Federal Program Information: Assistance Listing Number (ALN): 14.251 Federal Program Name: Economic Development Initiative, Community Project Funding, and Miscellaneous Grants Federal Agency: U.S. Department of Housing and Urban Development Passed-through Entity: None Federal Award Number: B-23-CP-CA-0189 Federal Award Year: 12/29/2022 - 8/31/2031 Compliance Requirement: Reporting Criteria or Specific Requirements: Pursuant to 2 CFR 200.512(a), Report Submission, recipients and subrecipients expending $750,000 or more in federal awards must submit their audit report, data collection form, and the reporting package to the Federal Audit Clearinghouse (FAC) no later than the earlier of: • Thirty (30) calendar days after the receipt of the auditor’s report(s), or • Nine (9) months after the end of the auditee’s fiscal year. Additionally, pursuant to 2 CFR 200.329, Monitoring and reporting program performance, and the grant agreement, LYRIC is required to submit semi-annual performance reports no later than 30 calendar days after the end of each six-month reporting period to support effective federal oversight and monitoring. Failure to submit required performance reports constitutes noncompliance with federal reporting requirements. Condition: As reported in FS finding 2024-001, LYRIC did not timely identify that it was subject to the Single Audit requirements for the year ended June 30, 2024. Consequently, LYRIC did not complete and submit its Single Audit reporting package, including the Data Collection Form (DCF) for fiscal year 2024, by the required due date of March 31, 2025. Additionally, the Performance Reports for periods covering from January 1, 2023 to June 30, 2024 required by the grant agreement were not yet submitted as of the audit date. These reports are due on July 30, 2024. Questioned Costs: None. Cause: LYRIC did not have adequate procedures in place to monitor cumulative federal expenditures and timely determine its Single Audit reporting obligations. Effect: The non-submission of the reports mentioned resulted in noncompliance with federal reporting requirements and may lead to increased oversight, delays in funding, or other administrative sanctions by the federal awarding agencies. Recommendation: We recommend that management establish and implement control procedures to ensure the timely identification of the single audit requirements and compliance with related reporting deadlines. Such procedures should include monitoring cumulative federal expenditures throughout the year, maintaining a compliance calendar that identifies applicable reporting deadlines, assigning personnel, and monitoring progress through periodic management review to ensure compliance with submission requirements. Views of Responsible Officials and Planned Corrective Actions: Management accepts this finding. To prevent recurrence, LYRIC will: (1) assign a designated staff member and a contracts manager the responsibility for federal audit compliance monitoring, including tracking cumulative award expenditures throughout; (2) establish an annual federal expenditure calendar that flags when spending approaches the $750,000 threshold; (3) maintain a reporting timeline aligned with FAC submission deadlines, including the nine-month post-fiscal-year-end deadline; and (4) engage its audit firm at the start of each fiscal year to plan audit scope and timing, ensuring the Single Audit can be completed within the required timeframe. Uniform Guidance applicability training will be provided to staff as needed. Management also agrees with the non-submission of performance reports. LYRIC will take the following corrective actions: (1) develop a comprehensive grant reporting calendar for all active federal awards, identifying each required report type, submission deadline, and the staff member responsible for preparation and submission; (2) designate a program staff lead for the federal award reporting, with mandatory review by the Contracts Manager and Director of Finance prior to each submission; (3) implement an internal check-in to review upcoming reporting deadlines across all grants; and (4) submit any outstanding reports to the authorities as promptly as possible and proactively communicate with the assigned program officer regarding the delayed submissions to mitigate any compliance impact. Responsible Official and Position: Ana Rubio, Director of Finance, and Laura Chavez, Contracts Manager Expected Implementation Date: July 1, 2026
Federal Program Information: Assistance Listing Number (ALN): 14.251 Federal Program Name: Economic Development Initiative, Community Project Funding, and Miscellaneous Grants Federal Agency: U.S. Department of Housing and Urban Development Passed-through Entity: Not applicable Federal Award Number: B-23-CP-CA-0189 Federal Award Year: 12/29/2022 - 8/31/2031 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria or Specific Requirements: Pursuant to 2 CFR 200.403, Factors affecting allowability, and 200.405, Allocable costs, costs charged to a federal award must be allowable and allocable generally. A cost is allocable to a federal award or other cost objective if the cost is assignable to that federal award or other cost objective in accordance with the relative benefits received. A cost may not be claimed for reimbursement multiple times under the same or different funding sources. Condition: During our audit, we noted that certain expenditures totaling $54,799 were claimed for reimbursement twice. Questioned Costs: $54,799 Cause: LYRIC did not have adequate review and monitoring procedures in place to verify that expenditures included in reimbursement requests had not been previously claimed and reimbursed. Effect: Federal funds were overdrawn, resulting in questioned costs and noncompliance with