Finding Text
Rehabilitation (Significant Deficiency) ALN No. 14.218 – Community Development Block Grants/Entitlement Grants Criteria: The Uniform Guidance requires recipients to establish, document, and maintain effective internal control over federal awards that provides reasonable assurance that the award is managed in compliance with federal statutes, regulations, and the terms and conditions of the award. Effective internal controls over CDBG rehabilitation activities should include documented review and approval of pre-rehabilitation inspection documentation by the designated approving authority and appropriate segregation of duties between preparation and approval functions. Condition: During testing of internal controls over compliance for CDBG rehabilitation activities, we selected a sample of three rehabilitation projects and noted that pre-rehabilitation inspection documentation was not consistently approved by the appropriate level of authority. Specifically, housing staff signed both the preparer and CDBG Director approval sections based on instruction from management. Effect: When the same individual signs both the preparer and approval sections, the effectiveness of segregation of duties and of review controls are weakened. This increases the risk that errors, omissions, or noncompliance related to rehabilitation activities may not be prevented or detected and corrected timely. Cause: The City did not have adequate procedures in place to ensure that inspection approvals were performed and documented by the designated approving authority. Additionally, management’s instructions allowed housing staff to sign both the preparer and approval sections, which weakened segregation of duties. Questioned Costs: $0 Recommendation: We recommend that the City implement procedures to ensure that inspection approvals are performed and documented by the designated approving authority to strengthen internal controls and maintain appropriate oversight of rehabilitation activities. The procedures should clearly assign preparer and reviewer responsibilities, prohibit the same individual from signing both sections unless formally approved as an exception, and require evidence of review to be retained in the project file. Repeat Finding from Prior Year(s): N/A Views of Responsible Officials: See management’s corrective action plan.