Finding Text
Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI section 4-14.218-
9 states:
"The grantee must accurately account for any program income generated from the use of CDBG
funds and must treat such income as additional CDBG funds which are subject to all program
rules.
"Making loans and collecting the payments on those loans can be a significant source of program
income for grantees. The use of program income derived from loan payments is subject to
program requirements. This carries with it the responsibility for grantees to have a loan origination
and servicing system in effect which assures that loans are properly authorized, receivables are
properly established, earned income is properly recorded and used, and write-offs of uncollectible
amounts are properly authorized (24 CFR sections 570.500 and 570.504)."
Condition: The City does not have adequate internal controls to identify and record CDBG program
income on a regular and timely basis. Program income is not being used to pay for allowable costs prior
to drawing down additional funds.
Known program income received in the current year from ten monthly loan repayments totaling $61,844
did not get reported as such. In addition, it is not clear whether or not two months of loan payments
totaling $12,369 were received and not reported.
Cause: Lack of internal controls and adequate staff training on program income identification,
determination, assessment, and recording.
Effect or Potential Effect: The Grants Division is not in compliance with grant requirements, where
drawdowns are being applied against the grant award instead of the required reported program income
first. The lack of internal controls may also result in misstatements due to errors or fraud, which could
ultimately result in misuse of federal funds.
Questioned Cost: $61,844
Context: There has been no accurate and timely process for the City to record program income. Per the
IDIS PR09 report, program income was reported on an annual basis for program years 1997 through
2005. No program income was reported for program years 2008 through 2015. During program year
2016, the grant consultant identified and reported program income received in program years 2011
through 2015. However, not all program year 2016 program income was reported and no 2017 program
income was reported.
Repeat of a Prior-Year Finding: 2017-002