Finding Text
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT: 2022-022 Compliance with Allowable Activity and Allowable Cost Fiscal year finding initially occurred: 2022 CDBG ? Entitlement Grants Cluster (14.218) B-22-MC-22-0003 Criteria In accordance with 2 CFR part 200, in order for a cost to allowable under a grant, the payment must not have been made for an incorrect amount under stator, contractual, administrative, or other legally applicable requirement. In addition, it must be for an allowable activity as identified in the grant documents or other grant/program information. Condition A sample of 30 disbursement transactions was selected for testing from a population of 475 transactions. The test found that 1 disbursement was for floor repairs to a home, in the amount of $3,317, that had been rehabilitated by the Government in 2012 under a different grant. Based on the original contract between the Government and homeowner, the homeowner had a 1-year warranty from the date of acceptance to report faulty work. Repair work done in 2022 was identified by CDBG employees, because of faulty work. However, there was no documentation on the approval or supporting documentation. Based on the contract, the Government had no obligation for this repair. Our sample was a statistical sample. Cause The internal controls over allowable activities and allowable costs were not effective in identifying this payment as an unallowable cost and activity under the CDBG grant guidelines. Effect The payment appears to be an unallowable activity and an unallowable cost. Recommendation The Government should review its internal control policies and procedures over allowable costs and activities to ensure payments meet both requirements before being approved as a charge to the grant. Views of Responsible Officials and Planned Corrective Action The home identified in this finding received major rehabilitation work under the HOME grant in 2012. This included flooring installation but the Government failed to install a moisture barrier. As such, the external moisture caused the wooden sub-floor to deteriorate slowly over a 10 year period which posed a serious threat to the health and safety of the homeowner. Although per the contract the homeowner had one year to identify issues, it was determined that the homeowner has no reasonable way of identifying the error made by the Government which caused this issue. In order to circumvent the eminent danger to the homeowner as a result of the Government?s error, it was decided that the original warranty would be honored. As per HUD regulations, CDBG may be used for minor rehabilitation (which the replacement of the floor qualifies as), and was used in this instance. In order to ensure the one year contractual language does not preclude the Government from correcting errors made, the policy and procedures of the Housing Rehabilitation Program have been updated. The following language has been added ? All work done under the auspices of the Housing Rehab Program (RHP) is guaranteed against faulty installation and/or material for one year after the home is confirmed to meet or exceed the standards of the International Property Maintenance Code (IPMC). Following the one year guarantee, should LCG have substantially failed to meet the standards of the IPMC, resulting in extreme Health and Safety issues for the homeowner, the Housing Rehabilitation Program staff, at its discretion, may review homeowner eligibility for additional repair of the faulty work in order to meet Health and Safety requirements and to fulfill its good-faith obligation to the homeowner. The homeowner must continue to meet HUD income and eligibility requirements. This finding is not expected to reoccur.