We audited the Municipality of Toa Alta’s Section 108 Loan Guarantee program. This audit was the result of a referral from the San Juan Office of Community Planning and Development. The objectives of the audit were to determine whether program funds were effectively used to meet a Community Development Block Grant (CDBG) program national objective and provide the intended benefits and whether the Municipality complied with loan application, contract and U.S. Department of Housing and Urban Development (HUD) requirements.
The Municipality did not ensure that it completed two Section 108 Loan Guarantee activities that showed signs of slow progress. As a result, HUD had no assurance that more than $9.5 million disbursed for two Section 108-funded activities met a national objective of the CDBG program and fully provided the intended benefits.
The Municipality used more than $139,000 for ineligible expenditures and did not support the eligibility of $12,000 in program disbursements. In addition, it did not comply with environmental requirements, disburse loan proceeds within the loan agreement timeframe, provide HUD the required loan collateral, establish a financial management system in accordance with HUD requirements, and ensure that deposits were fully collateralized. As a result, HUD lacked assurance that funds were adequately accounted for, safeguarded, and used for authorized purposes and in accordance with HUD requirements.
We recommend that HUD (1) determine the eligibility of more than $9.5 million in unsupported Section 108 program costs and activities that showed signs of slow progress, (2) require the repayment of more than $139,000 in ineligible expenditures, and (3) obtain supporting documentation showing compliance with environmental requirements.
Recommendations
Community Planning and Development
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Status2016-AT-1002-001-AOpenClosed$8,111,304.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Submit a plan for how it will proceed with respect to the multipurpose facility project, including a schedule that HUD can track to ensure its completion. HUD must reevaluate the feasibility of the activity and determine the eligibility of the $8,111,304 already invested. (Footnote 4: Total investments of $8,232,388 were adjusted to account for $109,084 questioned in recommendation 2A and $12,000 in recommendation 2B.) If HUD determines that the activity has been canceled or is not feasible, the Municipality must commit any unused loan proceeds for future loan repayments.
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Status2016-AT-1002-001-BOpenClosed$1,454,801.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Submit a plan for how it will proceed with respect to the municipal cemetery project, including a schedule that HUD can track to ensure its completion. HUD must reevaluate the feasibility of the activity and determine the eligibility of the $1,454,801 already invested. If HUD determines that the activity has been canceled or is not feasible, the Municipality must commit any unused loan proceeds for future loan repayments.
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Status2016-AT-1002-002-COpenClosed
Provide supporting documentation showing that it complied with all environmental requirements. If the Municipality does not provide evidence that it complied with all environmental requirements, HUD must initiate appropriate sanctions under 24 CFR 58.77(d)(1)(v) for noncompliance.
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Status2016-AT-1002-002-EOpenClosed
Provide HUD the additional security requirements according to the loan agreement.
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Status2016-AT-1002-002-FOpenClosed
Develop and implement a financial management system in accordance with HUD requirements to ensure that program funds can be traced to a level, which ensures that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes.
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Status2016-AT-1002-002-HOpenClosed
Provide training, technical assistance, and increase monitoring of the Municipality’s performance in the administration of its Section 108 loan program.