oversight

The City of Moreno Valley, CA, Did Not Administer Its Code Enforcement Program in Accordance with HUD Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-04-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

              City of Moreno Valley, CA
        Community Development Block Grant Program




Office of Audit, Region 9     Audit Report Number: 2018-LA-1004
Los Angeles, CA                                    April 27, 2018
To:            Chin Woo Choi, Acting Director/Program Manager, Los Angeles Office of
               Community Planning and Development, 9DD

               //SIGNED//
From:          Tanya E. Schulze, Regional Inspector General for Audit, 9DGA
Subject:       The City of Moreno Valley, CA, Did Not Administer Its Code Enforcement
               Program in Accordance with HUD Requirements


Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of the City of Moreno Valley’s Community
Development Block Grant program.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG website. Accordingly, this report will be posted at
http://www.hudoig.gov.

If you have any questions or comments about this report, please do not hesitate to call me at
213-534-2471.
                    Audit Report Number: 2018-LA-1004
                    Date: April 27, 2018

                    The City of Moreno Valley, CA, Did Not Administer Its Code Enforcement
                    Program in Accordance With HUD Requirements


Highlights

What We Audited and Why
We audited the City of Moreno Valley’s Community Development Block Grant (CDBG)
program, based on a referral from the Office of the Inspector General’s Los Angeles Office of
Investigation, identifying the concerns of the Los Angeles Office of Community Planning and
Development that the City did not properly charge salaries to the CDBG code enforcement
program. The objective of our audit was to determine whether the City correctly administered its
code enforcement program.

What We Found
The City did not administer its code enforcement program in accordance with U.S. Department
of Housing and Urban Development (HUD) requirements. Specifically, it did not (1) have a
sufficient definition of deterioration or a written strategy describing how the program would be
used to arrest the decline in CDBG-eligible target areas or (2) maintain adequate support for the
eligibility of code enforcement payroll costs. This condition occurred because the City did not
have adequate written procedures or controls to ensure that it met HUD requirements and City
staff was not sufficiently knowledgeable of the program requirements. As a result, the City
could not support $797,222 in code enforcement salary expenditures.

What We Recommend
We recommend that the Acting Director of HUD’s Los Angeles Office of Community Planning
and Development require the City to (1) support charges made to the code enforcement program
or repay the program $797,222 from non-Federal funds, (2) develop and implement written
policies to define deteriorated areas and establish a written plan of how the program would be
used to arrest the decline in CDBG-eligible target areas, (3) develop and implement written
controls to allocate code enforcement officers’ costs among different CDBG activities and other
funding sources and to properly record work hours for inspection activities, and (4) provide
training on HUD requirements to code enforcement staff.
Table of Contents
Background and Objective .................................................................................. 3

Results of Audit .................................................................................................... 4
         Finding 1: The City Did Not Administer Its Code Enforcement Program in
         Accordance With Requirements ...................................................................................4

Scope and Methodology ....................................................................................... 8

Internal Controls ................................................................................................10

Appendixes ..........................................................................................................12
         A. Schedule of Questioned Costs ................................................................................12
         B. Auditee Comments and OIG’s Evaluation ...........................................................13
         C. Criteria ...................................................................................................................18
         D. Breakdown of Questioned Costs ...........................................................................20




                                                                   2
Background and Objective
The City of Moreno Valley, CA, receives Community Development Block Grant (CDBG) funds
from the U.S. Department of Housing and Urban Development’s (HUD) entitlement program.
The CDBG program provides annual grants to entitled cities and counties to develop viable
urban communities by providing decent housing and a suitable living environment and by
expanding economic opportunities, principally for low- and moderate-income persons. To be
eligible for funding, program-funded projects must satisfy one of three HUD national program
objectives required in 24 CFR (Code of Federal Regulations) 570.208 to provide benefit to low-
and moderate-income persons, prevent or eliminate slums or blight, or meet other urgent
community development needs due to disasters or other emergencies.

