Fall 2016
Documenting the Life Cycle of a CPD Grant
Overview & Purpose
Community Planning and Development (CPD) grantees and subrecipients endeavor to
meet program requirements as they use grant funds for housing and community
development activities. While carrying out program activities should be the main focus,
grantees must remember that documentation provides the evidence that grant funds
were spent and activities completed appropriately. When grantees and subrecipients
fail to generate , gather and retain necessary documentation, justifying what was done
or how much it cost becomes a significant challenge. As a result, audits and monitoring
reviews frequently cite lack of documentation and questioned costs in findings. For
fiscal years 2011 to 2015, the U.S. Department of Housing and Urban Development
(HUD) Office of Inspector General (OIG) conducted 269 audits of CPD programs, and
questioned nearly $2.8 billion for ineligible or undocumented program costs. The
purpose of this bulletin is to make grantees and subrecipients aware of the impact that
insufficient documentation can have on their grant programs and offer guidance on how
to avoid these findings through the life cycle of a CPD grant.
The Importance of Documentation
Grantees are custodians of federal funds and should take special care to document how
use of these funds complies with applicable federal requirements. Establishing
procedures to produce adequate documentation is particularly important for new
grantees and subrecipients, who may be less familiar with federal rules regarding the
spending of grant funds. Once grantees and subrecipients are awarded a CPD grant,
program execution often becomes their primary focus; recordkeeping may be an
afterthought or local procedure may be used as a default, even if it is inconsistent with
federal rules.
When audit findings cite questioned costs, grantees must redirect time and resources
from program execution to locating or producing the appropriate documentation. When
such documentation cannot be produced, grantees must reimburse the federal funds
associated with the questioned costs. With an audit generally completed a year or more
after the grant funds have been spent, it is often difficult for the grantee and
subrecipients to know or have documentation of what actually occurred. In a worst case
scenario, the grantee may be required to repay grant funds for completed eligible
activities that are not adequately documented.
Document! Document! Document!
In many cases grantees do not realize that, in addition to spending-related
documentation, key decisions, plans, policies and procedures must all be
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documented as well. Audits often show that while some documentation is maintained,
problems generally arise because grantees and subrecipients do not realize the extent
of the documentation that is required, don’t know the requirements or misinterpret them.
At every phase of the grant life cycle, grantees must be careful to generate and
maintain appropriate documentation and stress the importance to their subrecipients of
maintaining appropriate documentation (see the Appendix for specific types of
documentation required at each of the phases described below).
Phase 1. Post-award Start-up
After the grant is awarded, documentation must be
maintained regarding expenditures, staffing,
facilities, equipment, program and administrative
policies and procedures associated with the grant.
Eligibility of CPD funded activities must be
documented, including any national objectives if
funded by CDBG grants. If activities involve
beneficiaries, appropriate criteria must be developed
and verifications of eligibility applied to document
who may receive funding. As discussed in the Integrity Bulletin on Subrecipient
Oversight, risk assessments and monitoring plans and schedules for subrecipients need
to be established and documented. Any applicable policies, plans, and procedures
needed to comply with the CPD grant should also be documented. Examples include
labor (Davis-Bacon), environmental and conflict-of-interest standards.
Example of undocumented post-award start up activities
A State’s contractor running a housing rehabilitation program was required to verify
homeowner eligibility and implement a management information system meeting
State specifications and internal control requirements. Of 22,135 grants, the
contractor coded 418 (2 percent) grants as ineligible. However, despite being coded
ineligible or lacking an eligibility determination, the homeowners were still awarded
grants. This occurred because the management information system lacked controls
to stop ineligible homeowners from being awarded funds. The audit questioned
$14.6 million and recommended all funded homeowners be reviewed to ascertain
eligibility. In this case, had the contractor tested the software before implementing
the system, the very costly glitch could have been identified and the finding could
have been prevented.
Phase 2. Administration and Spending
Administration refers to the internal management of the CPD funds
awarded to grantees and subrecipients. As discussed in the
Integrity Bulletin on Internal Controls, administration is where
documentation for control activities is developed and issued.
Administrative responsibilities include budget, accounting, cash
management systems, procurement policy plans and procedures,
all of which must be documented to demonstrate compliance with
CPD program rules.
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Rules for documenting spending are based on a set of standards—some universal, as
described in 2 Code of Federal Regulations (CFR) Part 200, and others specific to the
program requirements under which the funding is made available—that grantees and
subrecipients must follow. The three key regulatory cost principles are that costs must
be allowable, reasonable, and allocable. In general, adequate documentation includes
an invoice or receipt that identifies: who authorized the expense, what it was for, the
amount and when it was spent; which award was charged; and a determination that it is
allowable, reasonable and allocable per the regulation standards (see 2 CFR Part 200,
Subpart E on Cost Principals and specific program regulations for more information).
Executive and financial staff must be familiar with these principles to ensure grant funds
are spent appropriately.
The most common documentation deficiency found in OIG audits relates to payroll.
Often grantees have an administrative budget that lists, for instance, one full-time and
three half-time staff. They will then charge the grant for the full salary of the one person
and half the salaries for the other three regardless of how their time was actually spent.
This is incorrect. Instead, grantees should be requiring the staff to maintain individual
timesheets by funding source, cost objective and grant year (if there are multiple grants
or years involved). The time sheets are required to be approved by a supervisor and
entered into the payroll system accurately. Alternatively, some employees may charge
their time through an indirect cost allocation plan. These are all acceptable
administrative protocols, but audits find that some grantees or subrecipients neither
documented the rationale nor submitted a request to HUD for approval of a cost
allocation plan.
Example of incorrect payroll allocation
A non-profit coalition overseeing housing programs incorrectly allocated nearly
$41,000 in program staff salaries to its HUD grants. Employee timesheets were
inconsistent with the Coalition’s payroll records. The Coalition required its program
staff members to classify and separate hours worked by grant on their timesheets.
During an audit, coalition officials stated that actual costs incurred often exceeded the
total amount of its grants. Management and accounting staffs met on a periodic
basis to reallocate costs away from over-expended grants. These reallocations could
take place months after the employee timesheets were certified. The grantee should
not have reallocated the costs as there was no documentation to justify the changes
in the accounting records.
Phase 3. Program and Project Management
In this phase, documentation focuses on the scheduling of
activities to project completion and monitoring of subrecipients to
ensure that all requirements are being followed. Where matching
funds are required, grantees must track the source and age of
matching funds for their annual matching report to HUD. This is
also true for any program income the grant funds may generate. Grantees and
recipients are expected to have support for all progress reports and monitoring notes
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and reports. It’s a best practice to maintain a chronology file for each project that
contains a running history of everything that occurs on the project, including decisions,
significant phone call summaries or emails and texts related to major events in the life of
the project. Such a document allows a new manager or supervisor to know the exact
status of the project and how it got to its current point.
Example of lack of timely progress
A city achieved minimal progress on its economic development activities. It could not
demonstrate that more than $4.7 million in funds were spent in a timely manner. The
majority of funds for three fiscal years had gone unspent. The city failed to monitor
its subrecipient and failed to require and monitor progress reports. The city should
have removed a subrecipient that did not have the capacity to administer the activity
and should have requested a reprogramming of funds for other eligible activities.
Phase 4. Close-out
The end of a grant occurs after all activities are completed and
expenditures paid (other than close-out costs such as an audit) and
grant agreements with subrecipients satisfied. Close-out also
requires full reconciliation of all funding and expenditures and
securing and disposition of equipment or property per grant requirements. At the end of
a grant’s period of performance grantees and subrecipients have 90 days to submit
(unless an extension is granted) all financial, performance, and other reports, as
required by the terms and conditions of the Federal award (2 CFR 200.343 (a)).
Summary
Every year grantees and subrecipients lose the benefit of millions of dollars of grant
funds because they fail to adequately document their actions and expenditures.
Knowing the tests for allowability, reasonableness, and allocability, and the types of
documentation need to support the entire life cycle of your grant will make grant funds
go further and avoid repayments from your own funds. If you have questions regarding
documentation, contact your local CPD representative.
Appendix
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Following is a chart that shows the general life cycle activities of a grant and the
documentation that will be required. Records must be accurate, complete and orderly.
A grantee or recipient must establish the specific requirements for record keeping in its
subrecipient agreements.
DOCUMENTATING EACH PHASE OF THE GRANT LIFE CYCLE
Grant Phase
Documentation needed
Phase 1: Post-award Start-up
Funding
Approvals
and
Eligibility
• Award and amendment approvals
• Consolidated/Action/Annual Plans
• Grant correspondence
Make sure to have a full description of each activity that includes
location, the financials, targeted beneficiaries, and the regulatory
provisions confirming eligibility. Don’t forget to include citations for
cross-cutting regulations such as environmental, uniform
administrative requirements (2 CFR Part 200), labor, lead hazard,
Capacity,
Conflict of
interest, and
Institutional
Internal Controls
subrecipients:
• A Charter or Articles of Incorporation/Bylaws
• Tax status
• List of Board of Directors and Authorized Official
• Organizational Chart with Job Descriptions
• Résumés of Chief Admin. and Chief Fiscal Officers
• Lobbying Statement
• Financial Statement and Audit
• Conflict of Interest Statement
• Results of debarment and suspension checks
• Statement of Work
• Written Agreements
• Executed Memorandums of Understanding with Service
Providers
• Program policies and procedures
• Personnel Policies and Procedures
• Grievance Policy
• Policy Privacy/Confidentiality Policy
• Drug-Free Workforce Policy
•
Phase 2: Administration and Spending
Financial
Systems
cash management, accounting systems, processing
payments, drawing funds, and maintaining program income
Appendix
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budget items identified in the applications.
