Finding Text
Finding Reference Number: SA2022-003 - Monitoring of CDBG Program Activities For Compliance with Program Rules and Regulations Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: 24 CFR part 570 details the various rules and regulations of the Community Development Block Grant (CDBG) Program. These regulations include specific program requirements for timing of activities, eligible and prohibited activities, project and subrecipient monitoring requirements, as well as other provisions. If the City does not adhere to the requirements of 24 CFR part 570 both before disbursement for eligible activities and on an ongoing basis to ensure continued compliance with the income eligibility requirements of the program, costs incurred under the program may be deemed ineligible and need to be returned to the grantor. Condition: The City underwent a monitoring review by the grantor in January 2023 related to the fiscal year 2019 CDBG Program, the results of which were issued in March 2023. The monitoring review results found that the City staff had not utilized the program and financial policies and procedures and resulted in three overall management and financial management findings along with the several sub-findings as follows: ? Finding Number 2023-01: CDBG Overall Management System o 2023-01-A ? Lack of eligibility determination of activity and national objective for three activities - no determination of its CDBG eligible activity and national objective with the actual evaluation records o 2023-01-B ? Recordkeeping - no actual evaluation records to support the City?s CDBG funded eligible activity determination and selections o 2023-01-C ? Reporting - the City reported the inconsistent information to HUD in the Integrated Disbursement and Information System (IDIS) and its completed Consolidated Annual Performance and Evaluation Report (CAPER) for the activity?s accomplishments. In addition, the last three program years? CAPERs were not submitted accurately and HUD had to request several corrections. ? Finding Number 2023-02: Financial Management System ? The City provided HUD with the ?Project Accounting Reporting Claims for Grant Reimbursement? and ?Purchasing Procedures? as its financial management policies and procedures, but the first document was not used and the Purchasing Procedures policies were not consistent with the CDBG Program Procedures Manual. o 2023-02-A - No Grant-based Accounting System Used to Manage the CDBG grant o 2023-02-B - City?s Financial Management System/Internal Control - The City did not maintain sufficient records to demonstrate compliance with CDBG requirements o 2023-02-C - Public Service and Planning and Administration Caps ? the City missed the Program Year 2019 public services (PS) Cap in the IDIS. The City requested a waiver, but the City must take action to correct the reporting in the IDIS system. o 2023-02-D - No Debarment and Suspension Verification - The City did not ensure that the CDBG funded activities were not made to any subawards, contracts, or any party excluded, disqualified, or otherwise ineligible (e.g., suspension, debarment, or limited denial of participation). ? Finding Number 2023-03: Environmental Review and Record - A review of three selected CDBG-funded activity?s environmental review and records (ERRs) found that City conducted the environmental review after these activities commenced and were completed. In addition, during our testing of project expenditures, we noted that the Environmental Review for Activity/Project that is Categorically Excluded Subject to Section 58.5 form for the Downtown Breezeway Improvements Project was signed on April 7, 2022. However, that date was subsequent to two payments to the contractor that we tested dated March 21, 2022 and April 8, 2022 that were for work performed in February and March, respectively. Cause: HUD determined the City staff lacked experience and knowledge of the CDBG program/project requirements and did not maintain the required documents. Although the City had its CDBG Procedures Manual since 2018 and is in the process of updating it with CDBG and CDBG-CV programs, the contents were not organized or utilized as an active manual by its staff. In addition, HUD found that City did not have CDBG-specific financial management policies and procedures and managed the CDBG funds with one chart of accounts without its grant-based accounting requirement. The City did not have an internal control system to enforce meeting the CDBG requirements. When the activities were carried out, the Parks and Recreation Department and the Finance staff made the reimbursements from IDIS without review of the CDBG eligible costs. For the environmental review finding, City staff could not locate the environmental review records to demonstrate compliance with the requirements. Effect: The City is not in full compliance with the program/project rules and regulatory requirements and according to HUD may incur a sanction, including repayment of ineligible costs. Recommendation: The City must develop policies and procedures to ensure that all grant program activities are in compliance with the provisions of 24 CFR part 570 and 24 CFR Part 92 and ensure that all the findings are resolved with the grantor in a timely manner. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.