HUD’s Los Angeles Office of Community Planning and Development awarded the City $5.9
million for program years 2014 to 2016. CDBG grant funds are administered by the City’s
Financial Operations Division, which is under the Financial and Management Services
Department.

 Program year       Date use of funds           Grant number                 Funding
                       may begin                 (entitlement)
      2014              7/1/2014                B14MC060567                      $1,970,284
      2015              7/1/2015                B15MC060567                       2,020,124
      2016              7/1/2016                B16MC060567                       1,932,762
                                 Total funds                                      5,923,170

The City provided $797,222 in CDBG grant funds to its code enforcement program for program
years 2014 to 2016. Code enforcement is defined as a process whereby local governments gain
compliance with ordinances and regulations regarding health and housing codes, land use and
zoning ordinances, sign standards, and uniform building and fire codes. Code enforcement may
take place in primarily residential, commercial, and industrial areas.

Our audit objective was to determine whether the City administered its CDBG code enforcement
program in accordance with HUD requirements.




                                               3
Results of Audit

Finding 1: The City Did Not Administer Its Code Enforcement
Program in Accordance With Requirements
The City did not use its CDBG funds for code enforcement in accordance with HUD
requirements. Specifically, it did not (1) have a sufficient definition of deterioration or a written
strategy describing how the program would be used to arrest the decline in CDBG-eligible target
areas or (2) maintain adequate support for the eligibility of code enforcement payroll costs. This
condition occurred because the City did not have adequate written procedures and controls over
its CDBG program to ensure that it met HUD requirements and City staff was not sufficiently
knowledgeable of program requirements. As a result, the City could not properly support
$797,222 in code enforcement salary expenditures.

The City Did Not Establish and Define Deteriorated Target Areas or Develop a Strategy
The City did not have a sufficient definition of deterioration or written strategy describing how
the program would be used to arrest the decline in CDBG eligible target areas. HUD regulations
at 24 CFR 570.202(c), state that CDBG funds may be used for code enforcement for costs
incurred for inspection for code violations and enforcement of codes in deteriorating or
deteriorated areas when such enforcement, together with public or private improvements,
rehabilitation, or services to be provided, may be expected to arrest the decline of the area, and
24 CFR 570.207(a)(2) prohibits their use for general government expenses (appendix C). The
City spent and drew down $830,218 for its code enforcement activity throughout our audit scope
(July 1, 2014 to June 30, 2017). However, it did not adequately distinguish between its CDBG
code enforcement and its regular responsibilities as a unit of general local government.

The City had no written deterioration definition or policy in effect for its code compliance
officers’ inspection activities between July 1, 2014 and June 30, 2017. In response to our
inquiries, the City issued a deterioration policy (policy number 2017-01); however, this
definition was not effective until November 30, 2017. In addition, the City had not designated
or provided support showing that the specific CDBG target areas serviced by code compliance
officers were deteriorated. The City’s policy generally identified deteriorated areas only as
“CDBG areas” or in “predominantly residential CDBG areas where a minimum of 51 percent
of these residents are low-income and moderate-income as determined by the current City of
Moreno Valley CDBG program administrator.”

In addition, the City had no strategy or plan to describe how the program would be used in
conjunction with public or private improvements, rehabilitation, or services that would be
expected to arrest the decline in CDBG-eligible target areas as required in HUD, Office of
Community Planning and Development (CPD), Notice CPD-14-016 and the Guide to National
Objectives and Eligible Activities for Entitlement Communities (appendix C).




                                                  4
The City’s lack of a written deterioration definition or support that target areas were
deteriorated, combined with its not establishing a strategy or plan to describe how the program
would be used to arrest the decline in CDBG eligible target areas called into question the
eligibility of the entire amount drawn for code enforcement.

The City Did Not Adequately Support Code Enforcement Payroll Costs
HUD regulations at 2 CFR 200.430 state that charges to Federal awards for salaries and wages
must be based on records that accurately reflect the work performed and must be supported by a
system of internal control, which provides reasonable assurance that the charges are accurate,
allowable, and properly allocated (appendix C). The City drew down CDBG funds for code
enforcement salaries and benefits amounting to $830,218 for program years 2014, 2015, and
2016; however, it did not properly support that the costs were attributable to the program.

The City’s code enforcement department designated specific code compliance officers to work
only in eligible CDBG areas and charge 100 percent of their work time to the CDBG program.
The City’s quarterly reports showed that the officers performed community outreach activities in
addition to their normal inspection activities. Although community outreach is an eligible
CDBG activity, it is not eligible to be charged to the code enforcement activity budget. The code
compliance officers’ timesheets did not indicate the type of work activity conducted, and there
was no payroll allocation of time among different CDBG activities or any other funding source.
In addition, the City’s daily case activity reports, which listed the daily inspection activities
performed by officers, did not consistently record applicable time or indicate when community
outreach was conducted. As a result, we could not determine whether the payroll charges to
code enforcement represented the expense for performing eligible inspection activities or how
much should have been allocated to a public service budget.

In addition, code compliance officers did not stay completely within CDBG-eligible boundaries
when conducting code enforcement inspections. Our comparison of the City’s mapping
information detailing CDBG target-area data (such as boundaries and parameters) to the CDBG
inspection addresses identified in the quarterly report (see the Scope and Methodology section)
showed that during program years 2014, 2015, and 2016,1 there were 840 cases worked by
CDBG compliance officers that were outside CDBG-designated boundaries. There were also
136 cases with a bad or blank address.

    Fiscal    Inspections        Inspections          Inspections    Total                 Percentage of
     year    inside CDBG         with bad or         outside CDBG inspection               questionable
               boundary         blank address          boundary     records                 inspections
                  (A)                (B)                   (C)        (D)                  (B) + (C) /(D)
    14-15        1,656               15                    362       2,033                    18.54%
    15-16        2,203               47                    326       2,576                    14.48%



1
 Program years 2014, 2015, and 2016 correspond to the City’s fiscal years: July 1, 2014, to June 30, 2015; July 1,
2015, to June 30, 2016; and July 1, 2016, to June 30, 2017, respectively


                                                         5
    Fiscal    Inspections        Inspections          Inspections    Total                 Percentage of
     year    inside CDBG         with bad or         outside CDBG inspection               questionable
               boundary         blank address          boundary     records                 inspections
                  (A)                (B)                   (C)        (D)                  (B) + (C) /(D)
    16-17        3,627               74                    152       3,853                     5.8%
    Total        7,486               136                   840       8,462                    11.53%

Overall, between 2014 and 2017, the City performed 11.53 percent (976 cases out of 8,462) of its
code enforcement inspection activity outside CDBG areas or at locations that were not
adequately identified. Although 100 percent of a code compliance officers’ payroll was paid
with CDBG funds, the officers conducted work activities outside eligible CDBG target areas.
Since there are no hours listed on the quarterly reports indicating the amount of work time
associated with the individual inspections, we could not quantify the actual costs associated with
these inspections.

Finally, the City applied incorrect allocation percentages on the work logs for two code
enforcement employees, thereby overstating their salaries charged to the CDBG program. Upon
our inquiry, the City acknowledged that it used incorrect allocation percentages in paying
salaries and repaid the program the overallocated amount of $32,996 in CDBG grant funds in the
form of a drawdown adjustment on an open project. (See appendix D for voucher amounts
repaid.)

Overall, the CDBG code enforcement salary and benefits of $797,2222 were not adequately
supported due to the City’s not adequately identifying and separating out outreach activity and
inspections performed outside CDBG-eligible areas.

The City Lacked Proper Training To Administer Its CDBG Program
The code enforcement and payroll issues discussed above occurred because code enforcement
staff lacked the proper training and knowledge to administer the CDBG program. The code
enforcement staff had not received specific training with respect to CDBG requirements while
employed by the City. Also, the code compliance field supervisor had managed the program
only since July 2017. He stated that the code enforcement staff had not received formal CDBG
training but that such training would be helpful. Thus, code enforcement staff was not
knowledgeable of HUD requirements related to administering and implementing (such as
tracking work time and staying within eligible boundaries) the City’s CDBG program.




2
 Although the total payroll was $830,218, the unsupported cost was adjusted by the $32,996 in overallocated
amounts that were later paid back by the City during the course of our audit fieldwork ($830,218 - $32,996 =
797,222).


                                                         6
Conclusion
The City did not properly develop a sufficient definition of deterioration and did not have a
written strategy or plan to describe how the program would be used to arrest the decline in
CDBG-eligible target areas. It also did not maintain adequate support for code enforcement
payroll, as its code officers conducted inspections outside CDBG-eligible boundaries and
performed non-code-enforcement activities. This condition occurred because the City did not
have adequate written procedures and controls for its CDBG program to that ensure it met HUD
requirements. Also, City staff did not appear to be sufficiently knowledgeable and did not have
adequate training on HUD CDBG regulations or program requirements. These issues were
consistent throughout the audit scope. As a result, HUD did not have adequate assurance the
entire amount drawn for code enforcement salaries for program years 2014, 2015, and 2016
totaling $797,222 was used for eligible purposes (appendix D).

Recommendations
We recommend that the Acting Director of HUD’s Los Angeles Office of Community Planning
and Development require the City to
       1A.    Support the $797,222 in code enforcement costs, including meeting code
              enforcement and salary and benefits requirements, or repay its program from non-
              Federal funds.

       1B.    Develop and implement written policies and procedures to define deteriorated or
              deteriorating areas, which would apply to its CDBG-eligible target areas, and
              establish a written plan for using the program, in conjunction with public or
              private improvements, rehabilitation, or services, that may be expected to arrest
              the decline in CDBG-eligible target areas.

       1C.    Develop and implement written procedures and controls to properly track and
              charge code enforcement officers’ costs among different CDBG activities and
              other funding sources.

       1D.    Provide training to code enforcement staff on HUD CDBG regulations and
              requirements.




                                               7
Scope and Methodology
We performed our audit fieldwork at the City’s City Hall offices located at 14177 Frederick
Street, Moreno Valley, CA, from August 21, 2017, through February 22, 2018. Our audit period
covered July 1, 2014, to June 30, 2017, which we expanded when necessary3.

To accomplish our objective, we

•   Reviewed applicable CDBG code enforcement-related program requirements and applicable
    Federal regulations.

•   Reviewed relevant background information, including organizational charts, grant
    agreements, and grant applications.

•   Reviewed relevant City policies and procedures.

•   Reviewed audited financial statements, consolidated and annual action plans, and
    consolidated annual performance evaluation reports.

•   Interviewed appropriate City personnel and HUD staff.

•   Reviewed HUD monitoring reports.

•   Reviewed reports from the Integrated Disbursement and Information System (IDIS)4 and
    Line of Credit Control System (LOCCS)5 to obtain CDBG disbursement information for the
    period tested.

•   Reviewed drawdowns (vouchers) and supporting documentation for sampled program
    expenditures.

•   Reviewed code enforcement program definition requirements for deterioration and to verify
    whether the program was used in conjunction with public or private improvement,




3
  Code enforcement activities for grant years 2012 and 2013 had amounts expended and drawn within our audit
period, in program year 2014.
4
  IDIS is a web-based computer application that provides financial disbursement, tracking, and reporting activities
for the CPD formula grant. It enables HUD grantees to draw down program funds and report on the activities and
accomplishments outlined in the consolidated plan.
5
  LOCCS is HUD’s primary grant disbursement system, handling disbursements for most HUD programs.


                                                          8
    rehabilitation, or services that would be expected to arrest the decline in CDBG-eligible
    target areas.

•   Reviewed and verified the Geographic Information System (GIS) mapping for the City and
    determined whether code compliance officers performed inspections in CDBG-eligible target
    areas. The City provided GIS mapping information detailing CDBG target-area data (such as
    data on boundaries and parameters) on the CDBG inspection addresses identified in the
    quarterly report and also provided Excel files of the quarterly reports, specifying the
    addresses inspected by code compliance officers. We geocoded the information provided by
    the City and generated data files and maps that would be used to identify whether code
    enforcement officers provided inspections inside and outside CDBG-eligible target areas.
    We determined that between fiscal years 2014 and 2017, there were 840 cases worked by
    CDBG compliance officers that were outside CDBG-designated boundaries. There were also
    136 cases with problem records, in which the addresses could not be geocoded because the
    information contained a bad or blank address or it could be geocoded only to the zip code
    level and not to an actual street level.

