Federal Agency: U.S. Department of Treasury
Federal Program: CDFI Equitable Recovery Program (ERP)
Assistance Listing Numbers: 21.033
Federal Award Identification Number and Year: 22ERP061482 – 2023
Award Period: January 1, 2023 – December 31, 2023
Type of Finding:
Material weakness in Internal Control over Compliance
Compliance - Other Matter
Criteria or Specific Requirement: Standards for documentation of personnel expenses are defined in the federal regulations under 2 CFR section 200.430(i) which state “charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed”. This requires federal grant recipients to have “a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated”.
Condition: Lack of documented time and effort reporting for employee time/ wages charged to the federal grant.
Questioned Costs: None
Context: Of the twenty-six payroll transactions tested, all lacked after-the-fact time and effort documentation to adequately support management’s allocation of wages to the federal grant. We noted all employees tested were full-time salaried employees and a portion of those wages were charged to the ERP award. Additionally, loan records indicated these employees were involved in underwriting, originating, or providing ongoing technical assistance for ERP funded loans as well as other ERP qualifying loans.
Cause: Management did not have a system in place to track time and effort in order to demonstrate the allocation of wages and benefits by grant. Management believed their payroll register alone adequately supported the wages charged given the employees position and role within the organization.
Effect: Without after-the-fact documentation People Trust is not meeting the federal regulations around time and effort. Therefore, it’s possible the allocation of the employees time is not accurate.
Repeat Finding: No
Recommendation: We recommend management develop procedures requiring employees to track their time and effort by grant. Another individual should periodically review and approve these time and effort records before the reimbursement request is sent to the funding agency.
Views of Responsible Officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Treasury
Federal Program: CDFI Equitable Recovery Program (ERP)
Assistance Listing Numbers: 21.033
Federal Award Identification Number and Year: 22ERP061482 – 2023
Award Period: January 1, 2023 – December 31, 2023
Type of Finding:
Significant Deficiency in Internal Control over Compliance
Compliance - Other Matter
Criteria or Specific Requirement: Under the FY2022 CDFI ERP Supplemental FAQ (updated on September 9, 2022), award recipients cannot use the ERP funds to issue financial assistance net of fees charged by the award recipient, or any of its affiliates. If the award recipient would like to use ERP funds for this purpose, it would do so by waiving the processing or origination fee for the borrower or beneficiary and use the available operational support funds to cover those underlying costs (e.g. salaries).
Condition: The Organization disbursed grant payments to beneficiaries and loans to borrowers that were net of an application or origination fee assessed by the Organization.
Questioned Costs: $11,404
Context: Of the loan and grant disbursements tested it was identified twenty-four loans and ten grant disbursements sampled were net of fees assessed by the Organization. The total fees amounted to $11,404 which reduced the loan or grant disbursement made to the individual and was included as part of the total financial products/ grants paid under the federal award’s "program activities" budget line.
The underlying costs associated with these fees are primarily derived from salaries of the employees who processed the applications or originated the loans. As these salaries are directly charged to the award as part of “operational support activities” budget line, the Organization effectively charged the federal award twice for the same or similar costs.
Cause: Management assumed they could charge fees consistent with their other program and lending activities. They were not fully aware of the federal regulations and program requirements related to fees assessed by the award recipient under the ERP program.
Effect: Questioned costs were identified.
Repeat Finding: No
Recommendation: Management should update its policies and procedures to waive any organizational fees for the borrower or beneficiary and instead recover those costs through directly charging the underly expenses as part of the federal award’s “operational support activities” budget line. In addition, management should consult the appropriate federal agency on any further corrective action related to the fees already paid and allocated as “program activities”.
Views of Responsible Officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Treasury
Federal Program: CDFI Equitable Recovery Program (ERP)
Assistance Listing Numbers: 21.033
Federal Award Identification Number and Year: 22ERP061482 – 2023
Award Period: January 1, 2023 – December 31, 2023
Type of Finding:
Significant Deficiency in Internal Control over Compliance
Compliance - Other Matter
Criteria or Specific Requirement: Under 2 CFR Part-200, Subpart-D-200.305(b)(11), the non-Federal entity must maintain advance payments of Federal awards in interest-bearing accounts, unless the following apply:
(i) The non-Federal entity receives less than $250,000 in Federal awards per year.
(ii) The best reasonably available interest-bearing account would not be expected to earn interest in excess of $500 per year on Federal cash balances.
(iii) The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources.
(iv) A foreign government or banking system prohibits or precludes interest-bearing accounts.
Condition: Management did not maintain its advanced payment in an interest-bearing account nor met the exceptions criteria outlined above.
Questioned Costs: None
Context: The Organization received $3 million of advanced funds in 2023 and utilized approximately $1.8 million in the same year. As a result, the Organization should have placed the remaining portion of the advanced payment into an interest-bearing account and track the interest earned on the account. Additionally, any interest earned in excess of $500 should then be reported and remitted back to the federal agency in accordance with program requirements.
Cause: Management was not aware of the uniform guidance requirements around cash management, specifically related to maintaining advanced federal funds in interest-bearing accounts.
Effect: Cash management procedures were not properly followed in accordance with the uniform guidance and program requirements.
Repeat Finding: No
Recommendation: Management should develop a procedure to track its federal award advances to ensure those funds are placed in interest-bearing accounts, when applicable, and any interest earnings on those funds are separately tracked, reported and remitted in accordance with the program requirements. A documented review of this activity should be performed by a knowledge individual who is aware of the program requirements prior to reporting or remitting payment back to the federal agency.
