Finding Text
Federal Agency: U.S. Department of Treasury
Federal Program: CDFI Equitable Recovery Program (ERP)
Assistance Listing Numbers: 21.033
Federal Award Identification Number and Year: 22ERP061482 – 2023
Award Period: January 1, 2023 – December 31, 2023
Type of Finding:
Significant Deficiency in Internal Control over Compliance
Compliance - Other Matter
Criteria or Specific Requirement: Under the FY2022 CDFI ERP Supplemental FAQ (updated on September 9, 2022), award recipients cannot use the ERP funds to issue financial assistance net of fees charged by the award recipient, or any of its affiliates. If the award recipient would like to use ERP funds for this purpose, it would do so by waiving the processing or origination fee for the borrower or beneficiary and use the available operational support funds to cover those underlying costs (e.g. salaries).
Condition: The Organization disbursed grant payments to beneficiaries and loans to borrowers that were net of an application or origination fee assessed by the Organization.
Questioned Costs: $11,404
Context: Of the loan and grant disbursements tested it was identified twenty-four loans and ten grant disbursements sampled were net of fees assessed by the Organization. The total fees amounted to $11,404 which reduced the loan or grant disbursement made to the individual and was included as part of the total financial products/ grants paid under the federal award’s "program activities" budget line.
The underlying costs associated with these fees are primarily derived from salaries of the employees who processed the applications or originated the loans. As these salaries are directly charged to the award as part of “operational support activities” budget line, the Organization effectively charged the federal award twice for the same or similar costs.
Cause: Management assumed they could charge fees consistent with their other program and lending activities. They were not fully aware of the federal regulations and program requirements related to fees assessed by the award recipient under the ERP program.
Effect: Questioned costs were identified.
Repeat Finding: No
Recommendation: Management should update its policies and procedures to waive any organizational fees for the borrower or beneficiary and instead recover those costs through directly charging the underly expenses as part of the federal award’s “operational support activities” budget line. In addition, management should consult the appropriate federal agency on any further corrective action related to the fees already paid and allocated as “program activities”.
Views of Responsible Officials: There is no disagreement with the audit finding.