and completeness of its the housing quality standard enforcement procedures. Views of responsible officials and planned corrective actions The HACLB acknowledges the importance of timely reinspections to ensure compliance with Housing Quality Standards (HQS) and has taken concrete steps to strengthen its internal controls and enforcement mechanisms. To strengthen compliance and reduce delays, HACLB implemented an enhanced reinspection scheduling process in December 2024, using its MRI housing software to automatically schedule reinspections within the 30-day remediation period. The system also tracks extension requests and approvals, while staff regularly monitor system-generated reports to ensure timely follow-up and adherence to HUD standards. These improvements are designed to ensure that repairs are verified within the required timeframe, increase program compliance, and improve the overall quality of housing for HCV participants. HACLB is committed to ongoing monitoring and refinement of this process to ensure continuous improvement.
Finding Number: 2024-005 Finding Title: Internal Controls over Compliance of Reinspection’s to Enforce Housing Quality Standards Compliance Requirement(s): Special Tests – Housing Quality Standards Enforcement Classification: Material Weakness Programs: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year Federal Award Year: 2024 Criteria or specific requirement (including statutory, regulatory, or other citation PART 982—SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM 24 CFR 982.54(d)(21) Procedural guidelines and performance standards for conducting required HQS inspections, including: (i) Any deficiency that the Public Housing Authority (PHA) has adopted as a life-threatening deficiency that is not a HUD-required life-threatening deficiency (ii) For PHAs that adopt the initial inspection non-life-threatening deficiency option: a. The PHA's policy on whether the provision will apply to all initial inspections or a portion of initial inspections. b. The PHA's policy on whether the provision will be applied to only some inspections and how the units will be selected. c. The PHA's policy on using withheld HAP funds to repay an owner once the unit is in compliance with HQS. (iii) For PHAs that adopt the alternative inspection provision: a. The PHA's policy on how it will apply the provision to initial and periodic inspections. b. he specific alternative inspection method used by the PHA. c. The specific properties or types of properties where the alternative inspection method will be employed. d. For initial inspections, the maximum amount of time the PHA will withhold HAP if the owner does not correct the HQS deficiencies within the cure period, and the period of time after which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract. (iv) The PHA's policy on charging a reinspection fee to owners. 24 CFR 982.54(d)(22) The PHA's policy on withholding HAP for units that do not meet HQS (see § 982.404(d)(1)) 24 CFR 982.406(e)(5) The PHA may commence housing assistance payments to the owner and make housing assistance payments retroactive to the effective date of the HAP contract only after the unit passes the PHA's HQS inspection. If the unit does not pass the HQS inspection, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected. If a deficiency is life-threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within no more than 30 calendar days (or any PHA-approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract. PHA POLICY 8-II.F. INSPECTION RESULTS AND REINSPECTIONS FOR UNITS UNDER HAP CONTRACT The city of Long Beach PHA Admin Plan requires that each deficiency is identified in the NPSIRE standards as either life-threatening, severe, moderate, or low. Further indicating that units under HAP contract, must correct for life-threatening deficiencies within 24 hours after notice has been provided and all others must be corrected within 30 days (or a PHA-approved extension) after notice has been provided. Life-threatening deficiencies require notifying both parties by telephone or email immediately while Severe or moderate deficiencies will be provided through a written notification within five business days of the inspection. Both will include specifying who is responsible for correcting the violation and the time frame within which the failure must be corrected. If low deficiencies are identified, these deficiencies will only be noted for informational purposes. The notice will inform the party which caused the deficiencies, whether owner or family, that if life-threatening conditions are not corrected within 24 hours, and non-life-threatening conditions are not corrected within the specified time frame (or any PHA-approved extension), the owner’s HAP will be abated in accordance with PHA policy (Section 8-II.G.) or the family’s assistance will be terminated in accordance with PHA policy (Chapter 12). 2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The PHA did not have sufficient internal controls in place to ensure timely reinspection of initial inspections for housing quality standard enforcement leading to eighteen re-inspections which were not completed within the required time frames set by PHA policy, created in accordance with federal requirements. The inspections selected were categorized as severe or moderate deficiencies, allowing for a 30 day period starting after providing notification of inspection results which must occur within 5 days of the inspection completion (or effectively 35 days), the eighteen samples mentioned were completed after this window causing the PHA to be noncompliant with PHA policy 8-II.F and 24 CFR 982.406(e)(5). Additionally, one tenant failed inspection in October 2023 before failing a subsequent reinspection in December 2023. No further action was taken by the PHA, and the case was closed without resolving the deficiencies that caused the inspections to fail leading to noncompliance with 24 CFR 982.406(e)(5) and PHA policy 8-II.F. Cause The delayed reinspection’s and mistakenly closed inspection were due to constraints on resources and a change in the system utilized by the authority to administer the program during the year. Effect or potential effect The PHA did not perform necessary procedures to enforce owner and/or family obligations to correct deficiencies, which if unresolved, could lead to housing assistance payments to either party which should have been abated. Questioned costs None Context Sixty inspections requiring reinspection were selected for testing, eighteen were found to be completed after the required reinspection date. Late reinspection’s ranged from 1 day late to over a year late. One of the failed re-inspections cases was closed by management prior to resolution of identified deficiencies. None of the 60 samples selected were categorized as “life threatening”. Identification as a repeat finding if applicable 2023-008 Recommendation We recommend the Authority enhance internal controls over the timeliness and completeness of its the housing quality standard enforcement procedures. Views of responsible officials and planned corrective actions The HACLB acknowledges the importance of timely reinspections to ensure compliance with Housing Quality Standards (HQS) and has taken concrete steps to strengthen its internal controls and enforcement mechanisms. To strengthen compliance and reduce delays, HACLB implemented an enhanced reinspection scheduling process in December 2024, using its MRI housing software to automatically schedule reinspections within the 30-day remediation period. The system also tracks extension requests and approvals, while staff regularly monitor system-generated reports to ensure timely follow-up and adherence to HUD standards. These improvements are designed to ensure that repairs are verified within the required timeframe, increase program compliance, and improve the overall quality of housing for HCV participants. HACLB is committed to ongoing monitoring and refinement of this process to ensure continuous improvement.
