Finding Text
2024-003 The City did not have adequate internal controls and did not comply with federal reporting requirements. Assistance Listing Number and Title: 14.218, Community Development Block Grants Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: B17MC530019, B18MC530019, B19MC530019, B20MC530019, B21MC530019, B22MC530019, B23MC530019, B24MC530019 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The primary objective of the Community Development Block Grants/Entitlement Grants (CDBG) program is to help provide decent and affordable housing, particularly for people with moderate, low, and very low incomes. Funds also help recipients implement strategies for achieving an adequate supply of decent housing and providing suitable living environments and expanded economic opportunities for people with low incomes. In 2024, the City spent $844,720 for its CDBG program. Of this amount, it passed $153,815 through to subrecipients. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. During the audit period, the Federal Funding Accountability and Transparency Act (FFATA) required direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System. The City must report subawards by the end of the month following the month in which it made the subawards. Description of Condition The City’s internal controls were ineffective for ensuring compliance with FFATA reporting requirements. Specifically, the City made three new subawards in 2024 that exceeded $30,000, and it did not prepare or submit any FFATA reports for these subawards as federal regulations require. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition City staff overseeing the program were not aware of the federal FFATA reporting requirements. Effect of Condition Failing to submit the required reports diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Transactions Tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements 3 3 N/A N/A N/A Dollar Amount of Tested Transactions Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements $ 236,184 $ 236,184 N/A N/A N/A Recommendation We recommend the City establish and follow internal controls to ensure it prepares and submits FFATA reports for all applicable subawards, as federal regulations require. City’s Response The City of Longview acknowledges and appreciates the State Auditor’s Office finding regarding concerns noted in their methodical review. We recognize the importance of strong internal controls to ensure compliance with federal program and reporting requirements, and treat this matter with grave concern. Auditor’s Remarks We thank the City for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the City’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS).