Disaster Recovery CDBG- Supplemental Grants

Exhibit 6-96509.2 REV-7

Disaster Recovery CDBG- Supplemental Grants

NOTE:Most questions that address requirements contain the citation for the source of the requirement (statute, regulation, Federal Register notice, or grant agreement). However, in some instances, a controlling document (i.e., grant agreement or Federal Register notice) is provided without a specific citation. This is because requirements can vary significantly from appropriation to appropriation, causing the applicable regulations,grant agreements, and published Notices to vary accordingly. If requirements are not satisfiedin these instances, HUD should ensure that citations to the source of the requirement are appropriately noted in the section identified as “Describe Basis for Conclusion.” In addition, certain requirements may only apply to certain program participants; carefully review the citation to determine its applicability. If a requirement is not met, HUD must make a finding of noncompliance. Other questions may not address requirements, but are included to assist the reviewer in understanding the participant's program more fully and/or to identify issues that, if not properly addressed, could result in deficient performance. Negative conclusions to these questions may result in a "concern" being raised, but not a "finding."

Instructions: Use this Exhibit to monitor a Community Development Block Grant disaster recovery (CDBG-DR) program participant’s conformity to financial management requirementsin 24 CFR Parts 84 or 85 (2013 edition), and24 CFR 570, Subparts I, J, and K (2013 edition).

This Exhibit contains citations to the 2013 edition of 24 CFR part 84 and 85, regulations that were in place prior to the publication and implementation of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Requirements”)at2 CFR part 200, and is for monitoring program participants with funds not subject to the requirements in 2 CFR part 200. Program participants with funds subject to the requirements of 2 CFR part 200 should be monitored under Exhibit 34-1, as applicable.

In general, Federal awards made (obligated) prior to December 26, 2014, should be reviewed against the regulations codified in 24 CFR parts84 and 85 (2013 edition), as well as the 24 CFR part 570 (2013 edition) program regulations,unless otherwise provided by the terms of the Federal award (for example, where the terms of a Federal award made prior to December 26, 2014, state that the award is subject to regulations as may be amended, the Federal award is subject to 2 CFR part 200 and program regulations, as amended). Federal awards made (obligated) after December 26, 2014, as well as awards made prior to December 26, 2014, which include terms that state that the award is subject to regulations as may be amended, should be reviewed against the Uniform Requirements in 2 CFR part 200, as well as the 24 CFR part 570 program regulations, as amended. However, as mentioned in the NOTE above, requirementsassociated with CDBG-DR grants can vary significantly from appropriation to appropriation, which can result in the applicable regulations, grant agreements, published Notices, and general rules of thumb described in these instructions to vary; CPD staff should, therefore, first identify all sources of requirements related to the grant being monitored in order to determine the applicability of requirements and questions in this Exhibit through reference to Attachment 6-1, the Disaster Recovery CDBG Supplemental Grants Document Reference Tool, and any applicable statutes, regulations, and Notices.

For more information on whether compliance should be monitored against 24 CFR part 85 or 2 CFR part 200, CPD staff should refer to Notice SD-2015-01, Transition to 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Final Guidance, dated February 26, 2015, (available at: (“Transition Notice”) and Notice CPD-16-04, Additional Transition and Implementation Guidance for Recipients of Community Planning and Development (CPD) Funds for 2 CFR Part 200,Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, dated April 13, 2016 (available at: (“Additional Transition Guidance”). This is Exhibit is divided into two Parts:

PART 1: Scope of Review; Financial ManagementSystem and Cost Principles; Advances; Lump Sum Drawdowns;Internal Controls;Program Income; Salaries and Wages; Indirect Costs;and Reporting; and

PART 2: OMB CIRCULAR A-133: AUDITS OF STATES, LOCAL GOVERNMENTS, AND NON- PROFIT ORGANIZATIONS: Program Participants; Subrecipients; Audit Conclusions.

PART 1:

A. SCOPE OF REVIEW

1.

2.

1. Are there any waivers or alternative requirements published inassociation with the Federal Register for the CDBG-DR Program that would impact the financial management of this grant?

1. Are there any terms or special conditions related to financial management required by the grant agreement(s) obligating the funds?

1. If “yes” for either 2.a or 2.b, has the program participant taken steps to implement these waivers, alternative requirements, terms or special conditions?

1. If “yes” for either 2a. or 2.b, is the program participant compliant with the waiver, alternative requirements, terms and/or special conditions?

1. Listthe applicable waivers, alternative requirements, terms or conditions, and their effective dates, and identify the applicable Federal Registernotices:

B. Financial Management System and cost principles

3.

1. Do the program participant’s accounting records contain budgeted amounts for eligible activities as specified in 24 CFR 570, Subpart C?

1. Do the program participant’s accounting records contain evidence of an encumbrance/obligation when contracts are executed, purchase orders issued, etc.?

1. Do the program participant’s accounting records contain information on grant awards, obligations, unobligated balances, assets, liabilities, expenditures, and program income?

1. Do the program participant’s accounting records contain the identification of expenditures according to eligible activity classifications specified in the statute, regulations, or grant agreement that clearly identify the use of program funds for eligible activities?

4.

1. Does the program participant maintain adequate source documentation?

1. Did the record review indicate any instances of ineligible expenditures?

5.