•   Reviewed the City’s program income records.

Sampling Information
The audit universe consisted of nine vouchers amounting to $830,218 in drawdowns made for
code enforcement salaries and benefits during program years 2014, 2015, and 2016 (July 1,
2014, through June 30, 2017). Overall, we selected a nonstatistical audit sample, choosing four
code enforcement vouchers containing the highest draw amounts for each program year between
2014 and 2016. There were no other material non-salary and benefit code enforcement costs in
our audit universe. Our audit results were limited to the vouchers in our sample and cannot be
projected to the universe; however, the consistent issues with the code enforcement payroll costs,
discussions with City staff, and the lack of adequate policies and procedures resulted in our
questioning all code enforcement salary and benefit draws for the audit period.

The total amount of all four CDBG code enforcement vouchers chosen for review for the audit
was $654,435. (See the table in appendix D.)

We determined that data contained in source documentation provided by the City agreed with
data contained in IDIS and LOCCS. We, therefore, assessed the computer data to be sufficiently
reliable for our use during the audit.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                                 9
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

•   effectiveness and efficiency of operations,
•   reliability of financial reporting, and
•   compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.

Relevant Internal Controls
We determined that the following internal controls were relevant to our audit objective:

    •   Effectiveness and efficiency of program operations – Implementation of policies and
        procedures to ensure that program funds are used for eligible purposes.
    •   Reliability of financial information – Implementation of policies and procedures to
        reasonably ensure that relevant and reliable information is obtained to adequately support
        program expenditures.
    •   Compliance with applicable laws and regulations – Implementation of policies and
        procedures to ensure compliance with applicable HUD rules and requirements.

We assessed the relevant controls identified above.

A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.

Significant Deficiencies
Based on our review, we believe that the following items are significant deficiencies:

    •   The City lacked adequate controls, including written policies and procedures, to define
        deteriorated areas and plan to arrest the decline in CDBG-eligible areas in accordance with
        HUD requirements (finding 1).




                                                  10
•   The City did not have sufficient controls to ensure that eligible and reliable information was
    obtained to adequately support CDBG code enforcement salaries and benefits in accordance
    with HUD requirements (finding 1).




                                               11
Appendixes

Appendix A


                             Schedule of Questioned Costs
                          Recommendation
                                             Unsupported 1/
                              number
                                  1A               $   797,222
                                Total                  797,222


1/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures. The unsupported amount in this case includes
     $797,222 in code enforcement costs having no supporting documentation for work hours
     charged to the code enforcement budget; no consistent duration of time recorded for
     inspection activities; inspections occurring outside CDBG-eligible boundaries; and an
     insufficient deterioration definition, with the City’s having no set program strategy,
     working in conjunction with CDBG code enforcement, to arrest the decline in
     deteriorated areas. (See appendix D.)




                                              12
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG
Evaluation    Auditee Comments




Comment 1




Comment 2




Comment 3



Comment 4




                               13
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 4




Comment 5




Comment 6




Comment 3




Comment 4




                               14
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 7




                               15
                         OIG Evaluation of Auditee Comments


Comment 1   We appreciate the City considering the report and recommendations as an
            opportunity to improve its administration of the CDBG program.

Comment 2   The City claimed it made changes and improvements in recent years to the Code
            Enforcement program that were not recognized by OIG’s review efforts. We
            acknowledge that the City has made efforts to change its policies and procedures
            for the program; however, these changes occurred only after our audit inquires.
            For instance, the City had no definition of deterioration during the audit period
            and only developed a deterioration policy after we began asking questions about
            the City’s definition. In addition, the City still did not support that CDBG target
            areas were deteriorated or have a written strategy describing how the program
            would be used to arrest the decline in CDBG eligible target areas. These issues
            continued because code enforcement staff lacked the proper training to administer
            the CDBG program. We therefore continue to recommend that the City
            implement written policies and procedures to sufficiently define deteriorated areas
            and establish a written plan for how the program would be used to arrest the
            decline in CDBG eligible target areas.