Finding Number: 2024-006 Finding Title: Internal controls Over Compliance Participants Reexaminations, Housing Assistance Payments and Related Reporting Compliance Requirement(s): Special Tests – Housing Assistance Payment, Reporting, Allowed and Unallowed Costs Classification: Material Weakness Programs: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year Federal Award Year: 2024 Criteria or specific requirement (including statutory, regulatory, or other citation Allowable Costs Principles ; Activities Allowed and Unallowed; Eligibility § 982.201 Eligibility and targeting. (3) The annual income (gross income) of an applicant family is used both for determination of income-eligibility under paragraph (b)(1) of this section and for targeting under paragraph (b)(2)(i) of this section. In determining annual income of an applicant family that includes a person with disabilities, the determination must include the disallowance of increase in annual income as provided in 24 CFR 5.617, if applicable. (4) The applicable income limit for issuance of a voucher when a family is selected for the program is the highest income limit (for the family size) for areas in the PHA jurisdiction. The applicable income limit for admission to the program is the income limit for the area where the family is initially assisted in the program. At admission, the family may only use the voucher to rent a unit in an area where the family is income eligible. Housing Assistance Payments (e) Effective date of reexamination. (1) The PHA must adopt policies consistent with this section prescribing how to determine the effective date of a change in the housing assistance payment resulting from an interim redetermination. (2) At the effective date of a regular or interim reexamination, the PHA must make appropriate adjustments in the housing assistance payment in accordance with § 982.505. (f) Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant or participant families is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income). Reporting 24CFR982.516(d) Family reporting of change. The PHA must adopt policies consistent with this section prescribing when and under what conditions the family must report a change in family income or composition. HUD collects Tenant data to understand demographic, family profile, income, and housing information for participants in the Public Housing, Section 8 Housing Choice Voucher, Section 8 Project Based Certificate, Section 8 Moderate Rehabilitation, and Moving to Work Demonstration programs. This data also allows HUD to monitor the performance of programs and the performance of public housing agencies that administer the programs. 24 CFR Part 908 and 24 CFR section 982.158 The HUD-50058, Family Report (OMB No. 2577-0083) is required to be submitted by the PHA electronically to HUD each time the PHA completes an issuance, admission, annual reexamination, interim reexamination, portability move-in, expiration, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA’s jurisdiction under portability. 2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The Public Housing Authority (PHA) of the City of Long Beach did not have procedures implemented for a secondary review during the process of income tenant income reexamination. Insufficient internal controls around reexaminations of income could lead noncompliance with Eligibility, Reporting, Housing assistance payment, and expenditure allowability requirements. Cause The PHA did not have control procedures in place for a secondary review on income reexaminations but is in the process of implementing a control which was not in place for the fiscal year under audit due to understaffing. Effect or potential effect Insufficient controls over the reexamination process could lead to ineligible participants in the program, housing assistance payments that are either incorrect or to ineligible participants, and inaccurate reporting to HUD. Questioned costs None Context We tested 62 reexaminations, none of which included a secondary review. Identification as a repeat finding if applicable 2023-009 Recommendation We recommend the PHA establish a secondary review over the reexamination of income of program participants. Views of responsible officials and planned corrective actions While HUD does not mandate a secondary review of files or allocate additional funding for such activities, HACLB recognizes the critical importance of accurate participant data, timely housing assistance payments, and compliance with HUD reporting requirements. HACLB has established and continues to enhance a system of internal controls to ensure program integrity and compliance. HACLB leverages its MRI housing management software to automate data validation and error detection in alignment with HUD’s PIC requirements, ensuring accurate and compliant submissions. The system flags validation errors for correction before transmission, while additional oversight through the PIC Error Dashboard, SEMAP evaluations, and internal file reviews supports ongoing quality control. Errors identified through these processes are used for staff training and performance improvement, with new Housing Specialists’ work closely monitored to uphold accuracy and program integrity. With the utilization of MRI housing management software and PIC systems, enhanced quality control processes, ongoing staff training, and proactive monitoring, HACLB is confident in its ability to maintain strong internal controls, ensure compliance with HUD requirements, and safeguard program integrity.
Finding Number: 2024-006 Finding Title: Internal controls Over Compliance Participants Reexaminations, Housing Assistance Payments and Related Reporting Compliance Requirement(s): Special Tests – Housing Assistance Payment, Reporting, Allowed and Unallowed Costs Classification: Material Weakness Programs: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year Federal Award Year: 2024 Criteria or specific requirement (including statutory, regulatory, or other citation Allowable Costs Principles ; Activities Allowed and Unallowed; Eligibility § 982.201 Eligibility and targeting. (3) The annual income (gross income) of an applicant family is used both for determination of income-eligibility under paragraph (b)(1) of this section and for targeting under paragraph (b)(2)(i) of this section. In determining annual income of an applicant family that includes a person with disabilities, the determination must include the disallowance of increase in annual income as provided in 24 CFR 5.617, if applicable. (4) The applicable income limit for issuance of a voucher when a family is selected for the program is the highest income limit (for the family size) for areas in the PHA jurisdiction. The applicable income limit for admission to the program is the income limit for the area where the family is initially assisted in the program. At admission, the family may only use the voucher to rent a unit in an area where the family is income eligible. Housing Assistance Payments (e) Effective date of reexamination. (1) The PHA must adopt policies consistent with this section prescribing how to determine the effective date of a change in the housing assistance payment resulting from an interim redetermination. (2) At the effective date of a regular or interim reexamination, the PHA must make appropriate adjustments in the housing assistance payment in accordance with § 982.505. (f) Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant or participant families is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income). Reporting 24CFR982.516(d) Family reporting of change. The PHA must adopt policies consistent with this section prescribing when and under what conditions the family must report a change in family income or composition. HUD collects Tenant data to understand demographic, family profile, income, and housing information for participants in the Public Housing, Section 8 Housing Choice Voucher, Section 8 Project Based Certificate, Section 8 Moderate Rehabilitation, and Moving to Work Demonstration programs. This data also allows HUD to monitor the performance of programs and the performance of public housing agencies that administer the programs. 24 CFR Part 908 and 24 CFR section 982.158 The HUD-50058, Family Report (OMB No. 2577-0083) is required to be submitted by the PHA electronically to HUD each time the PHA completes an issuance, admission, annual reexamination, interim reexamination, portability move-in, expiration, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA’s jurisdiction under portability. 2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The Public Housing Authority (PHA) of the City of Long Beach did not have procedures implemented for a secondary review during the process of income tenant income reexamination. Insufficient internal controls around reexaminations of income could lead noncompliance with Eligibility, Reporting, Housing assistance payment, and expenditure allowability requirements. Cause The PHA did not have control procedures in place for a secondary review on income reexaminations but is in the process of implementing a control which was not in place for the fiscal year under audit due to understaffing. Effect or potential effect Insufficient controls over the reexamination process could lead to ineligible participants in the program, housing assistance payments that are either incorrect or to ineligible participants, and inaccurate reporting to HUD. Questioned costs None Context We tested 62 reexaminations, none of which included a secondary review. Identification as a repeat finding if applicable 2023-009 Recommendation We recommend the PHA establish a secondary review over the reexamination of income of program participants. Views of responsible officials and planned corrective actions While HUD does not mandate a secondary review of files or allocate additional funding for such activities, HACLB recognizes the critical importance of accurate participant data, timely housing assistance payments, and compliance with HUD reporting requirements. HACLB has established and continues to enhance a system of internal controls to ensure program integrity and compliance. HACLB leverages its MRI housing management software to automate data validation and error detection in alignment with HUD’s PIC requirements, ensuring accurate and compliant submissions. The system flags validation errors for correction before transmission, while additional oversight through the PIC Error Dashboard, SEMAP evaluations, and internal file reviews supports ongoing quality control. Errors identified through these processes are used for staff training and performance improvement, with new Housing Specialists’ work closely monitored to uphold accuracy and program integrity. With the utilization of MRI housing management software and PIC systems, enhanced quality control processes, ongoing staff training, and proactive monitoring, HACLB is confident in its ability to maintain strong internal controls, ensure compliance with HUD requirements, and safeguard program integrity.
Earmarking Federal Agency: Department of Homeland Security Federal Program Name: Disaster Grant Public Assistance (Presidentially Declared Disasters) Assistance Listing Number: 97.036 Grant Award Number: 4337DR-FL-2024 Award Period: Various Type of Finding: Material Weakness in Internal Control over Compliance and Other Matters Criteria: Compliance: 2 CFR 200.302(b)(3) states that records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the” Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Management costs requested and received from FEMA exceeded the 5% threshold. Questioned Costs: $35,572. Context: Received the total award amount for calculation of the 5% threshold. Compared to the management costs requested and received. Cause: The County requested management fees unaware of the total expenditure amount. Effect: Over request of management fees leads to unallowable costs. Repeat finding: No Recommendation: Provide clear, updated guidance and periodic training sessions on earmarking rules and how to apply them. Conduct reviews of earmarking compliance. View responsible official and planned corrective actions: New procedures will be implemented that strengthen internal controls to ensure clear earmarking guidance and initial review of compliances.
