Finding 540441 (2024-002)

Criteria: 24 CFR section 570.902 of the CDBG regulations states that a grantee is in compliance with timely expenditure requirements if, 60 days prior to the end of its program year, there is no more than 1.5 times its annual grant remaining in the line of credit, including any program income on hand. Condition: The Department of Housing and Urban Development (the “HUD”) notified the City, in a letter dated June 4, 2024, that the City was not in compliance with the 60-day timeliness test conducted May 2, 2024, as the City had a line-of-credit balance of 1.71 times its annual grant. Context: According to the HUD letter dated June 4, 2024, this is the third consecutive year that the City was not noncompliant with 24 CFR section 570.902. The HUD required the City to develop a workout plan describing the steps the City will take to ensure compliance by May 2, 2025. The City submitted a workplan to the HUD in a letter dated June 10, 2024 . HUD granted the City an exception to the timely expenditure requirements for the 2024 grant year due to factors beyond the City’s reasonable control. Cause: Based on our discussions with City management, the failure to meet the timely expenditure requirement was primarily due to capital projects delays and supply chain issues , which were beyond the program’s control. Effect: Failure to meet the timeliness standard results in noncompliance with the period of performance requirement and could result in sanctions and reduction in future grant funds. Questioned Costs: None Identification as a Repeat Finding, if applicable: See finding 2023-003 included in the Summary Schedule of Prior Audit Findings. Recommendation: We recommend the City adhere to the workout plan submitted to HUD to comply with the CDBG timely expenditure requirements. Views of Responsible Officials: Client agrees with finding, and the unabridged version of their response can be found in the Corrective Action Plan. Please see the Corrective Action Plan issued by the City.