FAC Explorer

Audit 52296

FY End
2022-12-31
Total Expended
$11.91M
Findings
2
Programs
6
Organization: Philadelphia Industrial Development Corporation (PA)
Year: 2022 Accepted: 2023-08-22
Auditor: Bdo USA LLP

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
47877 2022-001 Significant Deficiency - AB
624319 2022-001 Significant Deficiency - AB

Programs

ALN Program Spent Major Findings
11.307 Economic Adjustment Assistance $4.02M - 0
21.024 Community Development Financial Institutions Rapid Response Program (cdfi Rrp) $1.70M Yes 0
20.205 Highway Planning and Construction $241,750 - 0
21.020 Community Development Financial Institutions Program $199,371 - 0
14.218 Community Development Block Grants/entitlement Grants $188,654 Yes 0
17.258 Wia Adult Program $66,091 - 0

Contacts

Name Title Type
TW7TS5HCGJ57 Tiffany Canady Auditee
2154968136 Nicholas Durso Auditor
No contacts on file

Notes to SEFA

Title: Loan/Loan guarantees outstanding balances. Accounting Policies: The accompanying Cumulative Schedules of Source and Status of Funds, Schedules of Program Costs and Cumulative Schedules of Miscellaneous Revenue are presented in accordance with the requirements of grant agreements with the City of Philadelphia (City) and the City of Philadelphia Subrecipient Audit Guide. Expenditures reported on the Schedule of Expenditures of Federal, State and City Awards are reported on the accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles in Uniform Guidance, and the City of Philadelphia Subrecipient Audit Guide, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Corporation has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. The Corporation, under contract with the City, is engaged in selected economic development programs that are funded by the City through Community Development Block Grant (CDBG) Funds provided by the U.S. Department of Housing and Urban Development (HUD). The Corporation enters into annual contracts with the City with respect to administration of the program funds. The goals of these programs are the creation and retention of permanent jobs for very low and low to moderate income residents of the City, the stimulation of investment in economic activity in the City, and the generation of tax ratables throughout the City. The funds are used for limited direct loans and grants, which will make conventional private financing feasible for the bulk of an improvement project. Such loans and grants are used for the acquisition, site preparation, construction, reconstruction and rehabilitation of industrial and commercial property, machinery and equipment, and related site improvementsThe Corporation reports/calculates SEFA loan expenditures as per 2 CFR ? 200.502 (d) as there are no continuing compliance requirements.At December 31, 2022, the Corporation held $12,839,793 in CDBG loans receivable, net of an allowance for doubtful accounts of $1,578,722. At December 31, 2022, the Corporation held $31,521,637 in HUD Section 108 loans receivable, net of an allowance for doubtful accounts of $1,893,581. At December 31, 2022, the Corporation held $0 of Brownfield Economic Development Initiative loans receivable, $656,497 of CDBG-Recovery Act loans receivable, and $2,813,067 of Greenwork Program-Energy Efficiency and Conservation Block Grant loans receivable having no related allowance.Additionally, during 2022, the Corporation received CDBG- CV funding in the amount of $300,000 to establish a grant program for businesses impacted by the Coronavirus.Note D-Economic Development Administration (EDA)Programs-Coronavirus Aid, Relief and Economic Security (CARES) ACT-The purpose of this grant award received under ALN #11.307 is to capitalize a revolving loan fund to alleviate sudden and severe economic dislocation caused by the COVID-19 pandemic, to provide permanent