Finding 1151576 (2022-005)

Material Weakness
Requirement
C
Questioned Costs
-
Year
2022
Accepted
2025-08-28
Audit: 365226
Organization: City of Davis (CA)

AI Summary

  • Core Issue: Funds were drawn down from the grant before they were actually needed, violating cash management rules.
  • Impacted Requirements: Non-compliance with 2 CFR 200.305, which mandates that funds must be disbursed within three business days of being drawn.
  • Recommended Follow-Up: Ensure funds are only drawn after expenditures are made and assess if any interest earned needs to be returned to the grantor.

Finding Text

Finding Reference Number: SA 2022-005 Cash Management – Drawdown of Grant Funds In Advance of Disbursement AL Number: 14.218 Assistance Listing Title: CDBG - Entitlement Grants Cluster – Community Development Block Grants/Entitlement Grants COVID-19 - Community Development Block Grants/Entitlement Grants-CV Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-14-MC-06-0037, B-15-MC-06-0037, B-16-MC-06-0037, B-17-MC-06-0037, B-18-MC-06-0037, B-19-MC-06-0037, B-20-MC-06-0037, B-20-MW-06-0037, B-21-MC-06-0037 Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash needs, and must minimize the time elapsing between the transfer of funds from its line of credit, 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. The general rule is that CDBG funds must be used within three business days they are drawn down. Condition: We selected thirteen disbursements related to projects, subgrants and administrative expenditures and noted one disbursement on September 30, 2021 was included in a reimbursement request on September 9, 2021 and payment was received from HUD on September 13, 2021, which is seventeen days prior to payment to the vendor. Effect: Drawing down funds in advance and not disbursing the funds in three days or less 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 and the CDBG program. Cause: We understand the disbursement was requested prior to payment due to staff oversight. Recommendation: The City 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 City should determine whether the interest earned on the grant funds advanced needs to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.

Categories

Cash Management

Other Findings in this Audit

  • 575124 2022-001
    Material Weakness Repeat
  • 575125 2022-002
    Material Weakness Repeat
  • 575126 2022-003
    Material Weakness Repeat
  • 575127 2022-004
    Material Weakness Repeat
  • 575128 2022-005
    Material Weakness
  • 575129 2022-006
    Material Weakness
  • 575130 2022-001
    Material Weakness Repeat
  • 575131 2022-002
    Material Weakness Repeat
  • 575132 2022-003
    Material Weakness Repeat
  • 575133 2022-004
    Material Weakness Repeat
  • 575134 2022-005
    Material Weakness
  • 575135 2022-006
    Material Weakness
  • 575136 2022-007
    Significant Deficiency
  • 575137 2022-008
    Significant Deficiency
  • 575138 2022-009
    Significant Deficiency
  • 575139 2022-009
    Significant Deficiency
  • 575140 2022-009
    Significant Deficiency
  • 1151566 2022-001
    Material Weakness Repeat
  • 1151567 2022-002
    Material Weakness Repeat
  • 1151568 2022-003
    Material Weakness Repeat
  • 1151569 2022-004
    Material Weakness Repeat
  • 1151570 2022-005
    Material Weakness
  • 1151571 2022-006
    Material Weakness
  • 1151572 2022-001
    Material Weakness Repeat
  • 1151573 2022-002
    Material Weakness Repeat
  • 1151574 2022-003
    Material Weakness Repeat
  • 1151575 2022-004
    Material Weakness Repeat
  • 1151577 2022-006
    Material Weakness
  • 1151578 2022-007
    Significant Deficiency
  • 1151579 2022-008
    Significant Deficiency
  • 1151580 2022-009
    Significant Deficiency
  • 1151581 2022-009
    Significant Deficiency
  • 1151582 2022-009
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $4.08M
20.507 Federal Transit Formula Grants $2.83M
20.205 Highway Planning and Construction $1.57M
20.526 Buses and Bus Facilities Formula, Competitive, and Low Or No Emissions Programs $1.06M
14.218 Community Development Block Grants/entitlement Grants $302,823
14.235 Supportive Housing Program $78,419
93.569 Community Services Block Grant $65,437
14.239 Home Investment Partnerships Program $50,355
97.029 Flood Mitigation Assistance $32,249
59.075 Shuttered Venue Operators Grant Program $9,361
15.904 Historic Preservation Fund Grants-in-Aid $5,000
20.608 Minimum Penalties for Repeat Offenders for Driving While Intoxicated $2,112