PPEP MICROBUSINESS AND HOUSING DEVELOPMENT CORPORATION

Material Weakness: Deficient Controls Over Authorization and Approval of Capital/Real‑Property Transactions

Criteria

The Organization is required to comply with the following requirements regarding the Department of Labor’s National Farmworker Jobs Program

·       2 CFR §200.311 Real property — title, use, and disposition requirements for real property acquired with federal funds.

·       2 CFR §200.439 Other capital expenditures — allowability and treatment of capital expenditures.

·       2 CFR §200.407 Prior written approval — requirement to obtain agency approval where prior approval is required by the Uniform Guidance or the award.

Condition

Cause

·       Capital/real‑property obligations were made without obtaining required Grant Officer prior written approval.

·       Misclassification of the transactions as routine program expenditures (contractual) rather than capital/real‑property acquisitions.

·       Inadequate internal controls and Notice of Award (NOA) compliance procedures; insufficient coordination between Program Administration and the Finance Department.

Effect

·       Material weakness in internal control over financial reporting and compliance.

·       Reasonable possibility that a material misstatement of program expenditures or a material instance of noncompliance will not be prevented or detected on a timely basis.

·       Potential requirement to repay federal funds and increased audit/monitoring exposure.

Recommendation

1.     Disclose the matter immediately to the DOL Grant Officer and Federal Project Officer and request instructions.

2.     Submit a retroactive prior‑approval package (revised SF‑424/SF‑424A, purchase/closing docs, proof of payment, appraisals, environmental review or plan, procurement documentation, title, property management/disposition plan).

3.     Implement interim and permanent controls: pre‑obligation approval workflow (Program Administrator and CFO sign‑off), Notice of Award compliance checklist, policy updates, and staff training.

Management Response and Corrective Action Plan

See the response at Finding 2025-002 for the history of homes purchased under the Department of Labor’s National Farmworkers Jobs Program and administration of the program. The Organization received the results of the July 2025 program monitoring report by the Department of Labor on March 30, 2026. The Organization is currently working to resolve the compliance findings and to provide additional documentation, as requested. Additionally, the Organization is reviewing the monitoring report to determine whether changes to the current grant controls are deemed necessary. In the event that the Department of Labor deems that pre-approval is necessary, adequate pre-obligation workflow procedures will be developed and implemented immediately.

The Organization obligated and expended $390,091 to purchase two residential properties. These acquisitions were made without prior written approval from the DOL Grant Officer or required pre‑acquisition documentation (for example, appraisals, environmental review documentation, procurement justification) on file with the Grant Officer prior to obligation.

The properties purchased have always been listed as an item under the Contractual category in the federally approved budget and budget narrative; thus, while these costs appeared as a program expenditure for federal reporting purposes, the costs were properly categorized in PMHDC’s books as property and equipment.

PMHDC contends that it has substantially complied with the purpose of the award and has successfully developed permanent and temporary farm labor rental housing to meet the dire needs of migrant and seasonal farmworkers. The Organization is of the belief that the lack of prior written approval was an administrative oversight, not previously enforced by the Department of Labor, and PMHDC, therefore, vigorously defends its position that no costs should be disallowed.

Assistance Listing Number 17.264 National Farmworker Jobs Program – Compliance Finding and Questioned Costs

Criteria

The Organization is required to comply with the following requirements regarding the Department of Labor’s National Farmworker Jobs Program:

·       2 CFR §200.311 Real property — title, use, and disposition requirements for real property acquired with federal funds.

·       2 CFR §200.439 Other capital expenditures — allowability and treatment of capital expenditures.

·       2 CFR §200.407 Prior written approval — requirement to obtain agency approval where prior approval is required by the Uniform Guidance or the award.

Condition

PMHDC used NFJP funds to purchase two residential properties totaling $390,091, without prior written approval from the DOL Grant Officer and without required pre‑acquisition documentation.

Questioned Cost

Amount: $390,091

Rationale: The expenditures are questioned because they were incurred without documented prior written approval and without required supporting documentation. Under the Uniform Guidance and the NOA, capital/real‑property acquisitions require prior approval; therefore the costs are presumptively disallowed pending Grant Officer determination.

Effect on Major Program

·       Noncompliance with program requirements and the NOA.

·       Potential disallowance or repayment of $390,091; unresolved property management and disposition obligations until DOL provides direction.

Recommendation

1.     Disclose the matter immediately to the DOL Grant Officer and Federal Project Officer and request instructions.

2.     Submit a retroactive prior‑approval package (revised SF‑424/SF‑424A, purchase/closing docs, proof of payment, appraisals, environmental review or plan, procurement documentation, title, property management/disposition plan).

3.     Implement interim and permanent controls: pre‑obligation approval workflow (Program Administrator and CFO sign‑off), Notice of Award compliance checklist, policy updates, and staff training.

Management Response and Corrective Action Plan

The two residential properties purchased by PMHDC were the 42nd and 43rd properties purchased using funds from this award, which has been in place since 2012. The properties were included in the funding source approved Budget Narrative and Scope of Work. The requests for reimbursement were submitted for payment to the Department of Labor and subsequently processed and paid to the organization, without having submitted pre-acquisition documentation. The Federal Project Officer assigned to this award had previously visited the sites of the prior properties purchased on several occasions. Closeout reports required at the end of each funding cycle were submitted and subsequently approved by the funding source. At no time was a prior-approval package required to be submitted on any of the properties previously purchased.