Finding Text
2025-001: Public Housing Capital Fund Program, Federal Assistance Listing #14.872. Authority failed to obligate 90% of grant KY36P02450121 by 2/22/2023, the grant’s obligation end date (OED). Condition: In August 2025, the U.S. Department of Housing and Urban Development (HUD) determined that the Authority was not in compliance with Section 9(j) of the United States Housing Act of 1937 and the Capital Fund Rule (24 CFR § 905.306) because it failed to obligate at least 90% of grant KY36P02450121 by the required deadline of February 22, 2023. Consequently, HUD assessed a financial sanction of $782,322 against grant KY36P02450124, resulting in the loss of those funds to the Authority. Criteria: Under 2 CFR § 200.309, a non-federal entity may charge to a federal award only allowable costs incurred during the approved period of performance. Costs resulting from obligations made after the end date of the award are generally unallowable unless a formal extension or other written approval has been granted by the awarding agency. Cause: Management did not maintain adequate controls to ensure that obligations and expenditures were reviewed for compliance with the grant's approved period of performance prior to being charged to the federal award. Effect: Federal funds were not used in the authorized project period. As a result, the U.S. Department of Housing and Urban Development sanctioned the Authority and reduced grant KY36P02450124 from $782,322 to $0. Questioned Costs: None. Recommendations: We recommend the Authority implement procedures to monitor grant beginning and end dates, maintain documentation supporting the timing of obligations and expenditures charged to federal awards and to obtain written approval for any extensions before the award period expires. Management Response: Management concurs with the finding. The Authority has strengthened grant monitoring procedures. Management will work with the federal awarding agency to ensure timely use of project funds in the future.