Finding Text
Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Community Project Funding (CPF) Program Assistance Listing Number: 14.251 Federal Award Identification Number and Year: B-22-CP-MN-0492, 2025 Award Period: January 1, 2025 – December 31, 2025 Type of Finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: The grant agreement requires that, following the letter of invitation for the grant, neither the City nor contractors funded under the grant may undertake, commit, or expend grant funds or local funds for project activities until an acceptable environmental review process has been completed in accordance with applicable federal requirements. Condition: Project expenditures related to the Community Project Funding program were incurred prior to completion of the required environmental review process. Environmental review activities did not begin until after project-related expenditures had already occurred. Questioned costs: None. Context: The City received erroneous advice regarding the requirements for this environmental review from the federal grants officer, leading the City to believe the environmental review process was not required for their circumstances. Once revised guidance was provided to the city, the review was completed and costs were allowably spent on the project subsequent to the review. Cause: The environmental review was not completed prior to incurring project expenditures due to errors in guidance received regarding the timing and requirements of the environmental review process. Effect: Failure to complete the required environmental review prior to incurring project expenditures resulted in noncompliance with the terms and conditions of the federal award and applicable federal requirements. Repeat Finding: No. Recommendation: We recommend the City ensure environmental review requirements are completed and documented prior to incurring any project-related expenditures for the Community Project Funding program. The City should continue to maintain procedures designed to prevent project activities from beginning before environmental review requirements are satisfied. Views of responsible officials: There is no disagreement with the audit finding. City management noted that procedures have been implemented for this grant, including a memorandum of understanding that is annually reaffirmed by the City Council, to ensure environmental review requirements are completed prior to incurring project expenditures and to prevent similar occurrences in the future.