Louisville/Jefferson County Metro Government

Finding 2025-002: Monitoring and Management of Grant Budgets Should be Improved Federal Program: Assistance Listing Number (“ALN”) 93.391 Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises Name of Federal Agency: U.S. Department of Health and Human Services Award Identification Number and Year: 6 NH75OT000023-01-02 Name of pass-through entity: N/A COVID Identification: Yes Amount of Questioned Costs: $0 Compliance Requirement: Reporting Criteria: Title 2 of the Code of Federal Regulations (“CFR”) Section 200.302(b) states, “The recipient’s and subrecipient's financial management system must provide for the following: (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligations balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation.” Metro Government’s written grant administration procedures state that they “will abide by the processes for identification, recording, reporting and monitoring program expense” in accordance with 2 CFR 200. Condition: Metro Government did not closely monitor a number of its grant budgets in its Workday software during the course of the year. As a result, we noted a number of journal vouchers had to be used to move grant expenditures out of one grant program to another. Many of these journal vouchers occurred during the year end closing process. As a result, at any given point in time throughout the year, grant expenditures and the related amounts requested from the federal government might not match. We did find; however, that all of the grant expenditure amounts appeared to be accurate by the time we received the final SEFA. Cause: Project level budget to actual reports were not reviewed timely, resulting in reactive reallocations. Effect: Risk of noncompliance with the Uniform Guidance. Recommendation: We recommend Metro Government improve monitoring of grant budgets to ensure expenditures are posted correctly initially and to prevent unnecessary corrective journal vouchers.

Finding 2025-003: Weaknesses Were Noted in the Grant Drawdown Process Federal Program: Assistance Listing Number (“ALN”) 93.967 Centers for Disease Control and Prevention Collaboration with Academia to Strengthen Public Health Name of Federal Agency: U.S. Department of Health and Human Services Award Identification Number and Year: 6 NE11OE000004-02-02 Name of pass-through entity: N/A COVID Identification: No Amount of Questioned Costs: $0 Compliance Requirement: Cash Management Criteria: Per the Notice of Funding Opportunity CDC RFA OE22 2203, Section 13a, Funds Tracking, “Applicants are encouraged to demonstrate a record of fiscal responsibility and the ability to provide sufficient and effective oversight. Financial management systems must meet the requirements as described in 45 CFR 75.” Metro Government does not have a written procedure on drawdowns for this grant. Condition: During FY 2025, Metro Government initiated seven drawdowns under this federal grant totaling $3,644,670 in January, February, and March 2025. We selected three drawdowns for testing, totaling $3,062,067. After extensive communication with Metro Government’s grant accountants and review of numerous documents, we were provided with detailed expenditure records substantiating the amounts drawn, along with a reconciliation explaining the differences between Workday “bills” and drawdowns reported in the federal Payment Management System (“PMS”). Weaknesses were identified in the drawdown process. Of the seven drawdowns processed in PMS, only one matched the corresponding Metro Government billing records. The supporting documentation initially provided did not clearly identify or mark expenditures associated with each drawdown request. Required approval was not obtained before drawing down the billed amounts. Effect: If drawdowns are not reconciled with supporting records on a timely basis and/or if clear documentation supporting the drawdown is not readily available, this increases the risk of non compliance. Untimely or missing approvals heighten the risk that unapproved expenditures could be drawn down.Cause: Drawdown requests in PMS should be fully supported by detailed bills that itemize the associated eligible expenditures. Reconciliation between PMS drawdowns and bills is a fundamental internal control to ensure grant funds are drawn in accordance with grantor guidelines. Supporting documentation must clearly identify which expenditures correspond to each drawdown to facilitate verification and accountability. Recommendation: We recommend Metro Government maintain detailed supporting documentation substantiating all amounts requested for drawdown in the PMS. Additionally, drawdown requests should be properly reviewed and approved by authorized program grant staff before submission.

