Finding 1168586 (2025-004)

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.239, Department of Housing and Urban Development, Home Investment Partnerships Program Federal Award Identification Number and Year - M18MC260202 2018; M19MC260202 2019; M20MC260202 2020; M21MC260202 2021 Pass through Entity - N/A Finding Type - Material weakness Repeat Finding - Yes 2024 006 Criteria - Per 2 CFR 200.303, the recipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. The HOME program has income targeting requirements such that only low-income or very low-income persons can receive housing assistance, as prescribed by 24 CFR 92.216, which covers income targeting for tenant-based rental assistance and rental units. The City maintains Asset Management Policies and Procedures to comply with these standards, which state that an annual review will be performed on each asset. Condition - The City lacked adequate controls to ensure annual reviews were conducted in accordance with its policy, limiting its ability to exercise proper oversight of eligibility determinations performed by the program’s contractor. If Questioned Costs are Not Determinable, Description of Why Known Questioned Costs Were Undetermined or Otherwise Could Not be Reported - N/A Identification of How Questioned Costs Were Computed - N/A Context - The City engaged a contractor to review developers’ income-eligibility determinations for HOME-assisted housing units. While the contractor performs these reviews, the City retains full responsibility for compliance with eligibility requirements. Our testing showed that the contractor reviewed 62 determinations during the fiscal period; however, the City conducted annual reviews for only 50 of these projects. Additionally, for 5 of 9 projects selected for testing, there was no evidence that the City reviewed the contractor’s certification of the developers’ income-eligibility determinations. As part of our procedures, we reviewed evidence that the contractor performed the required number of reviews and that individuals assessed were income-eligible to receive program benefits. Cause and Effect - The City did not implement controls to ensure eligibility reviews performed by the contractor were in compliance with the terms and conditions of the award. Without oversight of the contractor’s procedures for assessing participant eligibility, there is an increased risk that ineligible participants could receive program benefits, potentially resulting in material noncompliance and repayment obligations to the funder. Recommendation - We recommend that the City continue to implement oversight procedures to conduct and document reviews of contractor work related to compliance requirements and programmatic decisions, specifically, eligibility determinations. Views of Responsible Officials and Planned Corrective Actions - This finding is timing related and was resolved by the City during the fiscal year. The City reviewed and updated its policies and procedures to help ensure proper segregation of duties and proper oversight of eligibility determination. Additional processes now have independent review of inspections after the program’s contractor to further support program compliance. Review responsibilities were put in place to help ensure determinations receive an independent secondary review by city staff. These changes were in place by year end. The City will continue to monitor the program and review procedures to ensure continued compliance and to prevent the recurrence of similar timing-related issues.