Finding Text
Identification of the Federal Programs:
Assistance Listing Number: 14.239
Assistance Listing Title: HOME Investment Partnership Program
Federal Agency: Department of Housing and Urban Development
Federal Award Number: M-21-MC-060521;M-22-MC-060521;M-23-MC-060521
Federal Award Year: FY 2024
Criteria or Specific Requirements:
Under 24 CFR 92.254, Qualifications for Affordable Housing: Homeownership, participating jurisdictions utilizing HOME funds for homebuyer assistance or the rehabilitation of owner-occupied single-family properties must adhere to the affordable homeownership limits established by the United States Department of Housing and Urban Development (HUD). These limits are determined separately for newly constructed and existing housing.
For housing that is currently owned by a family to qualify as affordable, it must meet the following criteria:
(1) The estimated value of the property, after rehabilitation, does not exceed 95 percent of the median purchase price for the area, described in paragraph (a)(2)(iii) of this section; and
(2) The housing is the principal residence of an owner whose family qualifies as a low-income family at the time HOME funds are committed to the housing. In determining the income eligibility of the family, the participating jurisdiction must include the income of all persons living in the housing.
Identified Condition:
During the audit, we noted that two of the sampled properties received HOME funds, even though their after-rehabilitation values exceeded 95 percent of the median purchase price for the area.
Cause:
Lack of proper oversight and review processes to ensure compliance with HUD’s requirements. Specifically, there appears to be an absence of controls to verify that the after-rehabilitation values of properties receiving HOME funds remain within the allowable limits of 95% of the median purchase price for the area.
Effect or Potential Effect:
The improper allocation of HOME funds to properties exceeding the after-rehabilitation value limit could result in noncompliance with HUD regulations. This may lead to financial penalties, grant disallowances, or the need to repay the misallocated funds. Additionally, such instances undermine the program’s goal of promoting affordable housing and may erode trust in the City’s ability to manage federal funds responsibly.
Questioned Costs:
The known questioned cost is $78,921.
Recommendation:
We recommend that the City:
1. Strengthen Verification Processes
• Implement stricter controls to verify that after-rehabilitation property values align with HUD’s requirement of not exceeding 95% of the median purchase price for the area.
2. Provide Training on Compliance Requirements
• Conduct regular training sessions for staff involved in administering HOME funds to ensure they fully understand HUD’s regulations and limits.
3. Enhance Documentation Standards
• Require thorough documentation of eligibility verification, including evidence of compliance with the after-rehabilitation value threshold, to maintain audit readiness.
4. Develop Oversight Mechanisms
• Establish internal review or monitoring procedures to identify and address noncompliance issues promptly.
5. Consult HUD for Guidance
• Engage with HUD for clarification or support in applying the 95% rule to ensure the City’s procedures align with federal expectations.
These measures will help the City ensure compliance, avoid financial penalties, and maintain the integrity of the HOME program.
View of Responsible Officials:
Gabriel Linares, Director of Community Development, will enhance the department’s HOME assistance rules to ensure the value of the HOME-assisted property after rehabilitation will not exceed 95 percent of the median purchase price for the area starting Quarter 4, FY2024 -25.
Personnel Responsible for Implementation: Gabriel Linares
Position of Responsible Personnel: Director of Community Development
Expected Date of Implementation: June 30, 2025