Finding Text
2024-001 – Program Income
Identification of the Federal Program
U.S. Department of Housing and Urban Development
Name of Program: Continuum of Care Program pass-through from Prince George’s County
Assistance Listing Number: 14.267
Grant Award Number: MD023L3G002012/MD0232L3G002013
Pass-through Identifying Number: 524.1-14267-2024
Grant Award Period: July 1, 2022 to June 30, 2024
Criteria or Specific Requirements – In accordance with 2 CFR 200.80, program income means,
“gross income earned by the non-Federal entity that is directly generated by a supported activity
or earned as a result of the Federal award during the period of performance except as provided in
§ 200.307 paragraph (f).” Paragraph (f) states, “There are no Federal requirements governing the
disposition of income earned after the end of the period of performance for the Federal award,
unless the Federal Awarding agency regulations or the terms and conditions of the Federal award
provide otherwise.”
There are three methods of applying program income: deduction; addition; and cost-sharing. The
Federal agency should specify what program income method(s) will be used in the terms and
conditions of the Federal award. The deduction method will be used if the Federal agency does
not specify a method for applying program income. Unless specified in the agency’s regulations,
program income treatment is usually handled in the grant agreement terms and conditions.
The pass-through grant from Prince George’s County should follow the method for applying
program income outlined in the manual issued by the Behavioral Health Authority (BHA). Per the
manual, the Continuum of Care (CoC) grant funds is to be used to pay the difference between the
contract rent for a unit and 30% of the participant’s or family’s income (program income).
Condition – The Organization failed to comply with the program income compliance requirement
of the U.S. Department of Housing and Urban Development (HUD) Continuum of Care Program by
not netting the $41,762 of program income (contracted rent amount per tenant) generated from
the pass-through grant to the amount to be reimbursed prior to submitting the reimbursement
request to HUD, in accordance with the protocol outlined in the manual issued by BHA. Per the
manual, BHA will utilize CoC funding to make affordable housing for program participants and
families by using CoC grant funds to pay the difference between the contract rent for a unit and
30% of the participant’s or family’s income. We were informed by the Organization that they instead followed what was verbally
communicated to them that they can use the program income to cover for utilities and
maintenance costs of the properties being rented, which is also an acceptable use of the program
income. We were also informed that BHA has not demanded that the Organization remit the
program income collected during the fiscal year 2024 and BHA has not stopped the funding under
this program since the Organization utilized the program income to cover program expenses.
Cause - The Organization did not follow the protocol in the manual issued by BHA to net the
program income from the pass-through grant with the contracted rent amount per tenant prior to
submitting the reimbursement request to HUD. Instead, the Organization followed what was
verbally communicated to them that they can use the program income to cover for utilities and
maintenance costs of the properties being rented, which is also an acceptable use of the program
income.
Potential Effect - Charges to Federal awards for rent is more than what is allowed under the
manual issued by BHA.
Questioned costs – $41,762, this is the amount the Organization is allowed to collect from the
tenants per the manual issued by BHA and represents 30% or less of the tenants’ annual income
and should have been netted with the contracted rent amount per tenant prior to submitting the
reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by
BHA.
Context – The condition was identified during the fiscal year 2024 audit when we reviewed and
tested the program income compliance requirement applicable for Assistance Listing Number
14.267. We noted that the program income generated from the pass-through grant during the
fiscal year 2024 totaling $41,762 was not netted to the amount to be reimbursed prior to
submitting the reimbursement request to HUD, in accordance with the protocol outlined in the
manual issued by BHA.
Recommendation - We recommend the Organization establish internal control and processes to
properly account for program income in accordance with the protocol outlined in the manual
issued by BHA, i.e., to net the program income to the contracted rent amount per tenant prior to
submitting for reimbursement from HUD.
Views of Responsible Officials - Management agrees with the federal award finding identified in
the audit. Effective immediately, the Organization will comply with the program income
compliance requirement of the U.S. Department of Housing and Urban Development (HUD)
Continuum of Care Program by netting program income generated from the pass-through grant to
the amount to be reimbursed prior to submitting the reimbursement request to HUD, in
accordance with the protocol outlined in the manual issued by BHA.