Finding 967515 (2023-002)

Evaluation of Finding Significant Deficiency/Noncompliance Federal Award Information Assistance Listing Number: 14.228 Program Title: Community Development Block Grant (CDBG) Federal Award Year(s): FY 2022-23 Name of Federal Agency: U.S. Department of Housing and Urban Development Passed through: State of California Department of Housing and Community Development Criteria or Specific Requirement The County is required to meet continuing loan compliance requirements for the loans disbursed under the CDBG grant program. These continuing loan compliance requirements include maintaining loan documentation and obtaining confirmation of insurance and address associated with the loans and their recipients. Condition We noted that of the 19 loan balances we sampled over the course of our audit, the County was unable to provide supporting documentation relating to proof of insurance and/or address for 13 of the selected loans. Cause of the Condition Per our inquiries with the County, due to the significant age of the selected loans, County personnel was unable to obtain the supporting documentation as a significant number of the selected loans had inception dates of ten years or more. Effect or Possible Effect Adequate supporting documentation of outstanding loans is not being effectively maintained and archived by County personnel. Additionally, the County was unable to provide proof of confirmation attempts to verify insurance and address associated with the loans and their recipients to meet compliance requirements. Questioned Costs None. Context Without maintaining current information surrounding ongoing loans the County is unable to best monitor grant recipients and evaluate the accuracy and reasonableness of the outstanding loan balances each year. Repeat Finding This is a repeat finding for the year ended June 30, 2022. See prior year finding 2022-001. Recommendation We recommend that management monitors each loan to ensure that the County maintains the most up-to-date information. Additionally, we recommend attempts are made annually to confirm insurance and address associated with the loans and their recipients to meet compliance requirements. Management’s Response and Corrective Action The County agrees with the finding. The Auditor-Controller will work with Development Services to show proof of attempts to collect current insurance certificates and proof of address from loan recipients.