Finding 980543 (2023-001)

Finding 2023-001: Internal Control over Activities Allowed or Unallowed and Allowable Costs Federal Agency: Department of Housing and Urban Development Pass Through Agency: Pennsylvania Department of Community and Economic Development Program: Community Development Block Grants/ State’s Program and Non-Entitlement Grants in Hawaii (CDBG), ALN 14.228 Criteria: In accordance with 2 CFR Part 200.303, a non-Federal entity must establish and maintain effective internal control over Federal awards that provide 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. Condition: The City did not have a process in place to obtain invoices or other supporting documentation from the subrecipient to ensure that the CDBG funding was spent on activities allowed and allowable costs prior to reimbursing the subrecipient. Subsequent to making the 2023 payments to the subrecipient, the City obtained the invoices for review. Cause: The City did not have procedures in place to ensure that the CDBG invoices to support payments to the subrecipient were obtained and reviewed. Effect: The lack of internal control processes to review supporting documentation to ensure compliance with federal requirements prior to payments being made to subrecipients could result in unallowable costs to occur and not be detected prior to payment of funding to the subrecipient. Questioned costs: Unknown Recommendation: We recommend that the City obtains invoice support for all reimbursement requests from the subrecipient prior to payment. These requests should be reviewed for allowable activities and allowable costs by an individual knowledgeable of the program requirements prior to approving for payment. This review should be documented. View of Responsible Officials and Planned Corrective Action: Management agrees with this finding. See separate Corrective Action Plan.