federal requirements. Recommendation: We recommend that management strengthen internal controls over the reimbursement process to ensure that expenditures charged to federal awards are reviewed for accuracy, completeness, and not duplicated prior to submission. Controls should include maintaining a detailed tracking log of all reimbursement requests, performing independent reviews and reconciliations of claims to supporting documentation, and implementing a system or procedures to detect and prevent duplicate reimbursement requests. Views of Responsible Officials and Planned Corrective Actions: Management agrees with this finding and treats accurate reimbursement of federal funds as a serious obligation. LYRIC will implement the following corrective actions: (1) create and maintain a detailed reimbursement tracking log recording each submitted draw by expense date, vendor, amount, and draw number, to be updated at the time of every submission; (2) require a second staff member to perform an independent review of each reimbursement request against the tracking log and general ledger prior to submission, specifically to identify potential duplicate charges or wrong coding of expenses; (3) work with HUD to address the $54,799 in duplicated amount to offset other legitimate expenses; and (4) explore whether LYRIC's accounting system can be configured to flag expenditures already coded to a prior reimbursement request, adding a system-level check to the manual review process. Responsible Official and Position: Ana Rubio, Director of Finance, and Laura Chavez, Contracts Manager Expected Implementation Date: July 1, 2026
Federal Program Information: Assistance Listing Number (ALN): 14.251 Federal Program Name: Economic Development Initiative, Community Project Funding, and Miscellaneous Grants Federal Agency: U.S. Department of Housing and Urban Development Passed-through Entity: Not applicable Federal Award Number: B-23-CP-CA-0189 Federal Award Year: 12/29/2022 - 8/31/2031 Compliance Requirement: Period of Performance Criteria or Specific Requirements: Pursuant to 2 CFR 200.309, Modifications to period of performance, and 200.403(h), Factors affecting allowability of costs, non-federal entities may charge to a federal award only allowable costs incurred during the approved period of performance. Costs incurred outside the period of performance are not allowable unless specifically authorized by the federal awarding agency or pass-through entity. LYRIC’s grant agreement with HUD establishes the period of performance as commencing from the grant execution date (February 15, 2024) to August 31, 2031. In addition, the Program Funding Grant Guide allows reimbursement of certain pre-award costs incurred before the grant execution date, provided such soft costs are incurred on or after December 29, 2022. Condition: During the audit, we noted that LYRIC billed and requested reimbursement for expenditures totaling $116,043 that were incurred before December 29, 2022. Questioned Costs: $116,043 Cause: Due to the operational disruptions and challenges arising from the COVID-19 pandemic when the grant was approved, LYRIC did not have an effective review process to ensure federal expenditures were incurred within the approved period of performance before submitting requests for reimbursement. Effect: This resulted in questioned costs and potential repayment to the granting agency. This condition also increases the risk of noncompliance with federal requirements and may expose LYRIC to additional oversight, sanctions, or other corrective actions by the awarding agency. Recommendation: We recommend that management strengthen internal controls over grant expenditures and reimbursement to ensure that only costs incurred within the allowable period of performance are charged to the federal grant. This should include procedures to verify that expenditure dates are within the grant period prior to recording and submitting costs for reimbursement. LYRIC should request prior approval from the awarding agency if it intends to charge costs beyond the allowable period of performance. Views of Responsible Officials and Planned Corrective Actions: Management agrees with this finding. LYRIC will implement the following corrective actions: (1) document the start and end period of grant and performance for each future federal award in a centrally accessible grant file, and require Finance staff to reference these dates during all expense coding and reimbursement processing; (2) add a pre-submission checklist step requiring staff to confirm that all expenditure dates fall within the approved period of performance before any draw request is finalized; (3) assign supervisory review responsibility to the Finance or Grants Manager to provide a secondary check on period eligibility before submission; (4) work with HUD to assess the questioned costs and take appropriate corrective action to substitute other legitimate expenses as necessary; and (5) train finance and program staff on period of performance rules and the requirement that only costs incurred within the approved grant period may be charged to a federal award. Responsible Official and Position: Ana Rubio, Director of Finance, and Laura Chavez, Contracts Manager Expected Implementation Date: July 1, 2026
