Finding 1223677 (2025-002)

2025-002 Reporting – Federal Funding Accountability and Transparency Act (FFATA) Prior Year Finding Number: N/A Year of Finding Origination: 2025 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Housing and Urban Development Program: 14.218 Community Development Block Grants/Entitlement Grants 14.218 COVID-19 – Community Development Block Grants/Entitlement Grants Award Number and Year: B-24-MC-27-0003, 2024; B-25-MC-27-0003, 2025 Pass-Through Agency: N/A – Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, that are codified in Title 2 U.S. Code of Federal Regulations, Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) or SAM.gov. Title 2 U.S. Code of Federal Regulations, Appendix A to Part 170, requires reporting a subaward, once issued, by the end of the subsequent month. Condition: The six subawards issued for the 2025 Community Development Block Grant (CDBG) award with obligation action dates between June 3, 2025, and December 18, 2025, were submitted to SAM.gov on March 23, 2026, after the documentation was requested for the audit. For one of the six subawards tested, the amount in SAM.gov did not agree with the applicable grant agreements or other supporting documentation. Additionally, two subawards for the 2024 CDBG award and one subaward for the 2024 CDBG-CV award were not submitted to either the FSRS or to SAM.gov as of the date of our review. Transactions Tested Subaward Not Reported Report Not Timely Subaward Amount Incorrect 6 3 6 1 Dollar Amount of Tested Transactions Subaward Not Reported Report Not Timely Subaward Amount Incorrect $ 1,699,034 $ 340,536 $ 1,699,034 $ 100,000 Questioned Costs: None. Context: The agreement between the Department of Housing and Urban Development (HUD) and the City of Minneapolis for CDBG for the 2025 award year was not signed until December 2025. The City could not submit FFATA subaward reports before the grant was uploaded into SAM.gov by HUD. All six subawards totaling $1,699,034 issued from the 2025 award year were tested. The subawards not reported for 2024 were not considered tested. Effect: The City of Minneapolis is not in compliance with FFATA reporting requirements. Cause: The submittal of the 2025 subawards was overlooked by City staff until the information related to those subawards was requested for the audit. The City was unable to determine the cause of the subaward amount not matching the grant agreement for the subaward. The subawards not submitted for the 2024 award year were due to these subawards not being communicated properly to the preparer of the subaward reports. The CDBG-CV subaward report was not submitted due to being an amendment to replace an initial award using Emergency Solutions Grant Program funds with CDBG-CV funds. The City did not want to overstate the total HUD funds provided to the subrecipient and were unaware that subaward reports could be edited. Recommendation: We recommend the City of Minneapolis implement procedures to ensure subawards are submitted as required by FFATA. View of Responsible Official: Concur