Finding Text
Finding Reference Number: SA2022-005 - Cash Management ? Draw Down of Community Development Block Grant Funds in Advance of Expenditures Assistance Listing Number: 14.218 Assistance Listing Title: Community Development Block Grant ? Entitlement Grant COVID-19 - Community Development Block Grants/ Entitlement Grants-CV Name of Federal Agency: Department of Housing and Urban Development Federal Award Identification Number: B-21-MC-06-0042 COVID-19 ? B-20-MW-06-0042 CDBG Daly City Pass Through #Not Available Name of Pass-through Entity: City of Daly City Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, 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. Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted one disbursement in April 2022 in the amount of $142,431 had been charged to the CDBG program in the amount of $149,927. The difference of $7,496 was the retention payable to the vendor, which was not paid in cash until after June 30, 2022. However, the City included the retention payable in the grant drawdown filed and received in April 2022. Cause: We understand that the retention was included in the grant drawdown due to staff oversight. Questioned Costs: We question costs in the amount of $7,496. Effect: Drawing down funds in advance 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. 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. The City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.