Federal Agency: Department of Homeland Security Federal Program Name: Disaster Grant Public Assistance (Presidentially Declared Disasters) Assistance Listing Number: 97.036 Grant Award Number: 4337DR-FL-2024 Award Period: Various Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria: Compliance: 2 CFR 200.302(b)(3) states that records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the” Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: It was observed that quarterly progress reports lacked documentation of review and approval by management prior to submission to the granting agency. Questioned Costs: None. Context: All quarterly progress reports selected for testing lacked documented review and approval. Cause: The City has not established formal policies and procedures for the review and approval process. Effect: The lack of a proper review and approval process for grant quarterly progress report submissions can result in the submission of inaccurate and incomplete reimbursement requests and reports, which may lead to non-compliance with grant requirements and potential financial penalties. Repeat Finding: No Recommendation: We recommend that the organization implement a review and approval process for all quarterly progress report submissions. This should include: - Training staff on the importance of the review and approval process. - Ensuring adequate staffing levels to handle the review process. - Developing clear guidelines and procedures for the review and approval process. - Regularly monitoring and auditing the review process to ensure compliance. View of Responsible Official and Planned Corrective Actions: There is no disagreement with the audit finding. See Corrective Action Plan
Federal Agency: Department of Homeland Security Federal Program Name: Disaster Grant Public Assistance (Presidentially Declared Disasters) Assistance Listing Number: 97.036 Grant Award Number: 4337DR-FL-2024 Award Period: Various Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria: Compliance: 2 CFR 200.302(b)(3) states that records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the” Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: It was observed that quarterly progress reports lacked documentation of review and approval by management prior to submission to the granting agency. Questioned Costs: None. Context: All quarterly progress reports selected for testing lacked documented review and approval. Cause: The City has not established formal policies and procedures for the review and approval process. Effect: The lack of a proper review and approval process for grant quarterly progress report submissions can result in the submission of inaccurate and incomplete reimbursement requests and reports, which may lead to non-compliance with grant requirements and potential financial penalties. Repeat Finding: No Recommendation: We recommend that the organization implement a review and approval process for all quarterly progress report submissions. This should include: - Training staff on the importance of the review and approval process. - Ensuring adequate staffing levels to handle the review process. - Developing clear guidelines and procedures for the review and approval process. - Regularly monitoring and auditing the review process to ensure compliance. View of Responsible Official and Planned Corrective Actions: There is no disagreement with the audit finding. See Corrective Action Plan
Item 2024-001 Activities Allowed/Allowable Cost Education Stabilization Fund (ESF) ALN# 84.425 U.S. Department of Education Passed through the State Department of Education Grant period – Years ended September 30, 2024 (84.425U) Criteria – Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should follow guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition – Controls in place did not operate properly to ensure that expenses were approved for allowability prior to purchase. Cause – Officials relied on approved budget for ESSER to substantiate the purchase of supplies made with ESSER funds. Effect – Lack of controls for proper approval on disbursements could lead to disallowed costs. We noted that certain payments lacked approval, however, our audit disclosed no instances of unallowable costs. Questioned Costs – N/A. Recommendation – We recommend the strengthening of controls to ensure that all expenses are properly approved by adequate officials as noted in procedures. Management’s Response – The Board will strengthen the controls in place to ensure that all procedures have been followed prior to expenditures being encumbered.
Item 2024-002 Special Tests and Provisions – Wage Rate Requirements Education Stabilization Fund (ESF) ALN# 84.425 U.S. Department of Education Passed through the State Department of Education Grant period – Years ended September 30, 2024 (84.425U) Criteria – Grantees should have controls in place to ensure that contractors and subcontractors are notified of the requirement to pay prevailing wage rates to all laborers and mechanics employed on construction contracts in excess of $2,000 financed by federal assistance funds and to submit weekly certified payrolls for each week in which contract work is performed. 2 CFR 200.303 requires the non‐Federal entity to “(a) establish and maintain effective internal controls over the Federal award that provides reasonable assurance that the non‐Federal entity is managing the Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR 200.326 and 29 CFR Part 5, Labor Standards Provisions Applicable to Contracts Governing Federally Financed and Assisted Construction (DOL Regulations) require the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). Condition – Adequate controls were not in place to ensure that contractors and subcontractors were notified of the requirements to comply with the wage rate requirements and provided timely certified payrolls throughout the construction projects. Cause – A clause describing the Wage Rate Requirements was not added to the construction contracts. There was a lack of sufficient controls over the communication of this requirement to ensure the accuracy and completeness of the certified payrolls being provided to the Board. Effect – Lack of notification of the wage rate requirements to the contractors and subcontractors could lead to disallowed costs. We noted that payments to contractors did not have supporting documentation of certified payrolls. However, our audit disclosed no instances of unallowable costs. Questioned Costs – $166,152. Recommendation – We recommend the strengthening of controls to ensure the prevailing wage rate clauses are included in the contracts and that certified payrolls are received for each week in which construction work is performed. Management’s Response – The Board will strengthen the controls in place to provide assurance that proper prevailing wage rate clauses are added to construction contracts and certified payrolls are received from each week in which construction work is performed.
Criteria: 2 CFR 200.303 requires that internal control must provide reasonable assurance that the Organization complies with the requirements of the Uniform Guidance and its grant agreements. If not complied with, it could result in the disallowance of costs and repayment of funds to the granting agency. The standards mentioned above require that internal control be established and maintained to ensure compliance. Condition: The Organization's Congregate Meal program reports meals served using computerized software. This information is prepared using original documentation prepared at the point of service. During the fiscal year under audit, instances were identified of inconsistencies between the software reports and the original documentation of the meals served to participants. Cause: The Organization's procedures for preparing meal reports primarily relies on summary-level information and does not include more detailed reconciliations by individuals to the records prepared at the senior center. Effect or Potential Effect: The reported meal counts were materially in agreement with the underlying documentation, but the lack of more detailed review could cause reimbursement requests to be made for meals not actually served. Questioned Costs: None. Recommendation: We recommend the Organization increase the detail of the review process over the tracking of meals, including both the financial function and those with direct knowledge and supervision of the services being performed. We recommend the Organization consider additional training for program staff. Management's Response: Management agrees with the recommendation and has established and implemented written procedures to ensure future compliance.
U.S. Department of Health and Human Services - 93.432 Center for Independent Living 2024-004 Lack of Documented Approval Criteria: Per 2 CFR §200.303, the entity must establish and maintain effective internal controls over federal awards that provide reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the award. Adequate documentation of approvals is a fundamental internal control to ensure expenditures are necessary, allowable, and properly authorized. Condition: During our testing of expenditures charged to the Centers for Independent Living funded by the U.S. Department of Health and Human Services, we noted that the League did not maintain documented evidence of management approval prior to incurring or paying costs. The transactions reviewed lacked documented authorizations, supervisor sign-offs, or other documentation showing formal approval. Cause: The lack of documented approval appears to be due to inconsistent application of internal controls and the absence of a standardized process for documenting expenditure authorization for federal programs. Effect: Without documented approval, there is an increased risk that unallowable or unauthorized expenditures could be charged to the federal award. It also weakens the audit trail and compliance with Uniform Guidance requirements. Questioned Costs: None noted. Recommendation: We recommend the League implement and enforce a formal process requiring documented pre-approval of all expenditures charged to federal programs. This may include standardized approval forms or electronic workflows that clearly demonstrate appropriate review and authorization prior to payment. Views of Responsible Officials and Planned Corrective Actions: See corrective action plan on page 50.
