Finding Text
Condition and criteria: The CDBG manual states that program income must be disbursed prior to the drawdown of additional funds of the treasury and there were some drawdowns of additional funds even though there is program income on hand. Program income also includes interest on cash on hand, but the City has not been allocating interest to the CDBG program. Cause: The City sets up activities for each project and program income is allocated as the funding source and when draws are done, they either go against program income or as a request for funds based on the particular project. If a project was set up later and does not have program income allocated as a funding source to spent out first, there will be a request for additional funds, even if there is program income on hand. Context and effect: The City has under $25,000 of program income remaining at fiscal year end, thus it is not considered material non-compliance. There is also an exception for allocating interest to program income when the total from all sources for the program is less than $25,000 but would be required if excess income exceeds that amount. Auditor's recommendation: We recommend that the City perform procedures at year end to determine whether it has excess program income on hand, calculate interest on cash on hand if applicable, and return any excess funds to its line of credit. Management response: Management agrees with the auditor's recommendation. The City has currently exhausted all program income on-hand and will perform year-end testing/monitoring around program income going forward.