resources to support economic resiliency, and to further the long-term economic adjustment objective of the Greater Philadelphia region. On July 28, 2020, PAID, a related party of the Corporation, was awarded $7,458,000 in grant funds, from the EDA, funded under the additional Supplemental Appropriations for CARES Act. During 2021, PAID entered into a sub-grant agreement with PIDC CC under the same terms and conditions of the original grant. Additionally, under the terms of the sub-grant agreement $1,030,000 of loans that were funded by PAID, in 2020, were granted to PIDC CC in 2021.Of the awarded amount, $6,780,000 is to be used to capitalize a revolving loan fund and $678,000 is to be used to defray the cost of administering the revolving loan fund (administration costs). At December 31, 2022, the Corporation held $4,975,503 in loans receivable, net of an allowance for doubtful accounts of $661,402. Note E U.S Department of the Treasury, Community Development Financial Institutions Fund Grant Programs-The purpose of grants received under ALN #21.020 is to aide to promote economic revitalization and community development. During 2020, CDFI Awards were used/disbursed for Business Supportive Services and Lending Capital for loans to businesses or developers. At December 31, 2022, the Corporation held $1,487,431 in CDFI loans receivable, net of an allowance for doubtful accounts of $422,628.The purpose of grants received under ALN #21.024 is to aide to promote economic revitalization and community development. During 2022, CDFI Awards were used/disbursed for Business Supportive Services and Lending Capital for loans to businesses or developers. At December 31, 2022, the Corporation held $980,581 in CDFI loans receivable, net of an allowance for doubtful accounts of $65,076.
Title: Loan/Loan guarantees outstanding balances. Accounting Policies: The accompanying Cumulative Schedules of Source and Status of Funds, Schedules of Program Costs and Cumulative Schedules of Miscellaneous Revenue are presented in accordance with the requirements of grant agreements with the City of Philadelphia (City) and the City of Philadelphia Subrecipient Audit Guide. Expenditures reported on the Schedule of Expenditures of Federal, State and City Awards are reported on the accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles in Uniform Guidance, and the City of Philadelphia Subrecipient Audit Guide, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Corporation has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. Note F U.S Department of Transportation Federal Highway Administration-PennsylvaniaThe purpose of this grant award received under ALN #20.205 is to be used to pay grantees to address the need for an internal circulation shuttle to reduce the wait time for the Navy Yard/NRG Station Loop for its tenants (and future residents) to access amenities throughout the facility and the Sports Complex/SEPTA station. The project includes the use of an all-electric autonomous vehicle (AV), as a supplement to existing PIDC Services, as part of this solution. During 2022, the Corporation was awarded $347,000 to fund grantees for services provided for shuttle services. At December 31, 2022, the Corporation disbursed a total of $241,750 to grantees. Note G U.S. Department of Labor-The purpose of this grant award received under ALN #17.258 is for the expansion of the West Philadelphia Skills Initiative and PIDCs Navy Yard Skills Initiative, both cohort-based, employer-driven training models developed in partnership with universities, health systems and other major employers. During 2022, the Corporation was awarded $66,091 to fund grantees for services provided for skill-based initiative services.At December 31, 2022, the Corporation fully disbursed the award total of $66,091 to grantees.