Finding 2024-006 – CASH MANAGEMENT (repeat comment) Type: Significant Deficiency in Internal Control. Program: ALN 93.493 Congressional Directives Grant Name: Access to Behavioral Crisis Services Grantor Number: FG-22-099 Criteria: Pursuant to 2 CFR 200.303, recipients must, “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Condition: The CMHSP has established internal controls relating to approvals of cash requests. However, during testing, we noted that cash requests did not contain evidence of required review and approvals. Cause: This condition was caused by an insufficient internal control process for review and approval of cash requests. Effect: Cash requests submitted prior to review and approval are at risk of reporting incorrect information. Questioned Cost: None. Context: Although amounts listed in the cash requests were supported by the CMHSP’s internal records, the requests did not contain evidence of approvals. Recommendation: We recommend that the CMHSP review their internal controls and make necessary changes to ensure that cash requests are reviewed and approved prior to submission. Management’s Resp: We are in agreement with this finding.
Federal Agency: U.S. Department of Agriculture Federal Program Name: State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Assistance Listing Number: 10.561 Pass-through Agency: The Pennsylvania State University; New Jersey Department of Health Pass-through Number: S004968-COP-TFT; DFHS24SNA005 Award Period: October 1, 2023 - September 30, 2024 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria: 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart F - Audit Requirements, section 200.303 requires that non-Federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. This includes verifying that vendors are not suspended or debarred before engaging in transactions. Condition: During our testing, we found that the Organization provided documentation showing that the vendors used in the federal program were not listed as suspended or debarred according to the Sam.gov website, in line with their internal control procedures. However, there was no documentation indicating that the verification was performed prior to entering the transactions. Questioned Costs: None Context: The absence of documentation confirming that vendors were screened for suspension or debarment before engaging in transactions represents a gap in internal control over compliance. This control measure is essential to adhere to Federal regulations and reduce the risk of conducting business with parties who are suspended or debarred. Cause: The Organization did not have a formal process in place to document the verification of suspension and debarment status prior to engaging with vendors. Effect: In the absence of documented evidence of vendor verification, there is an elevated risk that the Organization may engage in transactions with suspended or debarred parties. This situation could lead to noncompliance with Federal regulations and result in potential penalties. Repeat Finding: N/A – Not a repeat finding. Recommendation: The Organization should establish and enforce controls to verify that vendors are not suspended or debarred prior to entering any transactions and maintain this documentation. This measure ensures the integrity of the procurement process and mitigates risks associated with engaging disqualified vendors. In 2024, the threshold amount for suspension and debarment checks was $25,000. Transactions equal to or exceeding this amount required verification to confirm that the entity involved was not debarred or suspended. Viewed of Responsible Officials and Planned Corrective Actions: Please refer to The Food Trust’s Corrective Action Plan.
Federal Agency: U.S. Department of Agriculture Federal Program Name: State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Assistance Listing Number: 10.561 Pass-through Agency: The Pennsylvania State University; New Jersey Department of Health Pass-through Number: S004968-COP-TFT; DFHS24SNA005 Award Period: October 1, 2023 - September 30, 2024 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria: 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart F - Audit Requirements, section 200.303 requires that non-Federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. This includes verifying that vendors are not suspended or debarred before engaging in transactions. Condition: During our testing, we found that the Organization provided documentation showing that the vendors used in the federal program were not listed as suspended or debarred according to the Sam.gov website, in line with their internal control procedures. However, there was no documentation indicating that the verification was performed prior to entering the transactions. Questioned Costs: None Context: The absence of documentation confirming that vendors were screened for suspension or debarment before engaging in transactions represents a gap in internal control over compliance. This control measure is essential to adhere to Federal regulations and reduce the risk of conducting business with parties who are suspended or debarred. Cause: The Organization did not have a formal process in place to document the verification of suspension and debarment status prior to engaging with vendors. Effect: In the absence of documented evidence of vendor verification, there is an elevated risk that the Organization may engage in transactions with suspended or debarred parties. This situation could lead to noncompliance with Federal regulations and result in potential penalties. Repeat Finding: N/A – Not a repeat finding. Recommendation: The Organization should establish and enforce controls to verify that vendors are not suspended or debarred prior to entering any transactions and maintain this documentation. This measure ensures the integrity of the procurement process and mitigates risks associated with engaging disqualified vendors. In 2024, the threshold amount for suspension and debarment checks was $25,000. Transactions equal to or exceeding this amount required verification to confirm that the entity involved was not debarred or suspended. Viewed of Responsible Officials and Planned Corrective Actions: Please refer to The Food Trust’s Corrective Action Plan.
Internal Controls over Compliance with Activities Allowed or Unallowed Requirement (Significan Defiency. Identification of the Federal Program(s): 1. Assistance Listig program Title and Number 21.027 Appalachian Community Grant Program, 2. Federal award identification number: 21.027 Ohio Department of Development (GOA-F23-ACGDG-195968), 3. Name of the federal agencies: 21.027 Department of the Treasury, 4. Name of the applicable pass-throught entities: 21.027: Ohio Department of Development. Criteria or specific requirement (including statutory, regulatory, or other citation): The 2 CFR section 200.303 of the Uniform Guidance requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations and the terms and conditions of the fereral awards. Condition: During the Audit, it was noted 8 out of 8 non-payroll charges for the major program lacked invoice approvals, as approvals were not required for the actural transactions. Cause: Failure to adhere to their established porcess and no proper turnover of previous employees let to the absence of approvals for the actual transactions. Effect or potential effect: Without adequate internal controls to ensure that all charges to teh federal program are properly reviewed for allowablity, SAOP could be noncompliant with the allowability requirement and might request funds for unalloed costs. Questioned Costs: None. Context: There are no invoice approvals for non-payroll charges in the major program. Identificaion as a repeat findings, if applicable: Yes, see findings 2023-001. Recomendations: We recommend that SAOP secure approvals for charges related to the federal program. View of responsible officals: Management agrees with the findings and recommendation.
