Finding 51557 (2022-004)

Significant Deficiency
Requirement
AB
Questioned Costs
-
Year
2022
Accepted
2023-05-30
Audit: 48358
Organization: City of Victorville (CA)

AI Summary

  • Core Issue: The City is reviewing CDBG grant expenditures after disbursement instead of before, which undermines effective internal controls.
  • Impacted Requirements: This practice violates 2 CFR Part 200, section 200.303, which mandates prior authorization for federal award expenditures.
  • Recommended Follow-Up: Implement electronic or manual approval processes for all grant expenditures before disbursement to ensure compliance and proper documentation.

Finding Text

Federal Agency: United States Department of Housing and Urban Development Federal Program Name: CDBG Entitlement Grants Cluster: Community Development Block Grant (CDBG) Assistance Listing Number: 14.218 Federal Award Identification Number and Year: B-21-MC-06-0593; B-20-MC-06-0593; B-19-MC-06-0593; B-18-MC-06-0593; B-17-MC-06-0593; B-16-MC-06-0593; Award Years 2021, 2020, 2019, 2018, 2017, and 2016 Award Period: Fiscal Year 2021-2022 Type of Finding: ? Significant Deficiency in Internal Control over Compliance (Allowable Costs) ? Other Matter (Allowable Costs) Criteria or Specific Requirement: 2 CFR Part 200, section 200.303 of the Uniform states that a non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: The City has specific CDBG grant personnel that are responsible for reviewing all grant expenditures to ensure they are allowable. However, the designated grant personnel are reviewing the expenditures after the disbursement has been made instead of prior to authorizing the disbursement and charging to the grant. In addition, there is no formal documentation retained to illustrate that all disbursements were reviewed. Internal controls over federal awards should include authorization by appropriate grant personnel prior to such disbursements occurring. Questioned Costs: None noted. Context: All disbursements are reviewed in the same manner. Cause: The City will correct any unallowed expenditures identified by grant personnel by moving such expenditures to an appropriate fund and revenue source. These procedures were deemed by the City to be adequate. Effect: Without formal documentation of the review process, the review might not occur without management's knowledge. In addition, internal controls should have a preventative as well as detective aspect to ensure timely identification of any unallowable costs or activities. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the City either utilize the electronic authorization capabilities of the accounting system or manually initial or sign invoices to have approvals of all grants expenditures by the designated grant personnel prior to disbursing the funds.

Corrective Action Plan

Views of Responsible Officials: The City maintains internal controls to review all CDBG expenditures. These controls vary based upon expenditure type (e.g. administration, City Department subrecipients, and non-City subrecipients); however, all of these expenditure types are reviewed prior to disbursement. These controls are summarized as follows: ? Administration ? Expenditures such as hours worked by City Staff, procurement of office supplies used to supplement the CDBG program, and other administrative costs are tracked through the City?s accounting system. These measures currently include the review/approval by managers/supervisors of City staff hours worked and the projects/activities completed, and review/approval of Purchase Requisitions and Purchase Orders by City staff through the City?s accounting system, all of which occur prior to disbursement. Purchase Requisitions and Purchase Orders also include a contract and an invoice or project description that lets appropriate City staff determine the eligibility of the proposed disbursement and the associated account being charged. ? City Department Subrecipients ? Expenditures for City Department Subrecipients are not made until review has been completed and the associated Purchase Requisitions and Purchase Orders is approved by appropriate City staff. Purchase Requisitions and Purchase Orders also include an invoice or project description that lets appropriate City staff determine the eligibility of the proposed disbursement and the associated account being charged. Applicable projects are also tracked through the City?s process to solicit bids/proposals, with the scope of work reviewed during all phases of the project to ensure grant eligibility. ? Non-City Subrecipients ? Subrecipients from outside the organization are subject to a thorough reimbursement protocol that includes the following: o Checklist - Provided to all grantees outlining requirements for submitting reimbursement requests, with example/fillable exhibits to outline eligible expenditures. These exhibits require the submittal of supplemental evidence (e.g. receipts, cancelled check/bank statements, time sheets, description of services provided, client eligibility, etc.). Paper records of these items are maintained. o Reviews - All reimbursement requests are reviewed/verified by two separate City departmental grant staff, with signatures confirming the eligibility of the request. Paper records of these items are maintained. o Purchase Orders - Invoices are included in all submittals to the City?s accounting system. All purchase orders are reviewed/approved by City staff via accounting system. In addition to maintaining paper records, moving forward all Purchase Orders and submitted invoices for non-City subrecipients will include copies of the approved/signed exhibits further confirming staff review of such items. All other Purchase Orders will include invoices that include a signed or initialed acknowledgement by appropriate City staff to supplement reviews/approval performed via the City?s accounting system.

Categories

Allowable Costs / Cost Principles Significant Deficiency Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 51558 2022-005
    Significant Deficiency Repeat
  • 51559 2022-006
    Significant Deficiency Repeat
  • 51560 2022-007
    Significant Deficiency Repeat
  • 51561 2022-008
    Significant Deficiency
  • 627999 2022-004
    Significant Deficiency
  • 628000 2022-005
    Significant Deficiency Repeat
  • 628001 2022-006
    Significant Deficiency Repeat
  • 628002 2022-007
    Significant Deficiency Repeat
  • 628003 2022-008
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
20.205 Highway Planning and Construction $15.47M
21.027 Covid-19 Coronavirus State and Local Fiscal Recovery Funds $1.80M
14.218 Community Development Block Grants/entitlement Grants $1.67M
20.106 Airport Improvement Program $940,527
14.218 Covid-19 Community Development Block Grants/entitlement Grants $446,317
14.239 Home Investment Partnerships Program $314,361
20.106 Covid-19 Airport Improvement Program $94,327
97.042 Emergency Management Performance Grants $21,449
16.738 Edward Byrne Memorial Justice Assistance Grant Program $8,918
21.019 Covid-19 Coronavirus Relief Fund $2,139