Finding 571839 (2024-005)

Material Weakness
Requirement
M
Questioned Costs
$1
Year
2024
Accepted
2025-07-23

AI Summary

  • Core Issue: The City-Parish loaned $961,671 for a housing development that is behind schedule, with no formal action taken to address the delays.
  • Impacted Requirements: Subrecipient monitoring was insufficient, risking compliance with federal guidelines and potential liability for disbursed funds.
  • Recommended Follow-Up: The City-Parish should consider amending the loan agreement or placing the subrecipient in default, while enhancing monitoring procedures for future projects.

Finding Text

Subrecipient Monitoring Questioned Costs: $961,671 Department of the Treasury 21.027 Coronavirus State and Local Fiscal Recovery Program (SLFR) (COVID-19) Grant No(s): N/A Criteria: According to the Uniform Guidance, subrecipients of federal funds must be monitored by the primary grant recipient to ensure compliance with federal statues, regulations and terms of the subaward. Condition: The City-Parish loaned $961,671 of SLFR funds in 2023 to a subrecipient under a loan agreement for $6,000,000 to develop affordable housing. The terms of the loan agreement call for the subrecipient to be in default of the agreement if progress is not made on the development according to a progress schedule contained in the loan agreement. According to the progress schedule, substantial completion was to occur in 2024 with initial occupancy in early 2025. The development has not progressed according to schedule, and no action has been taken to either amend the agreement or place the subrecipient/borrower into default. Universe/ Population: Of 8 subrecipients of the SLFR program, 6 were selected for testing. Of those selected, 1 subrecipient was found to be lacking with regard to monitoring. Effect: Untimely subrecipient monitoring could lead to City-Parish responsibility or liability for funds disbursed. Cause: While monitoring did occur in alignment with the development’s monitoring plan, the project did not progress to any new milestones in 2024 that would have triggered a draw request or submission of new monitoring documentation. According to the existing monitoring plan specified in the loan agreement, documentation requirements are structured around distinct project phases (Pre-construction, Construction, and Affordability) and correlate directly with milestone-based progress and payment requests. Since the developer did not submit any draw requests during this period or further progress on milestones, no additional monitoring documentation was required. This monitoring structure, based on milestone completion and cost reimbursement, meant that no new compliance checks or verifications were formally required in 2024 - despite informal oversight discussions and concerns about the project’s overall progress and viability. Going forward, enhanced formal documentation and escalation procedures will be implemented when material schedule deviations occur, even in the absence of payment activity, should the project proceed. Recommendation: The City-Parish should address the delayed status of the development and the impacts to compliance with the loan agreement. Actions such as amendments to the agreement or placement into default should be considered and executed. View of Responsible Officials: The City-Parish acknowledges that the development has not progressed in accordance with the schedule outlined in the original loan agreement with the developer for the Scotlandville Housing Development. At the time of the 2023 disbursement, documentation provided by the developer supported project readiness and anticipated completion timelines; however, subsequent review and monitoring activities identified delays tied to financing, site control, and design completion. At present, the administration is evaluating if it wants to proceed with the project and what contract amendments would be stipulated. The Office of Community Development, working alongside its grant management consultant CSRS, recently initiated a detailed review of the project status and supporting documentation. This review culminated in the identification of potential deficiencies, including unresolved site control issues and the need for updated construction plans. An updated site plan, ownership verification, environmental remediation documentation, and full construction package are being actively pursued, and the developer has been provided a prioritized list of immediate action items to remedy outstanding issues if the project is going to proceed. To bring the project and agreement into compliance, the corrective actions noted below are actively being pursued. These corrective actions are intended to either return the project to a viable status under the existing agreement or establish the necessary conditions to invoke appropriate default provisions should remediation fail. These corrective actions include: Formal reassessment of project viability with CSRS, OCD, and project leadership, including a meeting scheduled for the week of July 1, 2025; Issuance of a formal notice to the developer requesting documentation of progress and corrective actions related to site control, tax clearance, design completion, and permitting; Evaluation of amendment or enforcement actions under the agreement, including potential restructuring of the loan timeline or initiating default proceedings if satisfactory progress is not demonstrated by mid-Q3 2025; Preparation of an updated commitment letter from the current administration to support the developer’s financial closing, contingent on demonstrated progress and documentation clearance, if the administration chooses to move forward with the project.

