Finding Text
Finding 2022-004 – Activities Allowed or Unallowed
Repeat Finding – See Finding 2021-002
U.S. Department of Housing and Urban Development (HUD) – CDBG - Entitlement Grants Cluster: COVID-19 - Community Development Block Grant/Entitlement Grants (ALN 14.218)
Condition: There were not adequate internal controls in place to ensure unallowable costs were not charged to the program. Our allowability sample totaling $6,781,416 yielded the following unallowable costs charged to the Community Development Block Grant/Entitlement Grants (CDBG) program: $70,370 of expenditures that the City was unable to provide supporting documentation, $29,228 of administration and planning costs in excess of the 20% limitation cap, and $257 of wages in excess of actual CDBG program hours worked.
Criteria: The City is required to have controls in place to ensure only actual allowable costs are charged to federal programs and that documentation is maintained to support such charges. Per 24 CFR 570.200(g)(2), no more than 20 percent of any grant shall be expended for planning and program administrative costs.
Cause: The City’s procedures to ensure only allowable costs are charged to the CDBG program were not adequate and the City did not have appropriate controls in place to ensure documentation was maintained for all CDBG expenditures. The City also did not have adequate monitoring controls in place to make sure planning and program administrative costs charged to CDBG were not in excess of 20%.
Effect: The City does not have adequate internal controls to ensure only allowable costs are charged to the CDBG program. The City was required to return $29,228 to HUD in 2023 for the planning and program administrative costs in excess of the 20% costs cap and may be liable to return additional funds to HUD.
Repeat Finding: Yes
Questioned costs known and likely: $112,594
Recommendation: We recommend the City implement internal control procedures to ensure compliance with allowable cost requirements and that all relevant documentation is maintained. We also recommend the City establish monitoring procedures for the planning and program administrative costs requirement.
View of Responsible Official: The City agrees. See the corrective action plan.