Program Information: U.S. Department of Housing and Urban Development Indian Housing Block Grant Assistance Listing #14.867 Award Numbers: 55-IH-53-18320 Award Period: 10/18/2011 – 09/30/2034 Criteria: Per the 2024 OMB Compliance Supplement, each recipient shall develop written policies governing the eligibility, admission, and occupancy of families for housing assisted with grant funds (25 USC 4133(d)). Per YNHA policies, all program applicants must meet the following eligibility requirements: • Qualify as an Indian Family or qualify for an exception - YNHA may decide to provide housing assistance for non-Indian family if they deem the presence of the family on the reservation is essential to the well-being of Indian families and the need for housing of essential families cannot reasonably be met without such assistance (ex. teachers, healthcare providers). Executive Director will make a determination for essential families. YNHA may also provide housing for law enforcement officers of the Nation or another unit of government and YNHA determines the presence of the officer may deter crime. • Have an annual income that meets income eligibility standards (considered low-income based on HUD thresholds) or qualify as an exception. Families that are not low-income can receive assistance in a few cases: they were low income at the time of initial occupancy, they received a Mutual Help unit through transfer of the unit from a family member, or the family is an essential family/law enforcement (see above). • Be 18 years or older or 16 with status as an emancipated minor. • Provide a complete application including proof of tribal enrollment, social security cards, and proof of income. • Signed Consent for Release of Information to YNHA/HUD Form 9886. • Must submit to drug and alcohol screening tests prior to signing the rental agreement, lease, or homeownership agreement. • Annual inspections. 2 CFR § 200.303 - Internal controls states, the non-federal entity must: (a) Establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government,” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition/Context: During testing of 30 tenant files under the IHBG program: • 2 of 30 files did not include a signed rental agreement documenting initial eligibility approval. • 30 of 30 files lacked evidence of approval of recertifications or required inspections. [ X ] Compliance Finding [ ] Significant Deficiency [ X ] Material Weakness Cause: YNHA’s internal control procedures over eligibility and recertification were not consistently followed. Management did not ensure that signed agreements and approvals of recertifications/inspections were documented in the tenant files. Effect: Failure to document eligibility determinations and approvals creates a risk that ineligible tenants may receive housing benefits, that federal program requirements may not be met, and that YNHA may be subject to HUD compliance findings. Questioned Cost: N/A – The documentation deficiencies identified did not result in known unallowable costs or payments to ineligible participants; therefore, no questioned costs are reported. Prior Year Finding: No. Recommendation: We recommend that YNHA implement written procedures and staff training to ensure all required eligibility and occupancy documentation is obtained and retained. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
Program Information: U.S. Department of Housing and Urban Development Indian Housing Block Grant Assistance Listing #14.867 Award Numbers: 55-IH-53-18320 Award Period: 10/18/2011 – 09/30/2034 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR part 200. Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the suspension and debarment standards set out at 2 CFR Part 180, which implements Executive Orders 12549 and 12689, “Debarment and Suspension,” federal awarding agency regulations in Title 2 of the CFR adopting/implementing the OMB guidance in 2 CFR Part 180; program legislation; and the terms and conditions of the award. 2 CFR § 200.303 - Internal controls states, the non-federal entity must: (a) Establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government,” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition/Context: 2 of 4 samples selected for suspension and debarment testing did not have documentation of a suspension and debarment search performed prior to entering a transaction with the vendor. [ X ] Compliance Finding [ X ] Significant Deficiency [ ] Material Weakness Cause: There were ineffective controls in place during the period, along with management oversight. Effect: YNHA may unknowingly enter into business with a suspended or debarred vendor. Questioned Cost: N/A – While documentation of the suspension and debarment verification was not available, no evidence was identified indicating that payments were made to suspended or debarred parties. Therefore, no questioned costs were identified. Prior Year Finding: No. Recommendation: We recommend YNHA conduct a training for staff and program managers to review YNHA’s suspension and debarment requirements and perform searches annually. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
Program Information: U.S. Department of Housing and Urban Development Indian Housing Block Grant Assistance Listing #14.867 Award Numbers: 55-IH-53-18320 Award Period: 10/18/2011 – 09/30/2034 Criteria: Per the 2024 OMB Compliance Supplement: Program regulations provide that a tribe may assume responsibilities for environmental review and decision making under the requirements of 24 CFR Part 58 or it may allow HUD to retain these responsibilities. The tribe is the responsible entity, whether or not a TDHE is authorized to receive IHBG grant amounts on behalf of the tribe (24 CFR section 58.2(a)(7)(ii)). If HUD retains the responsibilities, HUD will do reviews under the provisions of 24 CFR Part 50 (24 CFR section 1000.20). A HUD environmental review must be completed for any activities not excluded before a recipient may acquire, rehabilitate, convert, lease, repair, or construct property, or commit HUD or local funds (24 CFR section 1000.20(a)). If the tribe assumes these responsibilities, the following applies: An environmental review must be prepared for each project or activity. Funds may not be committed to a grant activity or project before the completion of the environmental review and approval of the Request for Release of Funds (RROF) and environmental certification. If the responsible entity tribe determines that it met a criterion specified in the regulations that would qualify the project as exempt or qualify the project for certain categorical exclusions, the RROF and environmental certification requirements do not apply (24 CFR sections 58.34 and 58.35(b), 24 CFR section 1000.20(b)(3)). 2 CFR § 200.303 - Internal controls states, the non-federal entity must: (a) Establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government,” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition/Context: During testing, we noted that 1 of 3 environmental review samples had expenditures prior to approval of the environmental review. [ X ] Compliance Finding [ X ] Significant Deficiency [ ] Material Weakness Cause: Lack of internal controls over environmental reviews. Effect: If funds are expended prior to completion of the environmental review, they may be in violation of environmental laws and out of compliance with the program. The funds may also be used for projects where the review determines there were significant or unavoidable environmental impacts, and it should not have started. Questioned Cost: N/A – Although expenditures were incurred prior to approval of the environmental review, the costs tested were ultimately allowable under the program, supported by adequate documentation, and not prohibited by regulation. Therefore, no costs required adjustment or repayment. Prior Year Finding: No. Recommendation: We recommend YNHA ensure environmental reviews are approved prior to beginning work on the project. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.
Condition: In accordance with 2 CFR-200.328 and 2 CFR-200.303, non-federal entities must submit performance and financial reports as required by the awarding agency and must establish and maintain effective internal control over compliance with federal statutes, regulations, and the terms and conditions of the federal award. Context: The City is required to submit monthly progress reports ten calendar days after the end of each month, quarterly progress reports no later than the 10th of quarter end, and a bi-annual Contract and Subcontract Activity form (HUD-2516), to be submitted by April 15 and October 15 each year. Per testing, monthly and quarterly reports were submitted 10 to 27 days after the deadline. ABPA was unable to obtain evidence that form HUD-2516 was submitted by either of the required due dates. Effect: Failure to submit required reports in a timely manner, and the lack of supporting documentation, represents a deficiency in internal control over compliance. This increases the risk of noncompliance with federal reporting requirements, which could result in questioned costs, delayed reimbursements, or jeopardize future funding. Cause: Delays in report submission were primarily due to insufficient internal controls over the reporting process, lack of clear assignment of responsibilities, and inadequate monitoring of reporting deadlines. Questioned costs: None. Recommendation: We recommend that the City strengthen its internal controls over compliance by implementing a centralized reporting calendar or system to monitor federal reporting deadlines. In addition, procedures should be established to ensure that documentation of timely report submission is retained in the grant files. Staff responsible for grant administration should also receive training on federal reporting requirements.
Assistance Listing Number: 97.036 Program Title: Disaster Grants-Public Assistance (Presidentially Declared Disasters) Compliance Requirement: Reporting - Performance Reporting Pass-through Entity: Florida Division of Emergency Management Federal Grant/Contract Number and Grant Year: Z0884 2019 Finding Type: Material Weakness in Internal Control and Compliance Known Questioned Costs: $0 Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Federal awards submitted to the federal awarding agency should include all the activity of the reporting period, are supported by the underlying accounting or performance records, and are fairly presented in accordance with program. Condition: Of the 40 quarterly Federal Emergency Management Agency reports included in our sample for testing, 3 of the reports prepared by the County’s consultant were not based on the approved expenses and the underlying supporting documentation. This was not a statistically valid sample. Cause: The County has not implemented procedures to formally document their review of the quarterly reporting prior to submission of those reports by their third-party consultant to the Florida Division of Emergency Management which would have been able to detect these errors. Effect: Quarterly reporting could include potential errors and cause the County to be out of compliance with the requirements of the grant. Recommendation: The County should implement formal documentation via signature of approval on the quarterly reporting prior to submission to the Florida Division of Emergency Management. Management Response: See attached Corrective Action Plan.
Assistance Listing Number: 97.083 Program Title: Staffing for Adequate Fire and Emergency Response Grant (SAFER)Compliance Requirement: Cash Management Pass-through Entity: N/A - Direct Federal Grant/Contract Number and Grant Year: EMW-2019-FF-01635 2019 Finding Type: Material Weakness in Internal Control and Compliance Known Questioned Costs: $0 Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Condition: Of the three reimbursement requests selected for testing, two reimbursement requests had ineligible payroll costs approved for reimbursement by the Grant Administrator. This was not a statistically valid sample. Cause: Errors in the completion of the report by the Grant Administrator and inadequate review of the reports by the County which would have detected these errors. Effect: In both instances, the grantor caught the ineligible costs submitted for reimbursement and only reimbursed the eligible payroll costs. However, this could have been a much more significant issue if the grantor had not caught these ineligible costs which would then have caused the County to be out of compliance with the requirements of the grant. Recommendation: The County should implement an additional review of the payroll costs submitted with the reimbursement request. Review should be documented via signature of approval prior to submission or formal email confirmation that a review was done and the reimbursement request may be submitted. Management Response: See attached Corrective Action Plan.