Finding Details

Finding 2022-001
Section II - Financial Statement Findings No matters were reported. Section III - Federal Award Findings and Questioned Costs 2022-001 ? Activities Allowed or Unallowed and Allowable Costs / Cost Principles Information on Federal Program(s) - CDBG ? Entitlement Grants Cluster, Community Development Block Grant ? Entitlement Grants, 14.218, Philadelphia Department of Commerce, contract number 23-0489 (the ?Contract?) Criteria or Specific Requirement ? The Contract requires the Corporation to obtain approval to disburse funds from City of Philadelphia Department of Commerce prior to making the disbursement. Condition ? During our testing of activities allowed or unallowed costs, we noted the following exception: ? For one of the eight sample selections tested, the amount disbursed exceeded the amount approved by the City of Philadelphia Department of Commerce (approval for the excess disbursement was subsequently approved at a later date); Cause ? The Corporation did not follow its policy to ensure the disbursement was approved and was allowable at the time of disbursement. Effect or Potential Effect ? Funds were disbursed prior to obtaining approval by the City of Philadelphia Department of Commerce. Context ? We tested a sample of eight items totaling disbursements of $5,230,989 and identified one exception in the amount of $179,739. Disbursed funds in the amount of $3,079,739 exceeded the amount approved by the City of Philadelphia Department of Commerce in the amount of $2,900,000 by $179,739. The excess disbursement was approved subsequent to December 31, 2022. Repeat Finding - This is a new finding during the year. Recommendation - We recommend that management ensure its policies and procedures are followed on a consistent basis and that prior approval is obtained prior to disbursement of loan funds. Views of Responsible Officials ? The Mosaic/Sharswood loan was originally structured to be financed as a Line of Credit (LOC) grant-bridge financing product; however, after further consideration and through discussions between the Corporation?s lending team and the City of Philadelphia (the City), the decision was made to fund the loan with CDBG funding, in 2021. The approved CDBG loan amount, in 2021, was for $2,400,000. Subsequently, it was determined, as the project progressed, that additional funding was needed and requested, from the borrower, of the Corporation. Through discussions with the Corporation?s lending team and the City, the loan amount was increased and amended for an additional $500,000, taking the total loan amount funding to $2,900,000. As loan repayments came in on the loan during 2022, loan disbursements were being made, as well. As the project was continuing progress, again, the Corporation?s lending team met with the City in early 2023, to discuss the then current and future project funding needs requiring additional funding. Through these discussions, the City approved an additional amendment for a loan increase for an additional $2,550,625, taking the total loan amount to $4,950,625. The additional increase of $2,550,625 was to cover the funding of $179,739 disbursed in 2022, as well as any future project-related disbursements. Philadelphia Industrial Development Corporation and Affiliated Entities Summary Schedule of Prior Audit Findings Year Ended December 31, 2022 166 Corrective Action Plan and Status of Prior Year Findings Management?s Corrective Action Plan: Individual(s) Responsible for Corrective Action Plan Tysha Dixon Director, Financial Reporting (215) 496-8168 Completed March 2023 Management?s Corrective Action Plan Management will continue to rely on its existing controls that are in place, including the ongoing communication with the City for any changes in transactions that require their approval. In the circumstances where management is pending a contract amendment from the City for loans requiring additional funding, management will determine if there are unrestricted funding sources to support the change in the approved amount of the loan until the amended contract is finalized. Questioned Program: ALN #14.218 Community Development Block Grants (CDBG) Finding #2002-02 ? Program Income Information on Federal Program ? ALN #14.218 Community Development Block Grants (CDBG) Interest Earned on Revolving Fund Prior Year Finding: In the 2002 audit, the auditors noted that the Corporation did not have internal controls in place to identify the applicable compliance requirements, and it was estimated that cumulatively $1,250,000 of interest had not been remitted to the Department of Treasury as of December 31, 2002. However, the liability had been accrued in the financial statement amounts. The HUD Monitoring Unit also reported this finding in their report dated December of 2002. During 2003, the Corporation established internal controls over cash management and has remitted interest for the current year, as well as the amount related to earning in the prior years. However, certain amounts related to interest earned on the proceeds of a loan fund securitization have been remitted. The assessment of the remaining cumulative questioned costs at both December 31, 2022, and 2021 is approximately $1,096,011. Philadelphia Industrial Development Corporation and Affiliated Entities Summary Schedule of Prior Audit Findings Year Ended December 31, 2022. Current Year Status The Corporation administers the revolving loan funds under contract with the City of Philadelphia. The interest not yet remitted was earned on the proceeds of a loan fund securitization, which was done with HUD approval. The City is disputing the applicability of this Federal regulation to these funds. The Corporation is awaiting further instructions from the City regarding the remittance of this balance to HUD. All interest currently being earned on the investment of the unused portion of the CDBG revolving loan funds is being remitted annually to HUD.
