Finding Text
Finding 2025-003 – Activities Allowed or Unallowed Program: CDBG – Entitlement Grants Cluster: Community Development Block Grants/Entitlement Grants ALN 14.218 Federal Agency: U.S. Department of Housing and Urban Development Pass-through Agencies: City of Pittsburgh Condition: The URA did not have sufficient internal controls to ensure that reimbursement requests were reviewed for compliance with the executed grant agreement before approval or payment. During our review of the grant agreement between the URA and Neighborhood Legal Services Association (NLSA), we noted that grant proceeds were required to be used for eligible project costs, including the salaries, wages, and related costs of NLSA staff performing the legal services. However, based on our examination of the reimbursement requests, NLSA billed the URA using a fixed hourly fee for salaries rather than actual expenditures. The reimbursement requests totaled $321,000, while the total grant award was $320,000. Because NLSA did not bill based on actual expenditures, the URA could have overpaid NLSA for services provided under the grant agreement. Although this represents noncompliance with the terms of the grant agreement, based on the information available, the potential effect of the noncompliance was not material to the major program. Criteria: 2 CFR 200.303 requires a non-Federal entity to establish and maintain effective internal control over a Federal award that provides reasonable assurance the award is managed in compliance with Federal statutes, regulations, and the terms and conditions of the award. Cause: The URA did not have sufficient internal controls to ensure that the executed grant agreement was followed when reviewing and approving NLSA’s reimbursement requests. Specifically, the URA’s review process did not require verification that billed salaries and wages represented actual eligible project costs and that cumulative reimbursement requests did not exceed the authorized grant amount. Effect: The reimbursement requests were not prepared in accordance with the terms of the grant agreement and created a risk that unallowable costs were reimbursed. Because NLSA billed using a fixed hourly fee rather than actual expenditures, the URA did not have assurance that all amounts requested represented allowable salaries, wages, and related project costs. The $1,000 billed in excess of the grant award is unallowable and additional unallowable costs may have existed if the fixed hourly billings exceeded NLSA’s actual allowable costs. The amount of any additional allowable costs could not be determined; however, based on the information available, the potential effect was not material to the major program. Questioned Costs: Unknown. The $1,000 billed in excess of the grant award and any additional unallowable costs that may have existed if the fixed hourly billings exceeded NLSA’s actual allowable costs. The amount of any additional unallowable costs could not be determined. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: The URA should establish and implement monitoring procedures requiring reimbursement requests to be reviewed against the executed grant agreement before approval or payment. The procedures should require verification that requests are supported by actual eligible costs, reconciled to payroll, time records, and related-cost documentation, and tracked against the authorized grant amount. The URA should coordinate with NLSA to determine the final allowable amount and require repayment or credit for any amount reimbursed in excess of allowable costs or the grant award. Views of responsible officials and Planned Corrective Action: Management agrees with this finding; see separate Corrective Action Plan.