Program: ALN 84.425V, Department of Education, Education Stabilization Fund, Emergency Assistance to Non-Public Schools, passed through the State of Alaska, grant number CO23.244.01/1004 052132102 2211Criteria: 2 CFR section 200.303(d)(2), states that a non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statues, regulations, and the terms and conditions of the federal award. 2 CFR section 200.430(g)(1), states that charges to Federal awards for salaries and wages must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: SAAMS’ policies require a payroll batch report be reviewed prior to issuing payroll. This payroll batch report specifies employee name, program charged, amount charged to each program, hours, and pay rate. During our testing, we identified that the payroll batch report did not always contain amounts charged to each program or pay rates, making the review ineffective. Cause: Turnover in personnel during the fiscal year led to inadequate training and inconsistent performance of the payroll batch report review. Effect: Unallowable payroll costs may be charged to a federal program. Questioned costs: None Context: During our testing of 11 payroll batch reports, 5 did not contain pay rates or amounts charged to each program. Statistical sampling: No Repeat finding: No Recommendation: We recommend the entity develop policies that incorporate standardized reporting and description of the review objective, along with training to staff.
Program: ALN 11.012, National Oceanic and Atmospheric Administration, Implementation and Development of Regional Coastal Ocean Observing System, Alaska Ocean Observing System grant numbers NA16NOS0120027, NA21NOS0120094, NA23NOS0120080, NA24NOSX012C0027 Criteria: 2 CFR section 200.303(d)(2), states that a non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statues, regulations, and the terms and conditions of the federal award. Condition: Reports were submitted to the federal agency without documented review or approval by management. Cause: The entity contracts with another organization to act as its fiscal agent. The fiscal agent experienced significant turnover and delays in hiring qualified personnel for finance roles, and the entity did not retain documentation of report reviews. Possible asserted effect: Lack of review increases the risk of submitting incomplete or inaccurate information, potentially leading to audit findings or questioned costs. Questioned costs: None Context: Inspection of all reports submitted during the year indicated that no financial or performance reports had documented approval prior to submission. Statistical sampling: No Repeat finding: No Recommendations: We recommend the entity work with its fiscal agent to provide oversight and compensating controls in times of staff vacancy, and develop policies that incorporate review and documentation of review of reports prior to them being submitted to the granting agencies. Views of responsible officials: AOOS will work with its fiscal agent to strengthen oversight and establish compensating controls during staff vacancies to ensure proper review of reports. In addition, AOOS will develop and implement policies that require management review and documentation of all reports prior to submission to granting agencies, thereby ensuring accuracy, accountability, and compliance with federal requirements
Finding 2024-001: Payroll Accruals - Material Weakness in Internal Controls over Financial Reporting and Internal Control over Federal Programs and Compliance Finding Federal Agency(ies): United States Agency for Global Media Federal Program(s): International Broadcasting Independent Grantee Organizations Assistance Listing Number(s): 90.500 Pass-through Entity (if applicable): N/A Award Identification Number and Year: MN01-24-GO-00001 (2024) Criteria or Specific Requirement: The general standards for internal controls over financial reporting set forth the objective of a system of internal control that provides for management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. Additionally, 2 CFR 200.303 Internal Controls states that recipients must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control-Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Prior to the start of our audit, the Organization noted that they had gone through an extensive balance sheet account cleanup process but had a few balance sheet accounts that had not yet been reconciled or cleaned and they were aware of adjustments that still needed to be made, but with the reduction in staff had not been able to address. The largest balance of these remaining accounts was the payroll accruals. As such, the Organization had not yet accrued payroll expenditures for the final pay period of the fiscal year. Additionally, it was confirmed that accrued payroll balances presented in the preliminary trial balance were related to prior year activity that was not accounted for properly. Such balances were adjusted during the audit, and a restatement of the opening net deficit was posted. Cause: At the end of the 2024 fiscal year, the Organization was in the midst of a restructuring, and did not have adequate resources in place in the finance and accounting department to properly review and reconcile the year end payroll accruals. This has now been corrected through the audit process. Effect or Potential Effect: Material errors with respect to year payroll accruals increase the risk that the financial statements as a whole, as well as the expenditures reported to USAGM, will not be presented correctly and also impacts the ability of management to make accurate financial decisions. However, the Organization knew what the correct balance should be so the ability to make accurate financial decisions was not impacted. Questioned Costs: NoneContext: The misstatement attributable to missed September 2024 payroll accruals was an understatement of expenses of approximately $2.48 million. The misstatement attributable to prior year activity was approximately $1 million (an increase in the net deficit). Identification as a Repeat Finding, if Applicable: Repeat of Finding 2023-001 and 2023-002 Recommendation: We recommend that management devote additional resources to the accounting and finance team to provide capacity for the implementation of thorough review and reconciliation process during year-end close.
(a) Criteria or Requirement 2 CFR 200.303 requires non-federal entities receiving federal awards to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effective internal control should include procedures to ensure federal expenditures are accurately and completely reported on the SEFA. (b) Condition Found The System lacked sufficient internal controls to ensure the allowability of expenditures charged to the HIV Care Formula Grants. Our testing of a sample of 40 transactions totaling $6,054 identified three charges, totaling $488, that were incorrectly billed to the federal program. These costs, although related to services provided to patients, were determined unallowable for the following reasons: • The patients had other insurance coverage that was not billed prior to submission to the federal agency. • The patients did not meet all eligibility requirements and should have been excluded from reimbursement requests. Additionally, management did not maintain adequate documentation to support the annual reverification of patient eligibility, which is required prior to receiving services each year to remain eligible for the program. Due to these deficiencies, an expanded sample of 23 additional charges totaling $2,799 was tested. Of these,12 were determined to be unallowable, totaling $1,808. Charges related to certain costs related to July through September 2024 were related to an agreement that was not fully executed, resulting in an additional $97,782 of unallowable costs. Lastly, management did not retain sufficient supporting documentation for certain amendments to the grant agreement. This documentation is necessary to substantiate various elements of patient eligibility criteria under the grant. The grant amendment includes specific language that the grant is for the treatment of females over the age of 13, however both males and females were expensed and reimbursed under the grant. The male population for the remaining nine months of year represents $404,710. Our testing identified 26 out of our expanded sample of 63 total patients were males that were not also identified in the above testing results, totaling $3,835. (c) Cause The System’s review processes for charges recorded against the grant and submitted for federal reimbursement were ineffective in preventing unallowable charges and inaccurate amounts.. NORTH MISSISSIPPI HEALTH SERVICES, INC. Schedule of Findings and Questioned Costs Year ended September 30, 2024 54 DRAFT 10/18/2025 10:56 AM 694078F-1A_NorthMississippiHealthServicesInc_SACR.docx Additionally, the System could not provide documentation for certain grant agreement amendments that would have supported the eligibility of specific patients. (d) Effect Federal funds were expended for unallowable purposes or for inaccurate amounts and evidence of the effective operation of management review controls was not maintained in accordance with Federal requirements. (e) Questioned Cost Expenditures related to patient charges of $222,016. (f) Statistical Sample The sample was not intended to be, and was not, a statistically valid sample. (g) Repeat Finding in the Prior Year Not a repeat finding (h) Recommendation We recommend that the System strengthen controls over the management review process to prevent unallowable costs and inaccurate amounts from being charged to Federal programs as well as ensure all relevant documentation is maintained in accordance with Federal requirements. (i) View of Responsible Officials Invoices were submitted to Mississippi State Department of Health (MSDH) for the HIV Care Formula Grants (CFDA No. 93.917); however, clinic staff did not conduct a thorough evaluation to verify continued eligibility for the program among patients who had previously qualified. Additionally, the lack of a fully executed agreement was a management oversight which contributed to the uncertainty regarding allowable billing to the program for reimbursement. Supporting documentation, including paperwork and emails, was also not properly maintained by management
