Finding Text
Finding #SA2022-008: Accurate Review and Payment of Vendor Reimbursement Requests
Assistance Listing Number: 14.218
Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants
Name of Federal Agency: Department of Housing and Urban Development
Pass Through Entity: San Joaquin County Community Development Department
Federal Award Identification Number: A-93-916
Criteria: Reimbursement requests received by the City from a vendor should be reviewed in detail to ensure that reimbursable expenditures are supported by documentation that is complete and clearly readable in order to ensure that any costs that will be reimbursed and charged to the grant are considered supported and allowable. In addition, the payment to the vendor should agree to the amount of eligible costs that are to be reimbursed.
Condition: In our testing of expenditures related to the CDBG-CV grant we noted the following:
• The City was invoiced for costs in the amount of $56,662, however the supporting documentation provided by the vendor totaled to $55,890 and the City issued a check to the vendor in the amount of $56,232, which did not agree to either the invoiced amount or the amount provided as support for the invoice.
• The City was invoiced for the gross amount of payroll costs incurred by the vendor’s employees, however, the support provided for each of the invoices included the employee payroll checks which were net of the related payroll taxes. The City was unable to provide support to show that the vendor paid the payroll taxes to the applicable taxing entities. City staff determined that total gross payroll costs reimbursed to the vendor for fiscal year 2022 were $216,224 and supporting documentation for the net payroll totaled to only $178,538. The difference between the gross amount of payroll charged to the City by the vendor and the net amount of payroll support that was provided was $37,686.
• One of the invoices included pages of support that were not readable with costs that totaled $347. We could not determine what the expenditures were for due to the condition of the scans of the supporting documentation.
• The support for some of the payroll costs that were being charged to the grant by the vendor included timesheets that were not readable and therefore we could not agree the hours charged from the timesheet to the hours paid in the employees’ paycheck.
Effect: Incorrect payments made to vendors or payments made with incomplete supporting documentation or based on documents that are not legible increases the risk that unallowable costs could be charged to the grant.
Cause: We understand that the program is currently administrated by different departmental staff than the staff during fiscal year 2022 and staff turnover led to inaccurate reviews of reimbursements and payments to the vendor. In addition, City staff had noticed that some of the documentation was illegible or missing, but did not request the information from the vendor.
Questioned Costs: We question costs of $38,033, which consist of $37,686 of payroll taxes paid for which support was not provided and the $347 that was supported by illegible documentation.
Recommendation: The City should implement processes to ensure the review of any invoices or requests for reimbursement undergo a detailed review to ensure that all expenditures are supported by clearly legible documentation and that when payment is made to a vendor, the amount of the payment made agrees to the allowable and supported amount being requested by the vendor.
View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.