Finding Text
Condition: During our review of expense allocations charged to the Economic Development Administration (EDA) for the Chew Street Technology Center Project, we noted that the client did not appropriately account for EDA grant draws: - January 2024 Draw #3 totaling $144,654 was fully paid by the City of Houston. However, 80% of the same amount ($115,723) was also drawn from EDA funds. - February 2024 Draw #4 totaling $668,967 was partially paid by the City of Houston and the FWCRC. Nonetheless, 80% ($535,173) was also drawn from EDA funds. These duplicate reimbursements resulted in an overcharge of $330,523 to the EDA. The client subsequently funded future draws from its own resources, and no further adjustments were deemed necessary. Cause: The overcharges were primarily due to errors in the initial draw submissions, likely stemming from inadequate internal controls and oversight in the grant reporting process. Effect: This resulted in noncompliance with federal cost principles and an overstatement of expenses charged to the federal award. If not corrected, such issues could lead to questioned costs or potential disallowance of funds. Criteria Per 2 CFR §200.403–405, only actual, unreimbursed, and allocable costs may be charged to a federal award. Duplicate reimbursement of expenses violates these principles and may result in noncompliance with the Uniform Guidance. Overcharges or duplicate reimbursements must be formally corrected, typically through: - Repayment to the grantor, or - Offsetting future draws, with written approval from the grantor agency. Recommendation: We recommend that the organization strengthen its internal controls over the grant reporting process to prevent similar overcharges in the future. Specifically: - Implement regular reviews of draw submissions to ensure expenses have not been previously reimbursed. - Provide targeted training to accounting and grants management staff on federal cost principles and drawdown procedures. - Enhance oversight mechanisms, including supervisory review and reconciliation of funding sources prior to draw submissions.