Comment 3   We acknowledge the City’s commitment to comply with policies and
            requirements affecting the CDBG program, specifically, having recipient
            Department/Divisions within the City comply with all policies, guidelines, and
            requirements under 24 CFR Part 570 and Uniform Administrative Requirements
            under 2CFR 200, as they relate to the acceptance and use of Federal funds.

Comment 4   We acknowledge that the City plans to work towards the elimination of future
            CDBG funding for the Code Enforcement program beginning in fiscal year 2018-
            2019. Should this take place, the City will have the opportunity to work with
            HUD concerning the continued applicability of the specific recommendations
            during the audit resolution process. We recognize that the City’s plans to
            implement written policies, procedures, and training should the City fund the
            Code Enforcement department with CDBG funding in the future.

Comment 5   We recognize the City’s efforts to revise its current deterioration policy (effective
            November 30, 2017) and further amend the policy’s definition of deterioration as
            it pertains to CDBG target areas. Moreover, we reiterate our recommendation for
            the City to establish and implement a written plan for using the program, in
            conjunction with public or private improvements, rehabilitation, or services, that
            may be expected to arrest the decline in CDBG-eligible target areas.




                                              16
Comment 6   We acknowledge the City’s willingness to work with HUD to provide
            documentation to identify and separate out any outreach activities and for
            inspections performed outside CDBG eligible areas. However, we continue to
            maintain that the documentation (time sheets, work logs, and quarterly reports)
            must accurately reflect the work performed and provide reasonable assurance that
            code enforcement charges are accurate, allowable, and properly allocated.

Comment 7   We appreciate the City’s commitment to working with HUD to address the report
            recommendations during the audit resolution process.




                                            17
Appendix C
                                             Criteria


24 CFR 570.202(c), Code enforcement
Costs incurred for inspection for code violations and enforcement of codes (e.g., salaries and
related expenses of code enforcement inspectors and legal proceedings, but not including the cost
of correcting the violations) in deteriorating or deteriorated areas when such enforcement
together with public or private improvements, rehabilitation, or services to be provided may be
expected to arrest the decline of the area.

24 CFR 570.207(a)(2)
General government expenses. Except as otherwise specifically authorized in this subpart or
under 2 CFR part 200, subpart E, expenses required to carry out the regular responsibilities of the
unit of general local government are not eligible for assistance under this part.

HUD Notice CPD-14-016, Use of CDBG Funds for Code Enforcement Activities
V. National Objectives for Code Enforcement
   A. Low and Moderate Income Area Benefit
        Code enforcement activities may meet the national objective of benefit to low and
        moderate income persons on an area basis under § 570.208(a)(1) (for
        Entitlements)…when carried out in deteriorated or deteriorating areas and when carried
        out in conjunction with public or private improvements, rehabilitation, or services that
        may be expected to arrest the deterioration of the area.

IX. Recordkeeping Requirements
• states that when carrying out CDBG-assisted code enforcement activities, the grantee should
   maintain records that include a description of the conditions of the areas in which CDBG
   funds are used for code enforcement, demonstrating that these areas meet the state local law
   definition of deteriorated/deteriorating.
• Grantees should maintain salary records (salaries, benefits, and timesheets) of code
   enforcement inspectors being paid with CDBG funds and a description of all areas they are
   responsible for inspecting.

CDBG Guide to National Objectives & Eligible Activities for Entitlement Communities,
L/M [low-moderate] Income Area Benefit
The code enforcement is targeted at a deteriorated or deteriorating area delineated by the grantee
and:
   (1) At least 51% (or less if the upper quartile applies) of the residents of the area are L/M
       income persons; and
   (2) The code enforcement, together with public improvements, rehabilitation, and services to
       be provided, may be expected to arrest the decline of the area.



