Finding Text
Program: Emergency Solutions Grant Assistance Listing No.: 14.231 Federal Agency: Department of Housing and Urban Development Pass-Through Agency: State of California and City of Salinas Federal Award Year: FY21-22 Compliance Requirement: Activities Allowed or Unallowed; Allowable Costs/Cost Principles Questioned Cost: $0 Repeat Finding: Yes Condition: The Agency lacked a formal, consistent process for obtaining and documenting approvals for expenditures related to federal awards. Several instances were identified where federal funds were used without proper pre-approval, or approvals were not consistently documented. Criteria: Recipients of federal awards must establish and maintain effective internal controls, including proper authorization and documentation of expenditures. Specifically, prior approval for costs related to federal awards must be obtained from the relevant parties, and expenditure documentation must be retained to demonstrate compliance with federal regulations. Cause: The Agency did not implement a structured approval process for federal awards expenditures, resulting in ad-hoc approvals or the lack of documented evidence of such approvals. Effect: Without proper internal controls over approvals, there is an increased risk of noncompliance with federal regulations, potential misuse of federal funds, and inaccurate financial reporting. This could result in disallowed costs or findings during future audits. Recommendation: We recommend the Agency implement a formal approval process for all expenditures related to federal awards, ensuring that appropriate pre-approvals are obtained, documented, and retained for all applicable costs. Consider training staff on the Uniform Guidance requirements and establish regular reviews of the approval process to ensure compliance. Management’s Response: See Corrective Action Plan.