Finding 2022-001
Section II - Financial Statement Findings No matters were reported. Section III - Federal Award Findings and Questioned Costs 2022-001 ? Activities Allowed or Unallowed and Allowable Costs / Cost Principles Information on Federal Program(s) - CDBG ? Entitlement Grants Cluster, Community Development Block Grant ? Entitlement Grants, 14.218, Philadelphia Department of Commerce, contract number 23-0489 (the ?Contract?) Criteria or Specific Requirement ? The Contract requires the Corporation to obtain approval to disburse funds from City of Philadelphia Department of Commerce prior to making the disbursement. Condition ? During our testing of activities allowed or unallowed costs, we noted the following exception: ? For one of the eight sample selections tested, the amount disbursed exceeded the amount approved by the City of Philadelphia Department of Commerce (approval for the excess disbursement was subsequently approved at a later date); Cause ? The Corporation did not follow its policy to ensure the disbursement was approved and was allowable at the time of disbursement. Effect or Potential Effect ? Funds were disbursed prior to obtaining approval by the City of Philadelphia Department of Commerce. Context ? We tested a sample of eight items totaling disbursements of $5,230,989 and identified one exception in the amount of $179,739. Disbursed funds in the amount of $3,079,739 exceeded the amount approved by the City of Philadelphia Department of Commerce in the amount of $2,900,000 by $179,739. The excess disbursement was approved subsequent to December 31, 2022. Repeat Finding - This is a new finding during the year. Recommendation - We recommend that management ensure its policies and procedures are followed on a consistent basis and that prior approval is obtained prior to disbursement of loan funds. Views of Responsible Officials ? The Mosaic/Sharswood loan was originally structured to be financed as a Line of Credit (LOC) grant-bridge financing product; however, after further consideration and through discussions between the Corporation?s lending team and the City of Philadelphia (the City), the decision was made to fund the loan with CDBG funding, in 2021. The approved CDBG loan amount, in 2021, was for $2,400,000. Subsequently, it was determined, as the project progressed, that additional funding was needed and requested, from the borrower, of the Corporation. Through discussions with the Corporation?s lending team and the City, the loan amount was increased and amended for an additional $500,000, taking the total loan amount funding to $2,900,000. As loan repayments came in on the loan during 2022, loan disbursements were being made, as well. As the project was continuing progress, again, the Corporation?s lending team met with the City in early 2023, to discuss the then current and future project funding needs requiring additional funding. Through these discussions, the City approved an additional amendment for a loan increase for an additional $2,550,625, taking the total loan amount to $4,950,625. The additional increase of $2,550,625 was to cover the funding of $179,739 disbursed in 2022, as well as any future project-related disbursements. Philadelphia Industrial Development Corporation and Affiliated Entities Summary Schedule of Prior Audit Findings Year Ended December 31, 2022 166 Corrective Action Plan and Status of Prior Year Findings Management?s Corrective Action Plan: Individual(s) Responsible for Corrective Action Plan Tysha Dixon Director, Financial Reporting (215) 496-8168 Completed March 2023 Management?s Corrective Action Plan Management will continue to rely on its existing controls that are in place, including the ongoing communication with the City for any changes in transactions that require their approval. In the circumstances where management is pending a contract amendment from the City for loans requiring additional funding, management will determine if there are unrestricted funding sources to support the change in the approved amount of the loan until the amended contract is finalized. Questioned Program: ALN #14.218 Community Development Block Grants (CDBG) Finding #2002-02 ? Program Income Information on Federal Program ? ALN #14.218 Community Development Block Grants (CDBG) Interest Earned on Revolving Fund Prior Year Finding: In the 2002 audit, the auditors noted that the Corporation did not have internal controls in place to identify the applicable compliance requirements, and it was estimated that cumulatively $1,250,000 of interest had not been remitted to the Department of Treasury as of December 31, 2002. However, the liability had been accrued in the financial statement amounts. The HUD Monitoring Unit also reported this finding in their report dated December of 2002. During 2003, the Corporation established internal controls over cash management and has remitted interest for the current year, as well as the amount related to earning in the prior years. However, certain amounts related to interest earned on the proceeds of a loan fund securitization have been remitted. The assessment of the remaining cumulative questioned costs at both December 31, 2022, and 2021 is approximately $1,096,011. Philadelphia Industrial Development Corporation and Affiliated Entities Summary Schedule of Prior Audit Findings Year Ended December 31, 2022. Current Year Status The Corporation administers the revolving loan funds under contract with the City of Philadelphia. The interest not yet remitted was earned on the proceeds of a loan fund securitization, which was done with HUD approval. The City is disputing the applicability of this Federal regulation to these funds. The Corporation is awaiting further instructions from the City regarding the remittance of this balance to HUD. All interest currently being earned on the investment of the unused portion of the CDBG revolving loan funds is being remitted annually to HUD.