Finding Text
2024-010 U.S. Department of Housing and Urban Development, For the period July 1, 2023, through June 30, 2024, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 24 CFR § 570.506, when CDBG and CDBG-CV funds are used for rehabilitation, the grantee must ensure the work is properly completed in accordance with applicable laws, codes and other requirements relating to housing safety, quality, or habitability. Pre-rehabilitation inspections are conducted to identify the deficiencies to be corrected. Deficiencies noted in the pre-rehabilitation inspections are required to be incorporated into the rehabilitation contract. Condition: During the audit period, it was noted that the City failed to retain documentation of pre-rehabilitation inspection reports for multiple CDBG-funded rehabilitation projects. These reports are essential to verify the initial condition of the properties and to support the justification for the scope of work and use of federal funds. Cause: The missing documentation was attributed to staff turnover within the City. Key personnel responsible for maintaining and organizing project files departed during the project period, and adequate transition procedures were not in place to ensure continuity of recordkeeping. Effect: Although formal pre-rehabilitation inspection reports were not retained, there was evidence that inspections were conducted. Specifically, deficiencies identified during inspections were incorporated into the scope of work outlined in the City’s contract with the grant recipient. However, the absence of formal documentation limits the ability to fully verify compliance with federal recordkeeping requirements and may result in questioned costs if eligibility cannot be clearly substantiated. Recommendation: We recommend the City implement procedures to ensure consistent documentation of preliminary inspections, including standardized templates and centralized digital storage. Staff should be cross-trained, and transition protocols should be established to maintain continuity during personnel changes. The City should ensure future inspections are properly recorded and retained. Questioned Costs: none