Audit 414660

Finding #SA2025-001: Reimbursement Requested In Advance of Payment Assistance Listing Number: 97.047 Assistance Listing Title: BRIC: Building Resilient Infrastructure and Communities Name of Federal Agency: Department of Homeland Security Pass Through Entity: California Governor's Office of Emergency Services (CalOES) Pass Through Identifying Number: LPM-PJ-09-CA-2023-005 Federal Award Identification Numbers: EMF-2023-PD-0004 Criteria: Under 2 CFR 200.305 (b), a grant recipient must minimize the time elapsing between the transfer of funds from the Federal agency or the pass-through entity and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity. In addition, under 2 CFR 200.305 (b)(8), a payment must not be made to a recipient or subrecipient for amounts that the recipient or subrecipient withholds from contractors to assure satisfactory completion of work. Payment must be made when the recipient or subrecipient disburses the withheld funds to the contractors or to escrow accounts established to ensure satisfactory completion of work. Condition: During our testing of program expenditures charged to the PDM (2024) project, we noted one charge to the grant included a retention payable in the amount of $7,119 that was not disbursed to the vendor as of December 31, 2025. We also noted one other charge to the grant for the same vendor that included a retention payable in the amount of $3,739 that had not been disbursed to the vendor as of December 31, 2025. Cause: We understand the retentions were included in the grant drawdowns due to a misinterpretation of the grantor’s drawdown form that indicated the “full, total grant expenditures incurred to date…(including applicable local share)” should be included on the reimbursement request. Questioned Costs: We question costs in the amount of $10,858, of which $9,772 has been reimbursed by the grantor. Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305. Recommendation: The Park District should not draw down funds until expenditures have been paid in cash and in the event, drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. In addition, the Park District should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: The reporting of project expenses in the amount of $10,858 was due to a misinterpretation of the grantor reimbursement form and was not intended to be an advanced payment. The grantor’s drawdown form indicates the grantee should report “project expenditures.” When Accounts Payable (AP) receives the vendor invoice to process, AP applies the full amount of the invoice to the associated Purchase Order (and its budgeted project/fund source) and withheld retention is tracked in a “retentions payable” liability account. When the Grants Department Accounting Technician prepares a drawdown (reimbursement) request, a Project Summary Report and the Project Cost Summary report are pulled from Finance Enterprise. Both reports reflect the full invoice amount as expenditures incurred. The Account Technician reconciles the summary reports with the cleared checks/electronic payments to confirm the actual amount paid to the vendor and if retention was taken out. The amount of any retention will be noted on the Project Summary Report, and the copy of the retention report will be attached as backup documentation when preparing the SEFA. In accordance with the Park District’s Federal Compliance Procedure, the Park District generally does not accept federal funds on an advancement basis. If an advance were to be required by the granting agency, the advancement of funds would be handled in accordance with any requirements of the grant contract and the C.F.R. part 200, 200.305(b). For future federal grant reimbursements, the Park District will only report project expenditures once they have been reconciled with the corresponding cleared checks/electronic payments. This will ensure retention withheld from contractor invoices is excluded from reported project expenses. Please also see Corrective Action Plan separately prepared by the Park District.