Finding 2025-004: Community Development Block Grant (“CDBG”) Draws Are Not Always Timely Federal Program: ALN 14.218 Community Development Block Grants/Entitlement Grants Name of Federal Agency: U.S. Department of Housing and Urban Development (“HUD”) Award Identification Number and Year: B-21-MC-21-0008, B-22-MC-21-0008, B-20-MC-21-0008, B-18-MC-0008, B-23-MC-21-0008, and B-24-MC-211-008 Name of pass-through entity: N/A COVID Identification: No Amount of Questioned Costs: N/A Compliance Requirement: Cash Management Criteria: 24 CFR 570.902(a)(1) states, “HUD will consider an entitlement recipient ….to be failing to carry out its CDBG activities in a timely manner if: (i) Sixty days prior to the end of the grantee’s current program year, the amount of entitlement grants funds available to the recipient under grant agreements but undisbursed by the U.S. Treasury is more than 1.5 times the entitlement grant amount for its current program year; and (ii) The grantee fails to demonstrate to HUD’s satisfaction that the lack of timeliness has resulted in factors beyond the grantee’s reasonable control.” Per HUD, “A grantee is considered to be in compliance if, 60 days prior to the end of its program year, there is no more than 1.5 times its annual grant remaining in the line of credit.” Condition: Metro Government received an email from HUD on May 22, 2025 stating that HUD reviewed their compliance with requirements for carrying out a CDBG program in a timely manner and that Metro Government was in noncompliance with the timeliness standard for the third consecutive time. Metro Government has a July 1st program start date. HUD conducted the 60 day test on May 2, 2025. It was calculated that Metro Government had a balance in its line of credit 2.21 times its annual grant. HUD required Metro Government to prepare a Timeliness Workout Plan to provide detail on the category of the CDBG funds. Per the CDBG Timeliness Progress Report on August 26, 2025, there was a total remaining balance of $37.4 million of CDBG funds to be drawn down. The largest categories of these funds were “slow but active project spending” of $18.8 million and “uncommitted funds” of $16.8 million. On January 15, 2026, the total remaining balance was $30.6 million. The two largest categories were “spending on time” of $9.2 million and “activities to be funded” of $9.1 million. Effect: HUD could impose sanctions for grant reductions. Cause: Reasons for this issue are projects are not moving forward as quickly as planned, focus of projects has changed and project will not move forward, and project has had expenditures but the reimbursement for the expenditures have not been drawn down. Recommendation: We recommend Metro Government reach the 1.5 timeliness standard by the next HUD timeliness standard assessment on May 2, 2026.

Finding 2025-005: CDBG Subrecipient Monitoring At Metro Government’s Office of Housing and Community Development (“OHCD”) Needs Improvement Federal Program: ALN 14.218 Community Development Block/Entitlement Grants Name of Federal Agency: U.S. Department of Housing and Urban Development Award Identification Number and Year: B-21-MC-21-0008, B-22-MC-21-0008, B-20-MC-21-0008, B-18-MC-0008, B-23-MC-21-0008, and B-24-MC-211-008 Name of pass-through entity: N/A COVID Identification: No Amount of Questioned Costs: N/A Compliance Requirement: Subrecipient monitoring Criteria:The Metro Government Subrecipient Management Policy Manual states, “Title 2 CFR 200.332 requires all pass-through entities to evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations and the terms and conditions of the subaward to determine the appropriate monitoring needed to ensure Federal funds are used properly. Passthrough entities are not required to complete a risk assessment on contractors. Metro agencies must complete risk assessments on all subrecipients no less than annually.” 2 CFR 200.332(c) states, “Evaluate each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring described in paragraph (f) of this section. When evaluating a subrecipient’s risk, a pass-through entity should consider the following: (1) The subrecipient’s prior experience with the same or similar subawards; (2) The results of previous audits. This includes considering whether or not the subrecipient receives a Single Audit in accordance with subpart F and the extent to which the same or similar subawards have been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of any Federal agency monitoring (for example, if the subrecipient also received Federal awards directly from the Federal agency).” Condition: During FY 2025, a total of $9,780,961 in CDBG funds were distributed to 21 subrecipients by Metro Government. Monitoring these subrecipients was conducted by two offices. The Office of Social Services (“OSS”) monitored 11 subrecipients totaling $5,306,082. The Office of Housing and Community Development (“OHCD”) was responsible for monitoring 10 subrecipients totaling $4,474,879. OSS is responsible for monitoring the subrecipients that have subawards for CDBG operating and service projects. OSS completes the following procedures when monitoring their subrecipients: completing a risk assessment spreadsheet, maintaining a historic log documenting the dates of when each subrecipient was monitored, and desk reviews and/or site visits. High risk subrecipients are monitored more frequently compared to those assessed at a lower risk. Subrecipients are required to be monitored at least once every three years. The OHCD is responsible for monitoring subrecipients that have subawards for CDBG capital projects. OHCD conducts informal, undocumented risk assessments of subrecipients. No site visits were conducted in fiscal year 2025. Effect: The OHCD did not adequately monitor its subrecipients during fiscal year 2025. Cause: The OHCD did not have a designated individual responsible for subrecipient monitoring during fiscal year 2025. Recommendation: We recommend the OHCD adopt the procedures and documentation practices established by OSS. Specifically, this includes conducting site visits, assessing each subrecipient’s risk of noncompliance, performing desk reviews and site visits, and maintaining comprehensive documentation of risk assessment and monitoring activities.

Finding 2025-006: FEMA expenditures need to be accurately reported on SEFA and reconciled to Workday Federal Program: ALN 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Name of Federal Agency: U.S. Department of Homeland Security Award Identification Number and Year: SC 095 2500001335 1 and SC 095 2600000514 1 Name of pass-through entity: Kentucky Division of Emergency Management COVID Identification: No Amount of Questioned Costs: N/A Compliance Requirement: Reporting Criteria: The 2025 OMB Compliance Supplement Part 3 under suggested audit procedures states, “Trace the amounts reported to accounting records that support the audited financial statements and the Schedule of Expenditures of Federal Awards and verify agreement.” 2 CFR 200.302(b) states, “The recipient’s financial management system must provide for the following: (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, income, and interest. All records must be supported by source documentation.” Condition: Louisville Metro calculated the amount reported on the SEFA using FEMA project worksheets. However, Louisville Metro did not perform a reconciliation between the FEMA project worksheets and Workday. A reconciliation is necessary to identify the FEMA related expenditures that were not tagged to the disasters in Workday. The Workday reflects $307,073 less in expenditures than the amounts shown on the FEMA project worksheets used to determine the amount reported on the SEFA. Effect: Increases the risk of noncompliance with Uniform Guidance requirements. Cause: Grant expenditures are required to be properly “tagged” in Workday to ensure accurate reporting on the SEFA. However, not all FEMA related grant expenditures have been tagged in Workday. Recommendation: We recommend Louisville Metro enhance its procedures to ensure that FEMA expenditures are accurately captured in the SEFA and fully reconciled to the expenditure detail recorded in Workday.