Views of Responsible Officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Treasury
Federal Program: CDFI Equitable Recovery Program (ERP)
Assistance Listing Numbers: 21.033
Federal Award Identification Number and Year: 22ERP061482 – 2023
Award Period: January 1, 2023 – December 31, 2023
Type of Finding:
Material weakness in Internal Control over Compliance
Compliance - Other Matter
Criteria or Specific Requirement: Standards for documentation of personnel expenses are defined in the federal regulations under 2 CFR section 200.430(i) which state “charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed”. This requires federal grant recipients to have “a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated”.
Condition: Lack of documented time and effort reporting for employee time/ wages charged to the federal grant.
Questioned Costs: None
Context: Of the twenty-six payroll transactions tested, all lacked after-the-fact time and effort documentation to adequately support management’s allocation of wages to the federal grant. We noted all employees tested were full-time salaried employees and a portion of those wages were charged to the ERP award. Additionally, loan records indicated these employees were involved in underwriting, originating, or providing ongoing technical assistance for ERP funded loans as well as other ERP qualifying loans.
Cause: Management did not have a system in place to track time and effort in order to demonstrate the allocation of wages and benefits by grant. Management believed their payroll register alone adequately supported the wages charged given the employees position and role within the organization.
Effect: Without after-the-fact documentation People Trust is not meeting the federal regulations around time and effort. Therefore, it’s possible the allocation of the employees time is not accurate.
Repeat Finding: No
Recommendation: We recommend management develop procedures requiring employees to track their time and effort by grant. Another individual should periodically review and approve these time and effort records before the reimbursement request is sent to the funding agency.
Views of Responsible Officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Treasury
Federal Program: CDFI Equitable Recovery Program (ERP)
Assistance Listing Numbers: 21.033
Federal Award Identification Number and Year: 22ERP061482 – 2023
Award Period: January 1, 2023 – December 31, 2023
Type of Finding:
Significant Deficiency in Internal Control over Compliance
Compliance - Other Matter
Criteria or Specific Requirement: Under the FY2022 CDFI ERP Supplemental FAQ (updated on September 9, 2022), award recipients cannot use the ERP funds to issue financial assistance net of fees charged by the award recipient, or any of its affiliates. If the award recipient would like to use ERP funds for this purpose, it would do so by waiving the processing or origination fee for the borrower or beneficiary and use the available operational support funds to cover those underlying costs (e.g. salaries).
Condition: The Organization disbursed grant payments to beneficiaries and loans to borrowers that were net of an application or origination fee assessed by the Organization.
Questioned Costs: $11,404
Context: Of the loan and grant disbursements tested it was identified twenty-four loans and ten grant disbursements sampled were net of fees assessed by the Organization. The total fees amounted to $11,404 which reduced the loan or grant disbursement made to the individual and was included as part of the total financial products/ grants paid under the federal award’s "program activities" budget line.
The underlying costs associated with these fees are primarily derived from salaries of the employees who processed the applications or originated the loans. As these salaries are directly charged to the award as part of “operational support activities” budget line, the Organization effectively charged the federal award twice for the same or similar costs.
Cause: Management assumed they could charge fees consistent with their other program and lending activities. They were not fully aware of the federal regulations and program requirements related to fees assessed by the award recipient under the ERP program.
Effect: Questioned costs were identified.
Repeat Finding: No
Recommendation: Management should update its policies and procedures to waive any organizational fees for the borrower or beneficiary and instead recover those costs through directly charging the underly expenses as part of the federal award’s “operational support activities” budget line. In addition, management should consult the appropriate federal agency on any further corrective action related to the fees already paid and allocated as “program activities”.
Views of Responsible Officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Treasury
Federal Program: CDFI Equitable Recovery Program (ERP)
Assistance Listing Numbers: 21.033
Federal Award Identification Number and Year: 22ERP061482 – 2023
Award Period: January 1, 2023 – December 31, 2023
Type of Finding:
Significant Deficiency in Internal Control over Compliance
Compliance - Other Matter
Criteria or Specific Requirement: Under 2 CFR Part-200, Subpart-D-200.305(b)(11), the non-Federal entity must maintain advance payments of Federal awards in interest-bearing accounts, unless the following apply:
(i) The non-Federal entity receives less than $250,000 in Federal awards per year.
(ii) The best reasonably available interest-bearing account would not be expected to earn interest in excess of $500 per year on Federal cash balances.
(iii) The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources.
(iv) A foreign government or banking system prohibits or precludes interest-bearing accounts.
Condition: Management did not maintain its advanced payment in an interest-bearing account nor met the exceptions criteria outlined above.
Questioned Costs: None
Context: The Organization received $3 million of advanced funds in 2023 and utilized approximately $1.8 million in the same year. As a result, the Organization should have placed the remaining portion of the advanced payment into an interest-bearing account and track the interest earned on the account. Additionally, any interest earned in excess of $500 should then be reported and remitted back to the federal agency in accordance with program requirements.
Cause: Management was not aware of the uniform guidance requirements around cash management, specifically related to maintaining advanced federal funds in interest-bearing accounts.
Effect: Cash management procedures were not properly followed in accordance with the uniform guidance and program requirements.
Repeat Finding: No
Recommendation: Management should develop a procedure to track its federal award advances to ensure those funds are placed in interest-bearing accounts, when applicable, and any interest earnings on those funds are separately tracked, reported and remitted in accordance with the program requirements. A documented review of this activity should be performed by a knowledge individual who is aware of the program requirements prior to reporting or remitting payment back to the federal agency.
Views of Responsible Officials: There is no disagreement with the audit finding.