Finding 1165742 (2024-002)

Finding 2024-002 – Activities Allowed or Unallowed U.S. Department of Housing and Urban Development (HUD) – CDBG – Entitlement/Special Grants Cluster: Community Development Block Grant/Entitlement Grants (ALN 14.218) Condition: The City’s payroll charging process for the CDBG program relies on budgeted percentages during the year and lacks a documented, operating after‑the‑fact review and reconciliation control that compares interim allocations to biweekly timesheets and records timely adjustments. Although biweekly timesheets reflect actual time worked on CDBG, the control structure does not ensure interim postings are periodically trued up to actual effort. Out of 27 payrolls, we sampled seven pay periods and determined excess CDBG expenses of $11,727 were charged to the program based upon actual time worked versus the budgeted allocations. Criteria: The City should maintain an effective system of internal control over Federal awards that is established, documented, and operating to provide reasonable assurance that financial activity is properly recorded and managed. Cause: The City does not have adequate procedures in place to verify that payroll costs are allocated in an equitable manner in accordance with the Uniform Guidance. Effect: The City overstated CDBG payroll charges and is not allocating CDBG payroll costs equitably. Repeat Finding: Yes. Questioned costs known and likely: Total of $45,477, $11,727 known and $33,750 likely. Recommendation: We recommend the City implement internal control procedures to ensure compliance with allowable cost requirements, which should include a periodic analysis comparing actual time spent on the CDBG program versus the budgeted allocations and evaluating need for adjustments. View of Responsible Official: The City agrees. See the corrective action plan.