• Chart of accounts and ledgers for the source, application
and balance of funds showing budget, obligation, expense,
revenue, credit and cash amounts
• Reconciliation reports showing the general ledger accounts
match the federal financial management systems,
performance reports, and federal cash transaction reports
(SF-425)
• Purchase orders, contracts, leases, invoices, and receipts to
support obligations and costs
• The financial assistance agreement between the
subrecipient and owner (specifying levels of assistance,
intended uses for funds, matching requirements, repayment
and recapture procedures)
• Financial underwriting to support the level of assistance,
viability of the project, capacity to carry-out the project, and
eligibility of the funding
• Cost Principles (Reasonable, Allocable, and Applicable)
reviews with a formal certification for each review asserting
that the expenditures and the review is true, complete and
accurate (2 Part 200, Subpart E)
• Canceled checks or wire transfers to verify receipt of funds
• Bank account records
• Indirect Cost Allocation Plans (ICAP), Indirect Cost Rate
Proposals (ICRP), and executed ICRP agreements
• For indirect costs, records to show the formula or rate
applications
• Documentation to support that the formulas used for
distributing costs across funding sources are based on
actual reasonable usage for the activities and not portioned
based on award amounts or any estimated amounts
• Standards for documenting personnel expenses are found
in 2 CFR Part 200.430(i), must be incorporated into the
official records of the entity, reflect the employees’ total
activities including the federal- and nonfederal-funded
portions and may include payroll, cancelled checks or direct
deposit advices, personnel activity reports (PAR forms), and
certified time sheets. Draws based on budgeted costs must
be adjusted to reflect documented actual costs.
Procurement
and contracting
procedures in compliance with 2 CFR Part 200 –
Procurement Standards
Appendix
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contracts supported by grant funds
• Description of Goods and Services
• Cost estimates and analysis to determine the price is
reasonable
• Depending on the type of Procurement:
- Micro-Purchases - Invoices, logs showing distribution of
orders among qualified vendors, quotations unless price
is documented as reasonable
- Small Purchases - Written or faxed quotes, or if by
telephone, a record of the telephone solicitation
- Sealed Bids – Bid tabulation, advertisements, outreach
notifications, bid evaluations, award determination
- Competitive Proposals - advertisements, outreach
notifications, list of evaluation factors, evaluation reviews
and scores, negotiation correspondence, award
determination
- Noncompetitive Proposals – Must show why the other
forms of procurement were infeasible because: single
source; public emergency; or inadequate competition
after a number of solicitations were made; and HUD
approval prior to contract award
• Executed Contracts signed by an authorized official
• Results of debarment and suspension checks
• Performance oversight documentation may include
inspection reports and punch lists
• Approved change orders must include justifications and cost
analyses to determine the prices are reasonable
• Contractor billing oversight means reviews are documented
to show that the services or items delivered and paid for are
consistent with the items contained in the corresponding
purchase orders and/or contracts and timely payment of
vendors occurs once requested
• Required Bonding and Insurance documents
• Records showing affirmative steps to use small, minority-
owned and women-owned businesses in grant funded
contracts
• Contract standard award templates found in 2 CFR Part
200, Appendix II – Contract Provisions for non-Federal
Phase 3: Program and Project Management
Project
management
eligible (i.e. documenting a disability for permanent
supportive housing, documenting an exclusive benefit to
disabled adults for public accessibility improvements, work
Appendix
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• Full description of each activity and eligibility determination
• National objective determination (CDBG)
• Use and changes for real property, property management
• Applicable compliance areas and certifications
• Characteristics and location of beneficiaries
• Evidence of liens to secure loans
• Schedules with start and end dates, assignments, progress
status (contents vary based of the type of activity being
conducted)
• Applicable property standards with inspections, building
permits, and occupancy certifications
Complaints
beneficiaries, citizens, contractors, and subrecipients
• Written responses
• Investigation reports
• Correspondence with investigation results and remediation
actions if applicable
• Verifications that complaints have been sufficiently
Beneficiary
eligibility
depending on the approved activity
• Intake/screening procedures
• Applications for assistance including property address if
applicable
• Program participant files with proof of income eligibility and
proof of program eligibility as applicable (i.e. elderly,
Outcome
submitted timely
Monitoring
• Risk assessments
• Monitoring schedules and plans
• Monitoring results and reporting
Subrecipient
oversight
and therefore must maintain documents for federally-funded
activities in the same manner as grantees and recipients. They
maintain the same documents required by grantees and recipients
in this guidance. The responsibilities to maintain records is passed
on through the written agreement.
• Policies and procedures for maintenance and access to
Appendix
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Phase 4: Close-out
notice. They may include:
• Asset/property disposition
• Matching requirements met
• Final Status and Evaluation Report (ASER).
• Financial Status Report SF-425.
• Final request for payment