Finding Text
Finding 2023-008: Allowable Costs
Capital Funds 14.872
Noncompliance
Questioned Costs - $292,548
Criteria: The Authority is awarded an annual Capital Fund grant each year. The Authority prepares a five-year plan which indicates what each annual grant will be spent on. This annual budget is modified upon the grant award to match the grant amount. Only items included within the budget are allowable costs.
Condition: During our audit, we noted the Authority expended $16,439.90 of its 2019 Capital Fund grants for work items not included in the 2019 Capital Fund budget. We further noted the Authority advanced $96,898.10 in the 2019 Capital Fund grant and $89,605 in the 2021 Capital Fund grant from the 1480 General Capital Activity line item although no improvements had occurred. The funds are reported as unearned revenue at March 31, 2023.
Cause: The Authority’s staff did not have an adequate understanding of capital fund grant funds. The obligation dates were approaching and the Authority selected “capital fund like” transactions which were the $16,439.90 spent. The remaining grant funds were advanced so the Authority would not lose them.
Effect or Potential Effect: $292,548 of costs are being questioned as unallowable costs as the Authority did not have the related budget approved expenditures.
Recommendation: The Authority should review its situation with HUD to determine the best course of action to deal with the unallowed costs. Further, the Authority should establish procedures to ensure Capital Fund grant expenditures are included in an approved budget prior to incurring the expenditure. The Authority should establish a monthly procedure where the capital fund grant activity is reported to the Board of Commissioners. For each grant, the report should include the total grant award, the amounts obligated, the amounts advanced and the amounts expended. The Board of Commissioners should be familiar with what was approved in the applicable grant budget so funds are only expended on these items.