The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, audited Grace Hill Neighborhood Health Centers (Grace Hill). Our audit objective was to determine whether Grace Hill properly charged payroll and support expenses to the grants. We concluded that Grace Hill charged unsupported salary and benefit costs to the grants because it did not require grant staff to properly track their time. Additionally, Grace Hill improperly charged computer support expenses as direct costs to its grants. As a result, it charged more than $3.2 million in unsupported payroll expenses to the grants and received $196,690 more than allowable from the grants.

We recommended that HUD require Grace Hill to design and implement a process to track actual staff hours, base future drawdown requests on actual activity, and provide documentation to support salary and benefits charged to the grants or reimburse the grants from nonfederal sources for costs that it cannot adequately support. Additionally, we recommended that HUD require Grace Hill to review the direct and indirect costs and certify that no other duplications have occurred and strengthen the review process by training the reviewer on what is included in the indirect cost rate.