Federal Reports

The objective of this alert was to emphasize to Federal Emergency Management Agency (FEMA) leadership the significant deficiencies with its internal controls and ongoing problems enforcing Federal requirements related to proper grant management and oversight of disaster funds. Given the catastrophic nature of the recent disasters, FEMA faces significant challenges ensuring its grant recipients properly manage FEMA disaster funds. This alert contains no recommendations. However, it does emphasize FEMA must implement and use effective controls to overcome existing problems with managing and monitoring funds for disaster response and recovery. As FEMA moves forward with its recovery efforts, it must hold recipients accountable for proper grant management.

2017 Financial Statement Management Letter

We audited the Commonwealth of Kentucky’s (Commonwealth) administration of the U.S. Department of Housing and Urban Development’s (HUD) Neighborhood Stabilization Program (NSP) based on a referral from the Louisville, KY, Office of Community Planning and Development and in accordance with our annual audit plan. Our objective was to determine whether the Commonwealth administered its NSP1 and NSP3 grants in accordance with HUD’s requirements.The Commonwealth generally administered its NSP1 and NSP3 grants in accordance with HUD’s requirements to (1) ensure grant activity eligibility, (2) record and use program income, and (3) report on its grants’ performance to HUD. However, the Commonwealth did not ensure that proper support for all activity disbursements was maintained by its subrecipient. Specifically, of the 69 disbursements reviewed for 15 NSP activities, 3 disbursements for 1 activity lacked adequate support. In addition, the Commonwealth’s records retention policy for the grants was not adequate to meet HUD’s requirements for records retention. These conditions occurred because the Commonwealth lacked (1) a strategy to address subrecipients’ storage needs and (2) an understanding of HUD’s requirements for records retention. As a result, HUD and the Commonwealth lacked assurance that nearly $54,000 in grant activity disbursements was used for appropriate expenses. Further, additional program expenses may be inadequately supported.We recommend that HUD’s Acting Director of the Office of Block Grant Assistance require the Commonwealth to (1) provide support adequate to HUD or reimburse its program subrecipient nearly $54,000 from non-Federal funds for the inadequately supported disbursements, (2) update its records retention policy to meet HUD’s records retention requirements and notify its subrecipients, and (3) develop a retention strategy for its subrecipients to ensure that documentation is readily available for review