County of YubaLocal Government

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Community Development Block Grants (CDBG) Assistance Listing Number: 14.228 Pass-Through Agency: State Department of Housing and Community Development Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Compliance Requirement: Allowable Costs/Cost Principles Criteria: Under the CDBG program requirements and HOME affordability/occupancy provisions, the County is required to ensure that assisted properties remain owner-occupied as a primary residence for the applicable affordability period. This includes maintaining documentation, such as certificates of occupancy or equivalent verification, to support ongoing compliance. Condition: During testing of continued compliance requirements, we noted that the department did not obtain a certificate of occupancy to verify that the loan recipient continues to occupy the property as their primary residence. Questioned Costs: None Context: Out of 8 loan files tested, 1 loan did not include documentation verifying continued occupancy of the assisted property. Cause: The condition appears to be due to insufficient procedures or oversight to ensure that required occupancy documentation is obtained and retained as part of ongoing monitoring activities. Effect: Failure to verify and document continued occupancy may result in noncompliance with program requirements and could increase the risk of ineligible use of program funds. This may also lead to increased monitoring or potential repayment of funds. Repeat Finding: No Recommendation: CLA recommends that the County establish and implement procedures to ensure continued compliance with occupancy requirements, including:  Obtaining and retaining certificates of occupancy or other appropriate documentation to verify primary residence status as part of the CDBG/HOME loan reconciliation workbook process.  Implementing periodic monitoring procedures for loan recipients.  Maintaining documentation in loan files to support compliance throughout the affordability period. View of Responsible Officials: There is no disagreement with the audit finding.

Audit procedures included a review of 40 payments to program participants during the fiscal year. For one sampled payment, it was determined that the amount was paid in error. The participant in question had been eligible for state foster care funding beginning in January 2017. State funds were paid to this recipient up until March 2022 when placement change paperwork was received. The new payee was updated; however, the caseworker had erroneously updated the payment code to federal. Thus, the participant had received overpayments of federal funds from March 2022 through the last month they were in the program which was May 2023. Overpayments during FY23 totaled $46,832.

Audit procedures included a review of 40 payments to program participants during the fiscal year. For one sampled payment, it was determined that the amount was paid in error. The participant in question had been eligible for state adoption assistance funding beginning in October 2003. State funds were paid to this recipient up through April 2019. In September 2019, the County received instructions via an updated adoption assistance agreement (form AAP-2) to increase the payment rate effective May 8, 2019. During this rate increase transaction, the caseworker erroneously updated the payment code to federal. Retroactive supplemental checks for May through August 2019 as well as ongoing monthly payments for September 2019 through October 2023 were issued. Thus, the participant had received overpayments of federal funds from May 2019 through the last month they were in the program which was October 2023. Overpayments during FY23 totaled $22,409.

Audit procedures included a review of the project and expenditure reports for the quarters ending December 31, 2022 and June 30, 2023. Supporting documentation for current period and cumulative obligations related to all projects listed in these reports was not provided.