We audited the Municipality of Yauco’s Community Development Block Grant (CDBG) program as part of our strategic plan. We selected this auditee because the U.S. Department of Housing and Urban Development (HUD) classified the Municipality as a high-risk grantee in its 2017 risk assessment review. Our objective was to determine whether the Municipality complied with HUD regulations, procedures, and instructions related to the administration of the CDBG program.
The Municipality did not properly identify the source and application of CDBG funds. In addition, it inappropriately transferred CDBG proceeds to its general fund account, did not disburse program funds in a timely manner, and paid ineligible bank penalties. As a result, HUD lacked assurance that more than $1 million in CDBG drawdowns was adequately accounted for, safeguarded, and used for eligible purposes.
The Municipality did not properly support the scope of its street resurfacing efforts, paid for work done before a contract was awarded, and improperly completed street resurfacing work on private properties. As a result, HUD lacked assurance that more than $469,000 in CDBG funds was used for eligible purposes and in accordance with the program requirements.
We recommend that HUD require the Municipality to (1) develop and implement a financial management system in accordance with HUD requirements, (2) submit all supporting documentation showing the eligibility and propriety of more than $1.5 million in CDBG funds, (3) return to its line of credit and put to better use $1,641 associated with unspent program funds, (4) reimburse the CDBG program $106 paid for ineligible penalties, and (5) develop and implement adequate controls and procedures to permit proper accountability for all program funds.
Recommendations
Community Planning and Development
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Status2019-AT-1005-001-AOpenClosed
Develop and implement a financial management system in accordance with HUD requirements, including but not limited to permitting the disbursement of funds in a timely manner.
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Status2019-AT-1005-001-BOpenClosed$1,045,085.00Questioned 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.
Ensure that $1,045,085 in CDBG funds drawn from HUD between July 1, 2015, and October 31, 2018, 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, or reimburse the CDBG program from non-Federal funds. Footnote 2: Total drawdowns of more than $1.5 million were adjusted to consider $106 questioned in recommendation 1D and $469,974 in recommendation 2A.
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Status2019-AT-1005-001-COpenClosed$1,641.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Require the Municipality to return to its line of credit and put to better use $1,641 associated with the unspent program funds that have been carried over since December 2017.
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Status2019-AT-1005-001-DOpenClosed$106.00Questioned 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.
Closed on July 17, 2020Reimburse the CDBG program from non-Federal funds the $106 paid for ineligible bank penalties.
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Status2019-AT-1005-001-EOpenClosed
Establish and implement adequate controls and procedures to permit proper accountability for all CDBG funds to ensure that they are used solely for authorized purposes and properly safeguarded.
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Status2019-AT-1005-002-AOpenClosed$469,974.00Questioned 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 supporting documentation showing how $469,974 in CDBG funds disbursed for street improvements was properly used and in accordance with HUD requirements or reimburse the CDBG program from non-Federal funds.
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Status2019-AT-1005-002-BOpenClosed
Determine the amount spent for the resurfacing of the 16 private properties identified and reimburse the CDBG program from non-Federal funds.
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Status2019-AT-1005-002-COpenClosed
Establish and implement adequate policies and procedures, including project inspection protocols, to ensure that CDBG funds are used for activities that meet a national objective, are used for eligible purposes, and are properly supported.