Finding Text
FINDING 2022-006 Subject: CDBG - Entitlement Grants Cluster - Period of Performance Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Number and Year (or Other Identifying Number): B-22-MC-18-0015 Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Other Matters Condition and Context A non-federal entity may charge to the federal award only allowable costs incurred during the period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity. Grant number B-22-MC-18-0015 had a period of performance which began on July 1, 2022. Two of the four claims tested, or 50 percent, were for services provided prior to the beginning of the period of performance. The City did not receive approval from the federal awarding agency to charge costs incurred before the period of performance to the federal grant. The lack of internal controls and noncompliance were isolated to grant B-22-MC-18-0015. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) 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. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.1 states in part: ". . . Period of performance means the total estimated time interval between the start of an initial Federal award and the planned end date, which may include one or more funded portions, or budget periods. Identification of the period of performance in the Federal award per ? 200.211(b)(5) does not commit the awarding agency to fund the award beyond the currently approved budget period. . . ." Cause A proper system of internal controls was not designed by management of the City. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, costs incurred before the beginning of the period of performance were charged to the grant. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure costs charged to the grant occur within the proper period of performance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.