Federal Program reported incorrectly on the Schedule of Expenditures of Federal Awards (“SEFA”) and errors noted in written off loans Federal Program: Assistance Listing Number (“ALN”) 11.307 Economic Adjustment Assistance Name of Federal Agency: U.S. Department of Commerce Award Identification Number and Year: 04-79-07547 and Year 2020 Name of pass-through entity: N/A COVID Identification: Yes Amount of Questioned Costs: $1,571,578 Criteria: 2CFR 200.510 states the requirements for SEFA reporting. The Louisville Metropolitan Business Development Corporation Policy and Procedures Handbook provides the order of priority for loan proceeds to be applied. Condition: The federal expenditure amount for ALN 11.307 was reported incorrectly on the draft SEFA provided by Louisville Metro. Also, the information in the loan system was incorrect for two written off loans. Effect: SEFA was mis-stated for ALN 11.307. Semi-annual report had incorrect information on chart. Cause: Lack of communication between Metro grants personnel and Metro OMB grants division. Also error in loan system. Questioned Costs: Total questioned costs is $1,571,578 (SEFA error of $1,570,592, loan error of $864, and loan error of $122). Context: Total federal expenditures on the SEFA required an adjustment of $1,570,592. The total written off loan amounts for FY 2024 were $343,439. Recommendation: We recommend communication be improved and management periodically reconcile the loan system to detect errors. Management’s response: Management agrees with the finding and will develop a plan to insure such differences do not reoccur in the future.

U.S Department of the Treasury: Questioned Costs $24,255 2021-001 Emergency Rental Assistance Program - Federal Assistance Listing Number 21.023 Award Number ERA0064 and ERAE0112 Condition: A beneficiary exceeded the income threshold to qualify for benefits. Criteria: Assistance under the Emergency Rental Assistance Program is disallowed above certain income thresholds. Cause: Auditor was unable to determine the cause of the condition. Effect: The impact was to pay benefits to an ineligible household. Context: A sample of 30 beneficiaries was selected for audit from a population of 4,499. The test found one instance in which benefits $24,255 was paid to a household that exceeded the income thresholds. Our sample was a statistically valid sample. Recommendation: The Government should implement controls that would prevent benefits from being paid when the applicant indicates in the application process that they exceeded the income thresholds to qualify. View of Responsible Officials and Planned Corrective Actions: The Government agrees with the finding and is the process of implementing policies that would prevent payments from being made to ineligible benefits.

U.S Department of the Treasury: Questioned Costs $9,416 2021-002 Emergency Rental Assistance Program - Federal Assistance Listing Number 21.023 Award Number ERA0064 and ERAE0112 Condition: Disallowed costs of $9,416 were reported under the Federal Program. Criteria: Assistance under the Emergency Rental Assistance Program is disallowed if determined to be duplicative. Cause: Payment was for the disallowed costs was stopped in the next fiscal period but the costs was not removed from fiscal year 2021. Effect: The impact was to overstate federal expenditures for fiscal year 2021. Context: A sample of 40 expenditures totaling $280,135 was selected for audit from a population of $23,464,472. The test found two instances in which costs of $9,416 reported in the Schedule of Expenditures of Federal Awards was not in compliance. Our sample was a statistically valid sample. Recommendation: The Government should implement procedures to ensure that checks voided are also remove the expenditure listing. View of Responsible Officials and Planned Corrective Actions: The Government agrees with the finding and is the process of implementing policies whereby voided payments will be remove the expenditure from the period in which it was recorded. Condition Draft - September 17, 2022

U.S Department of the Treasury: Questioned Costs $1,800 2021-003 Emergency Rental Assistance - Federal Assistance Listing Number 21.023 Award Number ERA0064 and ERAE0112 Condition: Benefits awarded to a household were paid in excess of the amount delinquent Criteria: Assistance under the Emergency Rental Assistance Program is only allowed for rents in arrears. Cause: The finding appears to be due to human error. Effect: The impact was to pay benefits in excess of the amount allowed. Context: A sample of 30 beneficiaries was selected for audit from a population of 4,499. The test found one instance in which benefits $1,800 was paid in excess of rents in arrears. Our sample was a statistically valid sample. Recommendation: The Government should implement controls that would prevent benefits from being paid in excess of rents in arrears. View of Responsible Officials and Planned Corrective Actions: The Government agrees with the finding and implement policies to increase supervisor review prior to initiating payments.