Finding Text
Finding Reference Number: SA2023-003 Cash Management - Draw Down of Community
Development Block Grant Funds in Advance of
Disbursement
Assistance Listing Number: 14.218
Assistance Listing Title: Community Development Block Grant – Entitlement Grants
COVID-19 - Community Development Block Grants/Entitlement
Grants-CV
Federal Agency: Department of Housing and Urban Development
Federal Award Identification Number: B-22-MC-06-0010
COVID-19 - B-20-MW-06-0010
Criteria: Under 2 CFR 200.305, a CDBG grantee is prohibited from drawing funds down from its line of credit in advance of cash need, and must minimize the time elapsing between the transfer of funds from its line of credit, and the disbursement of the funds. Advance payment must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the grantee or subrecipient carrying out an eligible activity.
Condition: We selected eight non-payroll disbursements related to projects and subgrants for testing and noted two disbursement in April 2023 and June 2023 totaling $268,439 had been charged to the CDBG program in the amount of $282.567. The difference of $14,128 was the retention payable to the vendor, which was not paid in cash until after June 30, 2023. However, the City included the retentions payable in the grant drawdowns filed and received in May 2023 and September 2023. We also noted that total retentions payable charged to the CDBG program for the project were $17,301 as of June 30, 2023.
Cause: We understand that the retentions were included in the grant drawdowns due to staff oversight.
Questioned Costs: We question costs in the amount of $17,301.
Effect: Drawing down funds in advance does not minimize the time elapsing between receipt of funds and expenditures and is not in compliance with the cash management provisions of 2 CFR 200.305 and the CDBG program.
Recommendation: The City should not draw down funds until expenditures have been paid in cash and in the event, drawdowns occur prior to disbursement, ensure that the time elapsing between the draw down and the expenditure is minimized. In addition, the City should determine whether the interest earned on the grant funds advanced need to be returned to the grantor.
View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.