Finding Text
Finding #SA2021-004: Allowable Subrecipient and Contract Costs
Assistance Listing Number: 14.218
Assistance Listing Title: COVID-19 - Community Development Block Grants/Entitlement Grants
Name of Federal Agency: Department of Housing and Urban Development
Pass Through Entity: San Joaquin County Community Development Department
Federal Award Identification Number: A-93-916
Criteria: The costs reimbursed to subrecipients and paid to vendors should not only be allowable under the grant program, the amounts paid should be supported by a contract or subgrant agreement with the entity.
Condition: During our testing of program expenditures for compliance with grant limitations and allowability, we noted that the City had a contract with a subrecipient for the Student Success Program, which included the personnel costs for the program/client coordinator of the program that provides basic and human schooling needs for eligible low-income children enrolled in the program. However, the costs reimbursed under the subrecipient agreement during fiscal year 2021 of $3,892 were for the subrecipient’s rent costs and not for costs related to the Student Success Program.
We also noted one vendor payment for costs related to running the Manteca Shelter in the amount of $50,000 that was supported by the vendor’s detail of expenses incurred for the period that totaled to only $47,292, a difference of $2,708. The contract with the vendor for the services provided indicated that it “shall not exceed” $225,000, and the first payment was to be a flat amount of $40,000, but it also indicated the “full payment of each task will only be made at such time as each task is completed” and did not indicate whether the remaining payments were to be on the reimbursement basis or a flat amount. City staff was not able to provide documentation to support the payment of the contract in “installments” as noted in the vendor invoice.
Questioned Costs: We question the costs disbursed to the subrecipient for the fiscal year of $3,892 and we question the costs paid to the vendor in excess of the supporting documentation of $2,708.
Effect: The City is not in compliance with the allowable costs requirements of the grant program.
Cause: We understand that the City staff responsible for the grant reimbursements at the time are no longer with the City and current City staff could not determine if the original subrecipient agreement was amended to allow the change from personnel costs to rent and if the vendor contract payment had additional supporting documentation that totaled to the amount paid.
Recommendation: The City should develop procedures to ensure that subrecipient costs reimbursed are related to the costs in the approved subgrant agreement.
In addition, the City should work with the grantor to determine if the ineligible costs can be corrected on a future reimbursement request, or if the questioned costs 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.