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Finding 2022-02: Loan Continuing Compliance Requirements Noncompliance/Significant Deficiency Federal Award Information Assistance Listing Number: 14.218 Program Title: Community Development Block Grant Federal Award Number: B-18-MC-06-0516; B-19-MC-06-0516; B-20-MW-06-0516; B-20-MC-06-0516; B21MC060516; B22MC060516 Federal Award Year: 2018; 2019; 2020; 2021; 2022 Name of Federal Agency: U.S. Department Housing and Urban Development Assistance Listing Number: 14.239 Program Title: Home Investment Partnerships Federal Award Number: M-15-MC-06-0541; M-16-MC-06-0541; M-17-MC-06-0541; M-18-MC-06-0541; M-20-MC-060541 Federal Award Year: 2015; 2016; 2017; 2018; 2020 Name of Federal Agency: U.S. Department Housing and Urban Development Criteria or Specific Requirement Per the loan agreements between the residents and the City, the homeowners are required to maintain the property as their primary residence or repayment is due on the loan. The City is required to review the outstanding loans and ensure residents are in compliance with the loan agreement. The City will need to verify through support, such as utility or insurance payment, that the residence is the primary address under the loan holder. Condition While the City did not have any new loans within the fiscal year, the City has not performed continuing compliance checks on the loans reported on the SEFA. Cause of the Condition The Housing Department at the City has not documented the insurance documents it received for the loan continuing compliance requirements or perform follow up checks to ensure principal residence. Effect or Possible Effect Failure to timely document continuing loan compliance checks has resulted in noncompliance. Questioned Costs No questioned costs were identified ($0). Context The City of Downey does receive insurance notification of expiring insurance then the Housing Department would check for loan compliance. Repeat Finding This is a repeat finding. Refer to Finding 2021-002 in the Schedule of Findings and Questioned Costs for fiscal year ended June 30, 2021. Recommendation We recommend that the City implement controls to document the insurance that is received by the City and the name listed is the homeowner of the loan. Management Response and Corrective Action The City implemented a monitoring process for existing first-time homebuyer assistance program (HAP) outstanding loans and continues working on a process to review all loans. The City will complete implementation of a monitoring process in the following fiscal year which includes sending out notices to existing loan recipients.