Federal Program Information: Assistance Listing Number (ALN): 14.251 Federal Program Name: Economic Development Initiative, Community Project Funding, and Miscellaneous Grants Federal Agency: U.S. Department of Housing and Urban Development Passed-through Entity: Not applicable Federal Award Number: B-23-CP-CA-0189 Federal Award Year: 12/29/2022 - 8/31/2031 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria or Specific Requirements: Pursuant to 2 CFR 200.414(f), Indirect costs, a non-Federal entity that does not have a negotiated indirect cost rate agreement (NICRA) may elect to charge indirect costs using the 10% de minimis rate of Modified Total Direct Costs (MTDC). Once an indirect cost rate is elected for a federal award, the rate must be applied in accordance with the terms of the grant agreement. Condition: LYRIC charged indirect costs using 15% rate, instead of the 10% indirect cost rate elected in the grant agreement. This resulted in overbilling of indirect costs by $48,814. Questioned Costs: $48,814 Cause: LYRIC did not have sufficient review procedures in place to ensure that indirect costs charged to the federal award were calculated using the elected indirect cost rate. As this was LYRIC’s first federal award subject to Single Audit requirements, LYRIC applied the indirect cost rate of 15% included in the original grant budget and did not verify the rate elected in the grant agreement. Effect: indirect costs charged to the federal awards exceeded the amount allowable under the grant agreement, resulting in questioned costs and noncompliance with federal cost principles, potentially requiring repayment of funds. Recommendation: We recommend that LYRIC coordinate with the federal awarding agency to resolve the questioned indirect costs, including returning any amounts determined to be unallowable. In addition, management should implement review procedures to ensure the indirect cost rate applied to federal awards is consistent with the approved award terms and applicable federal requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with this finding. LYRIC will take the following corrective actions: (1) immediately correct the indirect cost rate applied to the HUD award and all future grant budgets to ensure it does not exceed the 10% rate; (2) work with HUD to address the $48,814 overcharge and determine the appropriate remedy, including offsetting other legitimate expenses against the overdrawn amount as necessary; (3) document the organization's elected indirect cost rate and methodology in each grant's budget file and award documentation; (4) evaluate whether to pursue a new NICRA through the cognizant federal agency if a rate above 10% is needed to accurately recover indirect costs with future grants; and (5) provide specific and targeted training to concerned staff on indirect cost rate rules, MTDC calculation, and Uniform Guidance compliance. Responsible Official and Position: Ana Rubio, Director of Finance, and Laura Chavez, Contracts Manager Expected Implementation Date: July 1, 2026
Federal Program Information: Assistance Listing Number (ALN): 14.251 Federal Program Name: Economic Development Initiative, Community Project Funding, and Miscellaneous Grants Federal Agency: U.S. Department of Housing and Urban Development Passed-through Entity: Not applicable Federal Award Number: B-23-CP-CA-0189 Federal Award Year: 12/29/2022 - 8/31/2031 Compliance Requirement: Suspension and Debarment Criteria or Specific Requirements: Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended, debarred, or otherwise excluded. Covered transactions include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000, or as specified in 2 CFR section 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR section 180.215. To verify vendor eligibility, the non-federal entity must confirm that covered transactions with an entity at a lower tier are not suspended or debarred or otherwise excluded. This verification may be accomplished by: 1. Checking SAM.gov Exclusions; or 2. Collecting a certification from that person; or 3. Adding a clause or condition to the covered transaction with that person. Condition: During the audit, the management was unable to provide documentation demonstrating that vendor eligibility was verified prior to contract execution for two of three sampled vendors. Questioned Costs: None. Cause: LYRIC’s verification procedures were consistently performed as part of its procurement workflow; however, the procedures did not address the specific federal requirements for vendor vetting, resulting in the absence of required supporting documentation for the sampled vendors identified during the audit. Effect: The absence of required documentation constitutes noncompliance with federal requirements and increases the risk that contracts could be awarded to ineligible vendors. Recommendation: We recommend that management strengthen its internal controls and procedures to ensure that vendor eligibility is verified prior to award of contracts or procurement transactions, and that required documentation is maintained evidencing the verification procedures performed. Views of Responsible Officials and Planned Corrective Actions: Management agrees with this finding. LYRIC will implement the following corrective actions: (1) develop and adopt a written procurement policy that requires SAM.gov exclusion verification for all covered transactions at or above $25,000, as well as all subrecipient transactions regardless of amount; (2) create a standardized SAM.gov verification checklist requiring staff to print or save a screenshot of the SAM.gov search result and retain it in each vendor's contract file as documentation of verification; (3) designate the Contracts Manager as responsible for confirming that debarment documentation is completed and filed before any contract is executed; and (4) train all staff involved in procurement on suspension and debarment requirements under 2 CFR Part 180. However, please note that the appropriate Bids were held prior to the selection of the vendors and the vendors provided all the required validations before being contacted. Responsible Official and Position: Ana Rubio, Director of Finance, and Laura Chavez, Contracts Manager Expected Implementation Date: July 1, 2026