Finding Text
Finding 2024-002: Noncompliance with Continuing Loan Monitoring Requirements
(Significant Deficiency/Noncompliance)
Criteria:
The City is a subrecipient of Community Development Block Grant (CDBG) funds from the U.S. Department of
Housing and Urban Development. Per the grant agreement, the City must regularly monitor loan recipients’
compliance with the loan agreement and program guidelines.
Condition:
The City is not adhering to their established policy to oversee loan compliance requirements and has not retained
adequate documentation to demonstrate ongoing adherence to these requirements.
Cause:
The noncompliance is attributed to the City being unfamiliar with the continuing loan compliance requirements
specified within the CDBG grant program and grant agreement.
Effect:
The failure to comply with the continuing loan compliance requirements poses significant risks, including:
Potential mismanagement or misuse of funds by loan recipients.
Increased likelihood of default or financial instability among borrowers.
Inaccurate financial reporting and lack of accountability.
Overall diminished effectiveness and credibility of the CDBG program.
Questioned Costs:
No questioned identified.
Context:
We tested 8 out of 79 loans that existed prior to the fiscal year ended September 30, 2024, noting the City did not
have sufficient documentation to support continuing loan compliance requirements were met. Through discussions
with the City, the City was unaware of the continuing loan compliance requirements per the grant agreement.
Repeat Finding:
No
Recommendation:
To address and rectify this noncompliance issue, it is recommended that the following actions be implemented:
Provide comprehensive training on monitoring procedures and compliance requirements.
Review grant policies checklists to ensure thorough and consistent treatment.
Establish a regular schedule for loan evaluations, document inspections, and follow-up actions.
By taking these corrective measures, the City can ensure it meets the continuing loan monitoring requirements and
supports the success and integrity of the Community Block Development program.
Management Response:
The City acknowledges the finding regarding noncompliance with the continuing loan monitoring requirements for the
Community Development Block Grant (CDBG) Home Improvement Program. We recognize the importance of
ensuring full compliance with all grant requirements to maintain the integrity and effectiveness of the program and will
implement the recommendations by September 30, 2026.