2024-002 Suspension and Debarment ALN 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Department of the Treasury Grant # Y5082 2021 funding Condition: City staff were unable to produce contemporaneous documentation of verification that vendors were not disqualified, excluded, or debarred prior to entering into a covered transaction. Criteria: 2 CFR 180.300 requires the City to ensure vendors and contractors are not disqualified, excluded, or debarred prior to entering into a covered transaction. 2 CFR 200.303 requires non-federal entities to establish and maintain effective internal controls. The City should have a process to ensure compliance with 2 CFR 180.300. Cause: The City has experienced significant turnover in key management positions, including the City Manager and Finance Director, which created obstacles to locating documentation from prior periods. Potential Effect of Condition: Without a prior SAM check the City may have covered transactions with federally debarred vendors. However, in this case the impacted vendor was not debarred so there were no instances of non-compliance. Questioned Costs: None. Perspective: Of the non statistical sample of two vendors, one of the vendors did not have verification of not being suspended or debarred. Recommendation: The City should perform SAM checks for all vendors or contractors prior to entering into covered transactions and retain documentation of these processes. Management Response: Management concurs with the recommendation. The City recognizes the importance of complying with 2 CFR 180.300 and 2 CFR 200.303 to ensure that vendors and contractors are not suspended, debarred, or otherwise excluded from participation in federally funded programs. To strengthen compliance and documentation going forward, the City will implement the following corrective actions: 1. Establish a Standardized SAM Verification Process: The City will formalize written procedures requiring verification of all vendors and contractors in the System for Award Management (SAM) prior to entering into any covered transaction. 2. Maintain Documentation: Copies or screenshots of SAM verifications will be retained in the vendor file and/or attached within the City’s financial management system to ensure documentation is readily available for audit purposes. 3. Designate Responsibility: The Finance Department will assign a staff member to perform and document the SAM verification process, with supervisory review prior to vendor approval. 4. Provide Staff Training: Relevant staff will receive training on federal procurement requirements, including SAM verification procedures and documentation standards. 5. Ongoing Monitoring: Management will periodically review vendor files to confirm compliance with these requirements and ensure documentation is properly maintained. Management expects these measures will strengthen internal controls, ensure continued compliance with federal regulations, and prevent similar documentation issues in future audits.
Criteria 2 CFR 200.303 requires that the non-Federal entity must "(a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the comptroller General of the United States and the "Internal Control Intergrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)." Uniform Guidance 2 CFR Section 200.320 (a)(2) states regarding the applicability of simplified acquisition procedures: "The aggregate dollar amount of the procurement transaction is higher than the micro purchase threshold but does not exceed the simplified acquisition threshold. If simplified acquisition procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. Unless specified by the Federal agency, the recipient or subrecipient may exercise judgment in determining what number is adequate." Per procurement policy of AIHEC requires that for procurement by small purchase ($10,000 - $249,000), where the aggregate dollar amount is higher than the micro-purchase threshold, price or rate quotations must be obtained from three qualified sources. If three separate qualified sources cannot be obtained the reason needs to be formally documented. Condition/Context For procurement transaction tested, we noted that AIHEC did not complete a sole-source justification form timely to support the vendor that was selected. Cause Management does not have sufficient internal controls in place to ensure that AIHEC's procurement policies are followed for all procurement transactions prior to entering the procurement. Effect AIHEC entered into a procurement that did not go through a competitive solicitation process. Recommendation Management should review its policies and procedures to ensure all procurement transactions are in accordance with AIHEC's procurement policies and have the appropriate supporting documentation.
Finding 2024-002: Insufficient Documentation of Management Review of Section 3 Quarterly and Annual Reporting Audit Finding: Significant Deficiency Federal Program: Community Development Block Grant Mitigation Program Citywide Drainage Improvements (Assistance Listing 14.228) Compliance Requirement: Reporting and Special Tests and Provisions – Section 3 Requirements Criteria: In accordance with Title 2 of the Code of Federal Regulations (2 CFR) § 200.303, the City must establish and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award. Additionally, 2 CFR § 200.328 requires the City to ensure that reports submitted to the pass-through entity are accurate, complete, and supported by adequate review and oversight. The U.S. Department of Housing and Urban Development’s (HUD) Section 3 regulations at 24 CFR Part 75 require recipients to prepare and submit quarterly and cumulative annual Section 3 reports documenting efforts to provide employment, training, and contracting opportunities to low- and moderate-income persons and businesses within the project area. Condition: The City’s grant administrator is responsible for preparing and submitting the required quarterly and annual Section 3 reports to the Texas General Land Office on behalf of the City. However, there is no documentation demonstrating that City management reviews or approves these reports prior to and after submission. Cause: The City has not established procedures requiring City management to review and document approval of the Section 3 reports prepared and submitted to the Texas General Land Office. Effect: Without documentation of City management review and approval of the Section 3 reports prepared and submitted by the grant administrator, there is an increased risk that reports submitted to the passthrough entity may be inaccurate, incomplete, or not fully compliant with federal reporting requirements. Questioned Costs: None noted. Recommendation: The City should strengthen internal controls over federal reporting by establishing and documenting procedures to ensure City management reviews and approves all Section 3 reports prepared and submitted by the grant administrator. Evidence of this review, such as sign-offs or approval correspondence, should be retained in the grant files to demonstrate compliance with Uniform Guidance and HUD Section 3 reporting requirements. View of Responsible Officials: Management concurs with the recommendation. Please refer to the Corrective Action Plan for additional details.
Federal Program: Community Development Block Grants – Non Entitlement (Assistance Listing 14.228) Criteria: In accordance with Title 2 of the Code of Federal Regulations (2 CFR) § 200.303, the City must establish and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award. Additionally, 2 CFR § 200.328 requires the City to ensure that reports submitted to the pass-through entity are accurate, complete, and supported by adequate review and oversight. The U.S. Department of Housing and Urban Development’s (HUD) Section 3 regulations at 24 CFR Part 75 require recipients to prepare and submit quarterly and cumulative annual Section 3 reports documenting efforts to provide employment, training, and contracting opportunities to low- and moderate-income persons and businesses within the project area. Condition: During single audit testing for reporting, it was noted that management could not provide documentation for review of performance and Section 3 reports for the Community Development Block Grant – State’s Program grant. The grant administrator performs and submits all required reports. Cause: The City has not established procedures requiring City management to review and document approval of the Section 3 reports prepared and submitted to the Texas General Land Office. Effect or Potential Effect: The absence of documented reviews increases the risk that errors or irregularities in financial reporting or compliance with federal program requirements may not be detected and corrected in a timely manner. Recommendations: The City should strengthen internal controls over federal reporting by establishing and documenting procedures to ensure City management reviews and approves all Section 3 reports prepared and submitted by the grant administrator. Evidence of this review, such as sign-offs or approval correspondence, should be retained in the grant files to demonstrate compliance with Uniform Guidance and HUD Section 3 reporting requirements. Repeat Finding: No Views of Responsible Officials: See Corrective Action Plan.