Corrective Action Plan

The City-Parish acknowledges that the development has not progressed in accordance with the schedule outlined in the original loan agreement with the developer for the Scotlandville Housing Development. At the time of the 2023 disbursement, documentation provided by the developer supported project readiness and anticipated completion timelines; however, subsequent review and monitoring activities identified delays tied to financing, site control, and design completion. At present, the administration is evaluating if it wants to proceed with the project and what contract amendments would be stipulated. The Office of Community Development, working alongside its grant management consultant CSRS, recently initiated a detailed review of the project status and supporting documentation. This review culminated in the identification of potential deficiencies, including unresolved site control issues and the need for updated construction plans. An updated site plan, ownership verification, environmental remediation documentation, and full construction package are being actively pursued, and the developer has been provided a prioritized list of immediate action items to remedy outstanding issues if the project is going to proceed. To bring the project and agreement into compliance, the corrective actions noted below are actively being pursued. These corrective actions are intended to either return the project to a viable status under the existing agreement or establish the necessary conditions to invoke appropriate default provisions should remediation fail. These corrective actions include: Formal reassessment of project viability with CSRS, OCD, and project leadership, including a meeting scheduled for the week of July 1, 2025; Issuance of a formal notice to the developer requesting documentation of progress and corrective actions related to site control, tax clearance, design completion, and permitting; Evaluation of amendment or enforcement actions under the agreement, including potential restructuring of the loan timeline or initiating default proceedings if satisfactory progress is not demonstrated by mid-Q3 2025; Preparation of an updated commitment letter from the current administration to support the developer’s financial closing, contingent on demonstrated progress and documentation clearance, if the administration chooses to move forward with the project. Expected Implementation Date: September 2025 Contact person: Kelly LeDuff, Urban Development Director, Office of Community Development

Categories

Questioned Costs Subrecipient Monitoring

Other Findings in this Audit

  • 571835 2024-008
    Significant Deficiency
  • 571836 2024-008
    Significant Deficiency
  • 571837 2024-003
    Material Weakness
  • 571838 2024-004
    Material Weakness
  • 571840 2024-006
    Material Weakness
  • 571841 2024-007
    Material Weakness
  • 1148277 2024-008
    Significant Deficiency
  • 1148278 2024-008
    Significant Deficiency
  • 1148279 2024-003
    Material Weakness
  • 1148280 2024-004
    Material Weakness
  • 1148281 2024-005
    Material Weakness
  • 1148282 2024-006
    Material Weakness
  • 1148283 2024-007
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $35.19M
20.106 Airport Improvement Program, Infrastructure Investment and Jobs Act Programs, and Covid-19 Airports Programs $6.69M
93.914 Hiv Emergency Relief Project Grants $4.74M
21.023 Emergency Rental Assistance Program $4.73M
20.205 Highway Planning and Construction $4.59M
97.029 Flood Mitigation Assistance $3.72M
97.039 Hazard Mitigation Grant $3.37M
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $2.63M
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $2.54M
17.259 Wioa Youth Activities $2.24M
93.686 Ending the Hiv Epidemic: A Plan for America — Ryan White Hiv/aids Program Parts A and B $2.15M
20.933 National Infrastructure Investments $2.06M
17.258 Wioa Adult Program $1.97M
14.241 Housing Opportunities for Persons with Aids $1.73M
93.569 Community Services Block Grant $1.52M
17.278 Wioa Dislocated Worker Formula Grants $1.09M
93.137 Community Programs to Improve Minority Health $945,705
93.493 Congressional Directives $930,313
10.558 Child and Adult Care Food Program $776,684
20.600 State and Community Highway Safety $700,556
93.600 Head Start $633,927
16.817 Byrne Criminal Justice Innovation Program $615,862
14.218 Community Development Block Grants/entitlement Grants $339,915
14.905 Lead Hazard Reduction Demonstration Grant Program $328,961
97.067 Homeland Security Grant Program $230,203
95.001 High Intensity Drug Trafficking Areas Program $121,601
14.239 Home Investment Partnerships Program $107,696
20.616 National Priority Safety Programs $89,550
20.607 Alcohol Open Container Requirements $87,831
93.658 Foster Care Title IV-E $86,075
16.710 Public Safety Partnership and Community Policing Grants $67,000
16.045 Community-Based Violence Intervention and Prevention Initiative $52,193
16.738 Edward Byrne Memorial Justice Assistance Grant Program $50,076
66.818 Brownfields Multipurpose, Assessment, Revolving Loan Fund, and Cleanup Cooperative Agreements $36,996
21.009 Volunteer Income Tax Assistance (vita) Matching Grant Program $13,957
20.608 Minimum Penalties for Repeat Offenders for Driving While Intoxicated $5,550
93.069 Public Health Emergency Preparedness $3,605
97.024 Emergency Food and Shelter National Board Program $1,080
93.568 Low-Income Home Energy Assistance $757
14.231 Emergency Solutions Grant Program $75