                                                 18
2 CFR 200.430 Compensation—personal services
(a) General. Compensation for personal services includes all remuneration, paid currently or
    accrued, for services of employees rendered during the period of performance under the
    Federal award, including but not necessarily limited to wages and salaries. Compensation for
    personal services may also include fringe benefits which are addressed in § 200.431
    Compensation— fringe benefits. Costs of compensation are allowable to the extent that they
    satisfy the specific requirements of this part, and that the total compensation for individual
    employees:

               (1) Is reasonable for the services rendered and conforms to the established written
                   policy of the non-Federal entity consistently applied to both Federal and non-
                   Federal activities;
               (2) Follows an appointment made in accordance with a non-Federal entity’s laws
                   and/or rules or written policies and meets the requirements of Federal statute,
                   where applicable; and
               (3) Is determined and supported as provided in paragraph (i) of this section,
                   Standards for Documentation of Personnel Expenses, when applicable.
               (b) Reasonableness. Compensation for employees engaged in work on Federal
               awards will be considered reasonable to the extent that it is consistent with that
               paid for similar work in other activities of the non-Federal entity. In cases where
               the kinds of employees required for Federal awards are not found in the other
               activities of the non-Federal entity, compensation will be considered reasonable to
               the extent that it is comparable to that paid for similar work in the labor market in
               which the non-Federal entity competes for the kind of employees involved.

2 CFR 200.430, Compensation-personal services (h)(8)(i) Standards for Documentation
Personnel Expenses
(1) Charges to Federal awards for salaries and wages must be based on records that accurately
reflect the work performed. These records must:
         (i) Be supported by a system of internal control which provides reasonable assurance that
            the charges are accurate, allowable, and properly allocated.
         (ii) Be incorporated into the official records of the non-Federal entity.
         (vii) Support the distribution of the employee’s salary or wages among specific activities
         or cost objectives if the employee works on more than one Federal award; a Federal
         award and non-Federal award; an indirect cost activity and a direct cost activity; two or
         more indirect activities which are allocated using different allocation bases; or an
         unallowable activity and a direct or indirect cost activity.
          (8) For a non-Federal entity where the records do not meet the standards described in this
         section, the Federal government may require personnel activity reports, including
         prescribed certifications, or equivalent documentation that support the records as required
         in this section.




                                                 19
Appendix D
                                     Breakdown of Questioned Costs


     Voucher       Voucher       Grant number           Grant         Drawn            Repaid         Unsupported
     number         date                                year          amount          voucher6          amount

                                                                         (A)              (B)            (A – B)
    Audit sample
                             B12MC060567                 2012            $91,255
    58007747       4/16/15                                                               $24,465            $190,924
                             B13MC060567                 2013            124,134
    5906881        3/17/16   B15MC060567                 2015            130,479                             130,479
    6016546        2/28/17   B16MC060567                 2016            145,122                             145,122
    6064861        7/27/17   B16MC060567                 2016            163,445                             163,445
                   Audit sample subtotal                                 654,435           24,465            629,970

    Additional vouchers in audit period8
    5820669       6/18/15    B13MC060567                 2013             25,784            2,503             23,281
    5820719       6/18/15    B13MC060567                 2013             39,088            3,525             35,563
    5845092       9/3/15     B13MC060567                 2013             22,667            2,503             20,164
    5936869       6/20/16    B15MC060567                 2015             42,141                              42,141
    5952615       8/9/16     B15MC060567                 2015             46,103                              46,103
              Additional vouchers subtotal                               175,783            8,531            167,252
    Total unsupported                                                    830,218           32,996            797,222




6
  Voucher amounts the City repaid to the program due to overallocations (finding)
7
  The code enforcement activities amounts drawn on voucher 5800774 were for grant years 2012 and 2013 but were
drawn on the same voucher during program year 2014.
8
  Vouchers that were not tested or included in the audit sample but included as part of the unsupported questioned
costs (explanation above).


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