Finding Text
Section 3. Federal and State Award Findings and Questioned Costs Finding 2022-001 Information on Federal Program: Federal Program: CDBG Entitlement Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development (HUD) Assistance Listing: 14.218 Compliance Requirements: Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance and Noncompliance (Questioned Costs over $25,000 for a Major Program) Criteria: 24 CFR 570.202 (c) ? 570.202 Code Enforcement, allows costs incurred for inspection for code violations and enforcement of codes (e.g., salaries and related expenses of code enforcement inspectors and legal proceedings, but not including the cost of correcting the violations) in deteriorating or deteriorated areas when such enforcement together with public or private improvements, rehabilitation, or services to be provided may be expected to arrest the decline of the area. Condition: A HUD review of the City?s FY2021 CDBG-funded activities on the CDBG Summary Activity Report showed the City funded two ineligible Code Enforcement activities. Both activities included the expenditure of funds to correct code enforcement violations. Cause: City staff did not correctly identify these code enforcement activities as ineligible under the CDBG regulations. Effect or Potential Effect: By not appropriately reviewing the CDBG regulations and guidance to determine whether activity eligibility requirements were met, the City has used federal funds for ineligible activities which has resulted in required repayment of funds from non-federal sources. Context: Of the approximately $3.3 million reported as grant expenditures in fiscal year 2021, $0.2 million were disallowed. Questioned Costs: $247,429 Recommendation: We recommend City officials work with HUD to determine the nature of demolition costs and ensure all demolition costs are being appropriately expended under the grant agreement and ensure costs reported through the Consolidated Annual Performance Evaluation Report have the correct IDIS numbers. Views of Responsible Official(s) and Planned Corrective Action: See corrective action plan