Finding 2024-004 - Section 3 of the Housing Community Development Act (HCDA) Policy and Procedures guide Fiscal Year Finding Initially Occurred: FY 2024 (Initial Finding) Name of Federal Agency: U. S. Department of Housing and Urban Development (HUD) Assistance Federal Listing Award Number Number Program Title 14.218 N/A CDBG - 7308 Pinedale Renovation Project Award Year: 2024 Criteria or specific requirement: According to Section 3 of the HCDA, grantees must establish and maintain documentation to demonstrate that workers on Section 3 projects meet the definition of a Section 3 worker or Targeted Section 3 worker, at the time of hire or the first reporting period. This includes requiring written reports from developers or contractors summarizing the totals for labor hours, including Section 3 worker and Targeted Section 3 worker labor hours, and documentation from employees or employers certifying that the employee met the requirements to receive Section 3 worker status. Any information that a grantee enters in IDIS or DRGR must have supporting documentation demonstrating the accuracy of the data. (24 CFR part 75). Condition: SC UpLift does not have a written, documented Section 3 policy and procedures guide. However, Section 3 is identified in the activities section of the description of work in the contractual agreement with the contractor. SC UpLift did not maintain a formal written Section 3 Policy and Procedures Guide. However, Section 3 requirements were incorporated into the solicitation and executed construction contract Cause of condition: SC UpLift did not prepare a written Section 3 policy and procedures guide. Potential effect of condition: This appears to be an isolated incident because SC UpLift only had one award agreement under this program assistance listing number. This condition results in a noncompliance finding regarding a written Section 3 policy and procedures guide for the period under audit. Recommendation: We recommend SC UpLift’s Management create a written Section 3 Policies and procedures guide when participating in the above referenced program assistance listing number. Response of responsible SC UpLift official: SC UpLift Community Outreach acknowledges the audit finding and understands that a formal written Section 3 Policy and Procedures Guide should have been established for the CDBG-funded project. Although SC UpLift did not maintain a standalone written Section 3 policy during the audit period, the organization did recognize the applicability of Section 3 requirements during the procurement process. Section 3 provisions were incorporated into the project bid documents and executed construction contract to ensure contractors were aware of the federal requirements. Based on the guidance provided during project implementation, management believed these measures adequately addressed the Section 3 requirements for this project. SC UpLift recognizes that HUD requires recipients and subrecipients to maintain a formal written Section 3 Policy and Procedures Guide regardless of whether separate reporting is requested by the pass-through entity. We accept the finding and are committed to strengthening our compliance procedures. Management will develop and adopt a comprehensive Section 3 Policy and Procedures Guide that establishes procedures for: • documenting Section 3 workers and Targeted Section 3 workers; • monitoring contractor compliance with Section 3 requirements; • maintaining required supporting documentation; • retaining labor hour reports and other required records; and • ensuring compliance with 24 CFR Part 75 for all applicable HUD-funded projects. In addition, SC UpLift will incorporate a federal compliance checklist into its grant administration process to ensure all required HUD policies are adopted prior to the commencement of future projects.