Finding 2024-001 (A/B – Activities Allowed or Unallowed and Allowable Costs / Cost Principles) Identification of the federal program: Federal Grantor: US Department of Homeland Security Federal Emergency Management Agency (FEMA) Assistance Listing No.: 97.036 - COVID-19 - Disaster Grants – Public Assistance (Presidentially Declared Disasters) Criteria or specific requirement (including statutory, regulatory or other citation): The Uniform Guidance 2 CFR section 200.303 states, “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” The Uniform Guidance 2 CFR sections 200.400 through 200.405 set forth the guidance for allowable costs for projects funded with Federal funds. Condition: Baptist Health Care, Inc. (the Company) received funding under program 97.036 – COVID-19 - Disaster Grants – Public Assistance (Presidentially Declared Disasters) (Program) during the fiscal year ended September 30, 2024. The Company submitted duplicate invoices for different projects that resulted in expenditures being reimbursed for costs incurred multiple times. The Company also submitted for reimbursement an amount greater than what was supported by the underlying invoice due to incorrect data submission. Based on discussions with management, we understand that the Company utilized a contracted third party to assist with collecting the information to be submitted to FEMA. However, the internal controls over compliance did not detect or prevent these situations from occurring at the required level of precision. As such, we consider the lack of effectiveness of controls to validate completeness and accuracy of the amounts submitted for reimbursement for this program to represent a material weakness in internal control over compliance. Cause: The Company’s internal controls in place over the review of the completeness and accuracy of amounts submitted for reimbursement under the Program were not sufficient to detect or prevent errors in the underlying files submitted for reimbursement. Effect or potential effect: The lack of management review at a sufficient level of precision regarding expenditures submitted for reimbursement under this Program resulted in the reimbursement of duplicate invoices and reimbursement of an amount greater than the amount supported by the underlying supporting documentation from the granting agency. As a result, the Company will be required to reimburse the Federal Agency. Questioned costs: $79,118.82 Context: There were 8 individual projects for the COVID-19 disaster that the Company received funding for in fiscal year 2024. These projects were submitted to FEMA during the fiscal years 2020 through 2022. We selected 40 expenditures totaling $161,579 from the total population of expenditures totaling $1,843,741. We identified a duplicate invoice in our testing sample. We then reviewed the total population of invoices subject to testing and identified 24 invoices totaling $77,521.50 that were submitted for reimbursement more than once and therefore reimbursed by the Program more than once. We also identified one invoice totaling $177.48 for which reimbursement was requested for an amount $1,597.32 greater than the invoice amount. We extrapolated this error to estimate the likely questioned costs of $16,629.33. We reviewed the entire population of expenditures for which reimbursement was requested and received to determine the total amount of duplicate reimbursements and reimbursements in excess of supporting documentation to quantify the total known questioned costs of $79,118.82. Identification as a repeat finding, if applicable: Not applicable. Recommendation: The Company should ensure that a diligent review of amounts submitted for reimbursement is conducted at a sufficient level of precision by an appropriate individual with knowledge of the Program to ensure expenditures are only submitted once for reimbursement and to ensure that amounts submitted for reimbursement are not in excess of the amounts supported by appropriate documentation. We also recommend that management reimburse the Agency for the amounts reimbursed more than once and reimbursed at amounts in excess of the appropriate supporting documentation. Views of responsible officials: The Company agrees with the above recommendation. See separate Corrective Action Plan.
Finding 2024-043 - Use of Federal Funds to Satisfy Required Local Match Without Prior Approval Summary: The City of Batesville substituted federal Delta Regional Authority (ORA) and Appalachian Regional Commission (ARC) funds for required local match obligations under two federal grants-ARC (ALN 23.002) and CDBG (ALN 14.228)-without obtaining prior written approval from the awarding agencies. Although CDBG was not selected for audit testing, the questioned costs originally exceeded the $10,000 threshold and are reported in accordance with 2 CFR §200.516(a): Total questioned costs of $800,406 were initially allocated proportionally between the two programs; These costs have since been resolved through formal amendments to both grant agreements. Federal Programs 23.002 _; Appalachian Area Development (ARC) 14.228 - Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii· (CDBG) Note: ALN 14.228 was not selected for audit testing under the Uniform Guidance compliance requirements. However, a finding is presented in accordance with 2 CFR §200.516(a) due to the materiality of the issue and its connection to ARC grant MS-20699. Award Numbers ARC: MS-20699 CDBG Subgrant: 1137 ~21-111-PF-01 Federal Agencies U.S. Department of the Treasury (via Appalachian Regional Commission) U.S. Department of Housing and Urban Development Compliance Requirements Matching - 2 CFR §200.306 Allowable Costs/Cost Principles - 2 CFR §200.403 Internal Controls -2 CFR §200.303 Audit Finding Threshold - 2 CFR §200.516(a) Type of Finding Internal Control over Compliance - Material Weakness Compliance - Noncompliance Questioned Costs Based on actual net expenditures and proportional match requirements: (TABLE) These questioned costs have been eliminated following receipt of amended contracts from ARC and CDBG approving the use of ORA and CDBG funds as match. Criteria The following federal regulations and grant conditions establish the requirements violated in this finding: 1. Matching Requirements - 2 CFR §200.306 Federal funds may not be used to meet a required cost share or match unless expressly authorized by the awarding agency. Matching contributions must: Be verifiable from the recipient's records Not be included as contributions for any other federal award Be necessary and reasonable for accomplishing program objectives Be allowable under the cost principles Not be paid by. the federal government under another award, unless authorized 2. Allowable Costs ... 2 CFR §200.403 Costs must be necessary, reasonable, allocable, and conform to limitations in the award terms. Costs must be adequately documented and consistent with policies that apply uniformly to both federally financed and other activities. 3. Internal Controls - 2 CFR §200.303 Recipients must establish and maintain effective internal controls to ensure compliance with feqeral statutes, regulations, and award terms. Controls should provide reasonable assurance that the organization is managing the award in compliance with applicable requirements. 4. Audit Finding Threshold-2 CFR §200.516(a) Auditors must report known questioned costs that exceed $10,000 for a federal program, even if the program was not selected for audit testing. Condition During the audit of ARC grant MS-20699 (ALN 23.002), we noted that the City of Batesville substituted $569,600 in federal ORA funds for the originally budgeted local match of $341,784. Additionally, for COBG grant ALN 14.228, the City substituted $569,600 in ORA funds and $553,000 in ARC grant funds for the originally budgeted local match of $901,784. These substitutions were made without prior written approval or executed amendments from the awarding agencies, as required under 2 CFR §200.306 and the respective grant agreements. Resolution Following the audit fieldwork, the City obtained formal amendments to both grant agreements: On October 24, 2025, ARC approved the substitution of ORA and COBG funds as match under ALN 23.002. On November 7, 2025, COBG approved the substitution of ORA and ARC funds as match under ALN 14.228. These approvals eliminate the previously identified questioned costs totaling $800,406. However, the lack of contemporaneous documentation and prior approval reflects a breakdown in internal controls and remains a material compliance issue. Cause The City lacked adequate internal controls to ensure changes to match sources were formally reviewed and approved by the awarding agencies prior to implementation. The substitution of federal funds for required local match was not documented or authorized at the time of expenditure. Effect Although questioned costs have been resolved, the City was in noncompliance with federal matching requirements and allowable cost principles at the time of expenditure. This reflects a broader control deficiency in the City's grant management process and increases the risk of future noncompliance. Recommendation We recommend the City strengthen its internal controls over grant compliance, including: Formal review and documentation of match sources prior to drawdown Written approval from awarding agencies before substituting federal funds for required match Staff training on federal match requirements and Uniform Guidance compliance Views of Responsible Officials Management concurs with the finding. The City acknowledges that federal ORA and ARC funds were applied toward required match obligations without prior approval or amendment to the respective grant agreements. ARC and CDBG representatives have since approved the substitutions through formal amendments. The City will implement procedures requiring written authorization for any future match substitutions and establish a formal review process to verify match sources prior to drawdown.