6.

1. Do reviewed files document that no improper payments of CDBG-DR funds were made (i.e., any payment that should not have been made or that was made in an incorrect amount, such as a payment unsupported by invoices, contractors, or purchase orders, payments for an ineligible service, advances without prior approval, or payments for services not received)?

1. If answer to 6.a is “no,” what changes are the program participant taking for corrective actions (e.g., seeking recapture of funds resulting from an overpayment)?

C. Advances

7.

1. If the program participant requests funds in advance, does the participant minimize the time elapsed between the transfer of funds from the U.S. Treasury and disbursement by the participant?

1. Has HUD identified any problems where cash advances have been received and held in excess of three days?

1. If the program participant advances grant funds to subrecipients, does the participant have procedures to minimize the time elapsed between the transfer of funds to, and disbursement by, the subrecipients?

1. If HUD has required the program participant to provide narrative explanations of actions taken to reduce excess balances of cash advances, has the program participant provided such justification?

1. If grant advances are deposited into an interest-bearing account, what provisions have been made for return of interest income to HUD?

D. Lump Sum Drawdowns

8.

E. Internal Controls

9.

1. Are duties for key personnel of the program participant defined?

1. Does the program participant’s segregation of duties controls effectively reduce the opportunity for someone to perpetrate or conceal errors or irregularities in the normal course of duties?

1. Is it clear that all personnel are responsible for communicating upward the program participant’s operating problems and noncompliance with laws and regulations?

1. Does the program participant have sufficient liability coverage for responsible officials (such as fidelity bond coverage, errors/omissions coverage of self-insurance)?

10.

1. Does the program participant’s chart of accounts include a complete listing of the account numbers used to support the controls needed to ensure that resources used do not exceed resources authorized?

1. Do the program participant’s approval controls provide reasonable assurance that appropriate individuals approve recorded transactions in accordance with management’s general or specific criteria?

1. Do the program participant’s controls over the design and use of documents and records provide reasonable assurance that transactions and events are properly documented, recorded, and auditable?

1. Do the program participant’s internal control procedures support its ability to prepare financial statements that are fairly presented in conformity with generally accepted or other relevant and appropriate accounting principles and regulatory requirements? (One level of assurance of the accuracy and integrity of data is provided by the attainment of an unqualified opinion on the audited annual financial statements and internal controls.)

F. Program Income

11.

1. Are revenue-generating activities (e.g., rehabilitation, economic development loans) being undertaken? If answer is “yes,” answer Questions 11.b-d. If answer is “no,” move to Section G. Salaries and Wages.

1. If the program participant has an activity generating program income that is only partially Federally-assisted, does the participant have a system for ensuring that the program income is properly prorated to reflect the percentage of Federal program funds used?

1. Has the program participant disbursed program income (other than program income deposited in revolving funds) in payment of program costs prior to making further cash withdrawals from the U.S. Treasury?

12.

1. the timely and accurate transfer of any funds to be returned to the participant; and/or
2. the timely and accurate transfer of outstanding loans or accounts receivable?

13. Applicable Federal Register Notices may include additional grantee requirements for reporting the receipt and use of Program Income through the Disaster Recovery Grant Reporting (DRGR) System as well as procedures for amending or revising the grantee’s Action Plan.

1. Does the program participant comply with the requirements governing the receipt of, and reporting on the use of, program income in DRGR?

1. If the program participant received unexpected amounts of program income during its program year, did it follow the required procedures for amending or revising its Action Plan?

14.

1. written loan agreements that clearly describe the repayment terms, what constitutes a default and how it can be cured, what actions the program participant will take if the default is not cured, and (if applicable) what is pledged as security for the loan?
2. collection procedures that provide for the recognition of all current amounts due, payments received, notification to borrower when payments are overdue, a process for taking further action on defaulted loans, and criteria for writing off bad debts?

G. Salaries and Wages

15.

16.

1. For employees working solely on the CDBG-DR program, are charges for their salaries and wages supported by periodic certifications that the employees worked solely on that program for the period covered by the certification?

1. Were the certifications prepared at least semi-annually and signed by the employee or a supervisory official having first-hand knowledge of the work performed by the employee?

1. For employees who only work a part of their time on the CDBG-DR program, is there sufficient documentation to support the amount of time charged to the CDBG-DR program?

H. Indirect Costs(Indirect Costs are subject to OMBA-87 (2013) Requirements.)

17.

I. ReportING

18.

1. Has the program participantsubmitted timely and complete quarterly reports in DRGR?

1. Does the program participant demonstrate that its systems and/or procedures ensure that accurate information is collected and reported to HUD in DRGR and that such systems and/or procedures comply with Federal policies and requirements governing reporting?

1. Does the information on obligations, expenditures, and program income submitted to HUD in DRGR, or other applicable report(s), reconcile with the program participant’s accounting records?

1. Does the financial information (e.g., drawdowns, unexpended balances) recorded in HUD’s financial management systems (e.g., LOCCS, DRGR) match the official accounting records of the program participant for the period covered by the last CPD-required performance report?

1. If the accounting system is on a cash basis, can the program participant support accrual data in DRGR, or other applicable report(s), from documentation on hand?

19.