Finding Text
Finding Number: 2023-010 Prior Year Finding Number: N/A Compliance Requirement: Special Test and Provision – Environmental Oversight/Review Program: Government Department/Agency: U.S. Department of Housing and Urban Development (HUD) U.S. Virgin Islands Housing Finance Authority (VIHFA) Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii ALN #: 14.228 Award #: B-17-DM-78-0001/B-18-DP-78-0001 Grant Award Period: 9/05/2017 – 09/30/2024 Award Year: 10/01/2022 to 09/30/2023 Criteria – Per HUD Section 104(g) of the HCDA (42 USA5304(G)). A state must: (1) require each of its units of general local government (subrecipients) to perform as a responsible federal official in carrying out all HUD environmental review requirements under 24 CFR Part 58, National Environmental Policy Act (NEPA), and other applicable authorities; (2) review and approved each subrecipient’s Request for Release of Funds (RROF) in accordance with the procedures provided under 24 CFR Part 58 Subpart H; (3) ensure that each subrecipient observes the statutory requirements that funds cannot be expended or obligated before the state approves its RROF and environmental certification, except as otherwise provided specifically in regulation or authorized by law; and (4) monitor and provide technical assistance to its subrecipients to ensure compliance with the environmental authorities (24 CFR Part 58) and the adequacy of environmental reviews. Further, activities must have an environmental review unless they meet criteria specified in the regulations that would exclude them from RROF and environmental certification requirements. A responsible entity does not have to comply with the requirements of 25 CFR 58 or undertake any environmental review, consultation, or other action under NEPA and the other provisions of law or authorities cited in 24 CFR 58.5 for exempt activities or projects consisting solely of exempt activities. Exempt activities include assistance for temporary or permanent improvements that do not alter environmental conditions and are limited to protection, repair, or restoration activities necessary only to control or arrest the effects from imminent threats to public safety. A CDBD-DR and CDBG-MIT grantee is required to ensure every project/activity undergoes the appropriate level of environmental review and receives clearance and Authorization to Use Grant Funds (AUGF) prior to expending any funds. As a result, special circumstances apply to HUD environmental reviews for disaster recovery efforts, and an Environmental Review is required accordingly: (a) analysis of impacts of a project on the surrounding environment and vice versa; (b) demonstrates compliance with federal environmental laws and authorities; and (c) encourages public participation. Condition – We sampled and selected 2 out of 5 projects and noted the following: • For the 2 projects, supporting documentation was not available for review. Question Costs – Not determinable Context – This condition was identified through a review of VIHFA’s compliance with the specific requirements, using a statistically valid sample. Effect – There is a risk that inadequate record keeping of environmental oversight and reviews could lead to non-compliance with Federal regulations, resulting in violation of Federal funding requirements and or disallowance of Federal funds. Cause – VIHFA does not appear to have adequate policies and procedures in place to ensure compliance with applicable special test, provision, and maintenance of underlying documentation. Recommendation – We recommend that the Authority improve internal controls to ensure adherence to Federal regulations related to special tests and provide environmental oversight and environmental reviews. Further, there should be supporting documentation to support compliance with applicable compliance requirements, and such information should also be maintained, monitored, and retained by responsible officials of the Authority. Views of Responsible Officials: While the audit identified a lack of supporting documentation for environmental oversight and reviews in two of five sampled projects, it is important to emphasize that the Virgin Islands Housing Finance Authority (VIHFA) has established robust compliance procedures in accordance with HUD Section 104(g) of the HCDA and 24 CFR Part 58. Serving as the Responsible Entity for all environmental reviews, the Authority consistently mandates that all projects undergo environmental review and submit Requests for Release of Funds (RROF) prior to the commitment or disbursement of any grant funds. Additionally, VIHFA conducts regular monitoring of subrecipients and provides technical assistance to ensure adherence to environmental regulations and the thoroughness of environmental reviews. The instances involving missing documentation were exceptional, likely resulting from administrative transitions that impacted the transmittal of environmental review records for the audit exercise. VIHFA affirms that all projects are subject to review: those with full approval and expended funds have completed an environmental review process, submitted a Request for Release of Funds (RROF), and received an Authority to Use Grant Funds (AUGF), or were determined to be exempt via the Categorical Excluded Not Subject to Part 58 determination. Any gaps in documentation are not indicative of systemic non-compliance but represent isolated occurrences that are being addressed. Management's Corrective Action Plan – Regarding the corrective action plan, VIHFA has established enhanced internal controls and comprehensive record-keeping protocols. This includes expanded training initiatives for staff and subrecipients, as well as strengthened procedures for record retention. The Authority has updated its policies and standard operating procedures to ensure greater coverage and effectiveness. VIHFA is committed to ongoing improvement and consistently meets all compliance requirements through detailed documentation. These measures have been implemented, training has taken place, and policies have been revised. The Authority maintains its dedication to continuous improvement and diligent fulfillment of all compliance obligations.