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 a complete listing of loans and loan balances subject to repayment.
The City therefore does not have a working schedule that captures a complete listing of expected receipts
that will prompt the recording of program income. In addition, the loan receivable listing does not agree
with the general ledger balance.
Cause: Lack of internal controls, implementation, and adequate staff training on the maintenance of a
complete listing and schedule of issued loans and running loan balances related to CDBG.
Effect or Potential Effect: The Grants Division is not in compliance with grant requirements and grant income has not been properly reported. In addition, there's a possibility that loan payments received may
not be credited to the correct debtor's account or that write-offs are made without proper approval.
Questioned Cost: None
Context: The City appears to have a partial listing of outstanding loans and loan repayment schedules,
however, the repayment schedules have not been updated on a regular and timely basis, loan balances
are not reconciled to the general ledger, and loan repayments are not being reconciled to reported
program income. The completeness of program income cannot be assured as long as the City does not
have a complete tracking of CDBG Section 108 loans and HOME loans outstanding.
The loans receivable general ledger balance does not appear to be updated when payments are
received. The recorded balance at June 30, 2018 is the same as June 30, 2017 and 2016.
Our review indicated that no CDBG program income was reported from FYE 2009 through FYE 2016. In
FYE 2017, program income for FYE 2012 through FYE 2016 was reported as program income along with
some, but not all of the FYE 2017 program income. No CDBG program income was reported in FYE
2018.
Repeat of a Prior-Year Finding: 2017-003