CITY OF TAYLOR, MICHIGANLocal Government

Assistance Listing Number, Federal Agency, and Program Name - ALN 14.218, U.S. Department of Housing and Urban Development Community Development Block Grant Entitlement Grant Federal Award Identification Number and Year - B23MC260015 Pass through Entity - Not applicable Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.303 (a), the recipient and subrecipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in Standards for Internal Control in the Federal Government issued by the Comptroller General of the United States or the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition - The community development manager’s payroll expenses charged to the grant were supported by time records, but these records were not reviewed or approved by another individual. Questioned Costs - Unknown Identification of How Questioned Costs Were Computed - Not applicable Context - Recipients of federal awards must have internal control procedures in place to ensure payroll expenses allocated to the grant are accurate. During our audit testing, we confirmed that the community development manager reviews all payroll expenses charged to the grant, but nobody reviews or approves the managers allocated payroll expenses. Cause and Effect - The City did not have a procedure in place to review the community development manager's allocated payroll expenses, which could cause improperly reported or ineligible grant expenses. Recommendation - We recommend that the City implement internal controls to ensure the community development manager's payroll allocation is reviewed and approved before they are charged to the grant. Views of Responsible Officials and Corrective Action Plan - The City agrees with the finding. The City will implement a secondary review and approval of time sheets submitted by the community development manager. The approval will be completed by the third party consultant or chief of staff.

CFDA Number, Federal Agency, and Program Name - CDBG Entitlement Grants Cluster - CFDA No. 14.218 Community Development Block Grant Program (CDBG) Federal Award Identification Number and Year - Program year - 2018 - B19-MC-26-0015, Program year - 2019 - B19-MC-26-0015 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Expenditures of CDBG funds must support activities that meet the National Objective as required by 24 CFR 570.200(a)(2) and 24 CFR 570.208. Condition - The Department of Housing and Development (HUD) conducted a monitoring of the 2016, 2017 and 2018 program year and identified a specific activity funded with CDBG funds did not meet the National Objective as required by 24 CFR 570.200(a)(2) and 24 CFR 570.208. Questioned Costs - $99,310 Identification of How Questioned Costs Were Computed - Questioned costs are the amounts included on the Schedule of Expenditures of Federal Awards related to the activity identified by HUD as not meeting the National Objective as required by 24 CFR 570.200(a)(2) and 24 CFR 570.208. Context - The City has identified 5 activities within its Annual Action Plan to fund with CDBG funds and in its recent monitoring HUD identified one activity did not meet the National Objective as required by 24 CFR 570.200(a)(2) and 24 CFR 570.208. Cause and Effect - The City did not have the effective control in place to ensure it had proper, adequate and contemporaneous documentation and adequately provided evidence that the activity funded with CDBG monies met the established eligibility criteria as required by 24 CFR 570.200(a)(2) and 24 CFR 570.208. As a result the City expended $198,668 from the 2018 program year in previous fiscal years and $99,310 from the 2019 program year in the current fiscal year. The $99,310 expended in the current fiscal year is reported on the Schedule of Expenditures of Federal Awards and is considered questioned costs. Recommendation - The City should implement a process to review planned federal expenditures to ensure it has appropriately documented the allowability and eligibility of all expenditures funded with federal dollars in a timely manner. Views of Responsible Officials and Corrective Action Plan - The City of Taylor Community Development Department administration disagrees with this finding. The Department of Housing and Urban Development (HUD) monitoring report that noted the questioned costs is currently being appealed by the City and has been sent to the HUD Washington DC Headquarters. HUD has not issued a final determination on the appeal at the time of the audit report filing. The City of Taylor has contracted with Hennessey Engineers Inc. and M&H Legal since February 2014 to serve as outside consultants. The consultants have extensive experience with Community Development Block Grant guidelines and national objectives. The consultants meet regularly with city administration and vet all proposed projects to ensure that the proposed projects meet eligibility requirements before putting the projects out for competitive quotes or proposals. The consultants reviewed the questioned costs at the time they were submitted and determined they were eligible costs that meet the National Objective as required by 24 CFR 570.208. The City administration believes that the questioned costs noted by the HUD monitoring report were eligible and expects to win its appeal with HUD and the questioned costs will be removed from the monitoring report.