Finding 1206533 (2025-002)

Finding 2025-002 Information on Federal Program: Federal Program: CDBG Entitlement Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development (HUD) Assistance Listing: 14.218 Compliance Requirements: Allowable Costs/Cost Principles Significant Deficiency in Internal Control over Compliance and Noncompliance (Questioned Costs over $25,000 for a Non-Major Federal Program) Criteria 24 CFR §570.205 and §570.206 allows costs incurred for planning activities, which consist of all costs of data gathering, studies, analysis, and preparation of plans and the identification of actions that will implement such plans, as well as program administrative costs related to the planning and execution of community development activities. These costs are capped at twenty (20) percent. Condition A HUD review of the City’s program year 2023 Consolidated Annual Performance and Evaluation Report (CAPER) and related CDBG funded activities on the CDBG Financial Summary Report showed the City expended more than twenty (20) percent in administrative and planning costs for origin years 2015, 2017, 2018 and 2020. Cause City staff did not correctly identify activities as exceeding the administrative cap under the CDBG regulations and award requirements. Effect or Potential Effect Federal funds were reimbursed for activities which has resulted in required repayment of funds from nonfederal sources. Questioned Costs $249,565 Recommendation We recommend City officials work with HUD to determine the nature of noncompliance and implement any remedial actions to ensure future administrative and planning costs are being appropriately expended under the CDBG award agreements. Views of Responsible Official(s) and Planned Corrective Action See corrective action plan