Finding Text
Subrecipient Monitoring Questioned Costs: $961,671
Department of the Treasury
21.027 Coronavirus State and Local Fiscal Recovery Program (SLFR) (COVID-19)
Grant No(s): N/A
Criteria: According to the Uniform Guidance, subrecipients of federal funds must be monitored by the primary grant recipient to ensure compliance with federal statues, regulations and terms of the subaward.
Condition: The City-Parish loaned $961,671 of SLFR funds in 2023 to a subrecipient under a loan agreement for $6,000,000 to develop affordable housing. The terms of the loan agreement call for the subrecipient to be in default of the agreement if progress is not made on the development according to a progress schedule contained in the loan agreement. According to the progress schedule, substantial completion was to occur in 2024 with initial occupancy in early 2025. The development has not progressed according to schedule, and no action has been taken to either amend the agreement or place the subrecipient/borrower into default.
Universe/
Population: Of 8 subrecipients of the SLFR program, 6 were selected for testing. Of those selected, 1 subrecipient was found to be lacking with regard to monitoring.
Effect: Untimely subrecipient monitoring could lead to City-Parish responsibility or liability for funds disbursed.
Cause: While monitoring did occur in alignment with the development’s monitoring plan, the project did not progress to any new milestones in 2024 that would have triggered a draw request or submission of new monitoring documentation. According to the existing monitoring plan specified in the loan agreement, documentation requirements are structured around distinct project phases (Pre-construction, Construction, and Affordability) and correlate directly with milestone-based progress and payment requests.
Since the developer did not submit any draw requests during this period or further progress on milestones, no additional monitoring documentation was required. This monitoring structure, based on milestone completion and cost reimbursement, meant that no new compliance checks or verifications were formally required in 2024 - despite informal oversight discussions and concerns about the project’s overall progress and viability. Going forward, enhanced formal documentation and escalation procedures will be implemented when material schedule deviations occur, even in the
absence of payment activity, should the project proceed.
Recommendation: The City-Parish should address the delayed status of the development and the impacts to compliance with the loan agreement. Actions such as amendments to the agreement or placement into default should be considered and executed.
View of Responsible Officials:
The City-Parish acknowledges that the development has not progressed in accordance with the schedule outlined in the original loan agreement with the developer for the Scotlandville Housing Development. At the time of the 2023 disbursement, documentation provided by the developer supported project readiness and anticipated completion timelines; however, subsequent review and monitoring activities identified delays tied to financing, site control, and design completion. At present, the administration is evaluating if it wants to proceed with the project and what contract amendments would be stipulated.
The Office of Community Development, working alongside its grant management consultant CSRS, recently initiated a detailed review of the project status and supporting documentation. This review culminated in the identification of potential deficiencies, including unresolved site control issues and the need for updated construction plans. An updated site plan, ownership verification, environmental remediation documentation, and full construction package are being actively pursued, and the developer has been provided a prioritized list of immediate action items to remedy outstanding issues if the project is going to proceed. To bring the project and agreement into compliance, the corrective actions noted below are actively being pursued. These corrective actions are intended to either return the project to a viable status under the existing agreement or establish the necessary conditions to invoke appropriate default provisions should remediation fail. These corrective actions include: Formal reassessment of project viability with CSRS, OCD, and project leadership, including a meeting scheduled for the week of July 1, 2025; Issuance of a formal notice to the developer requesting documentation of progress and corrective actions related to site control, tax clearance, design completion, and permitting; Evaluation of amendment or enforcement actions under the agreement, including potential restructuring of the loan timeline or initiating default proceedings if satisfactory progress is not demonstrated by mid-Q3 2025; Preparation of an updated commitment letter from the current administration to support the developer’s financial closing, contingent on demonstrated progress and documentation clearance, if the administration chooses to move forward with the project.