Finding Text
FINDING 2023-005
FEDERAL PROGRAMS COMMUNITY DEVELOPMENT BLOCK GRANTS/ ENTITLEMENT GRANTS CLUSTER:
COMMUNITY DEVELOPMENT BLOCK GRANTS/ ENTITLEMENT GRANTS
(ASSISTANCE LISTING NUMBER 14.218)
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL
COMPLIANCE
REQUIREMENT PROGRAM INCOME
CONDITION During the Program Income test, I noted that the Municipality did not spend down program income funds on hand before grant funds. The Program had $224,800 in program income funds available to be disbursed for eligible activities during fiscal year 2022-2023. Nevertheless, the program only spends $92,126 of these funds and made cash withdrawals of CDBG funds for activities that could be covered with program income funds.
CRITERIA Code of Federal Regulations 24, Section 570.504(b)(2)(ii) states that if the recipient chooses to retain program income, that program income shall be disbursed for eligible activities before additional cash withdrawals are made from the U. S. Treasury.
CAUSE During the fiscal year 2022-2023, the Program did not maintain appropriate internal controls to ensure that all program income funds are used before additional grant funds drawdowns are made.
EFFECT When Grant Funds are used for an expenditure in place of the Program Income on hand, the grantee will not have the opportunity to increase the amounts available for program activities.
RECOMMENDATION I recommend management continue improving the internal controls and procedures to ensure that the program income funds are used for CDBG activities before withdrawal of CDBG funds.
QUESTIONED COSTS None
PRIOR YEAR FINDING A similar finding was presented in prior year Schedule of Findings and Questioned Costs (2022-005)
VIEWS OF RESPONSIBLE
OFFICIALS AND PLANNED
CORRECTIVE ACTION Instructions were given to the Program staff to ensure that the program income funds will be used for CDBG activities before the withdrawal of CDBG funds.