2021-006 ALLOWABLE ACTIVITIES, ALLOWABLE COST, AND ELIGIBILITY - MATERIAL WEAKNESS
Federal Program
Emergency Rental Assistance ALN 21.023; passed through the County of Berks
Criteria
Attachment A, #1 of the grant agreement indicates that grant funds are to be spent on rent, rental arrears, utilities and home energy costs, and utilities and home energy costs arrears and stipulates that assistance shall not be provided for a period in excess of 15 months (extended to 18 months in ERA2 agreement). The ERA1 agreements also state that assistance shall not be provided for more than 3 months of prospective rent payments unless a subsequent application for additional financial assistance is provided.
FAQ #5 issued by the Department of Treasury related to this program indicates that Grantees must obtain, if available, a current lease, signed by the applicant and the landlord or sublessor, that identifies the unit where the applicant resides and establishes the rental payment amount. Additionally, FAQ #6 notes that all payments for utilities and home energy costs should be supported by a bill, invoice, or evidence of payment to the provider of the utility or home energy service.
Attachment C, Section 2 of the grant agreement states that grants are available to households whose income does not exceed 80% of the area median household income as defined by the United States Department of Housing and Urban Development, and applicants must provide income source documentation at the time of application.
Condition/Cause
For 1 out of 60 cases tested, assistance in excess of 18 months was provided because the financial reviewer did not question the ledger indicating months of arrears.
For 14 out of 60 cases tested, prospective assistance for more than 3 months was provided without reapplications on file. In 5 of these cases, the reapplication was received, but after more than 3 months of prospective assistance had been paid. For the remaining 9 cases, reapplications were never received. Documentation was not provided to determine which payments fell under ERA1, which was subject to this requirement, or ERA2, which was not.
For 21 out of 60 cases tested, the amount paid for rent or utilities did not agree to a lease agreement or bills on file for the following reasons: (1) In 6 instances the Authority added a utility allowance to the monthly rent paid without obtaining utility bills to support the amount paid or ensuring funds were paid to the proper utility provider, (2) in 4 instances the Authority paid the same monthly rent twice, (3) in 10 instance either rent or utilities paid did not agree to documentation on file as a result of clerical errors or failing to question inconsistencies, and (4) in 1 instance the rent was paid to the incorrect landlord due to another case having a similar tenant name.
For 1 out of 60 cases tested, an individual who did not meet income eligibility requirements received assistance due to an error in how eligibility was calculated.
The Authority did not have controls in place to detect the noncompliance items noted above prior to issuing payments.
Effect
Program assistance was provided for certain individuals who did not demonstrate meeting the allowable activities/cost or eligibility criteria of the grant.
Questioned Costs
Known questioned costs are $55,938.
Context
The emergency rental assistance program was a new federal program for the Authority in 2021, and there was a push to provide payments to applicants timely, which required the Authority to put procedures into place quickly to administer the program. Additionally, guidance was being clarified after the funds were received. Within our testing of 60 cases, questioned costs comprise approximately 10.54% of the total costs tested.
Repeat Finding
No.
Recommendation
We recommend the Authority review their checklists and training for individuals who are reviewing transactions for the allowable activities, allowable cost, and eligibility criteria of grants. This training should include a thorough review of the grant agreement and allowable activities and costs for the funding stream. We also recommend that the Authority revisit and strengthen internal controls over allowable activities, allowable costs, and eligibility related to grant programs.
Management Response
See corrective action plan included in this report package.
2021-007 REPORTING - SIGNIFICANT DEFICIENCY
Federal Program
Emergency Rental Assistance ALN 21.023; passed through the County of Berks
Criteria
The grant agreements for the three grants related to emergency rental assistance each contain reporting requirements. The grant agreements for Federal ERA1 and ERA2 require the Authority to provide certain reporting information to the County within 30 days of each calendar quarter to allow the County to complete and submit the report. ERA1 funds passed through the state and County indicate that the Authority must prepare and submit a summarized monthly report in the format required by the Commonwealth no later than the 10th of each month, beginning May 10, 2021. Treasury has issued reporting guidance to all grantees.
Condition/Cause
The Authority did not maintain documentation of internal controls over reporting for the program. Additionally, while reporting spreadsheets were provided, the final reports submitted and back-up for the amounts reported were not maintained.
Effect
The Authority did not have documentation to support an internal control over reporting. Additionally, as certain files were over-written, the Authority could not produce documentation to support information reported.
Questioned Costs
Less than $25,000.
Context
During our testing, we requested all quarterly reports submitted, as well as a sample of 3 monthly reports. While the Authority could provide certain spreadsheets, the report submitted as well as a detail of supporting documentation could not be provided.
Repeat Finding
No.
Recommendation
We recommend that all grant reports are reviewed by a person independent of the preparer who has knowledge of the grant requirements. This review should include comparing the amounts reported to detailed support for accuracy. We also recommend that the Authority review their recordkeeping procedures for documentation related to grant reporting. There should be a process in place to ensure all required documentation is maintained and filed in an orderly system that allows the Authority to locate and provide documentation when required.
Management Response
See corrective action plan included in this report package.
2021-008 SUBRECIPIENT MONITORING - SIGNIFICANT DEFICIENCY
Federal Program
Emergency Rental Assistance ALN 21.023; passed through the County of Berks
Criteria
Per 2 CFR section 200.332(b), a pass-through entity must evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward. This evaluation of risk may include consideration of such factors as: (1) the subrecipient’s prior experience with the same or similar awards, (2) the results of previous audits, (3) whether the subrecipient has new personnel or new or substantially changed systems, and (4) the extent and results of federal awarding agency monitoring.
2 CFR sections 200.332(d) through (f) require that the pass-through entity monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals.
Condition/Cause
The Authority passed through funds to one subrecipient under the emergency rental assistance program in 2021. Management did not perform a risk assessment or monitoring of the subrecipient during 2021.
Effect
The Authority is not in compliance with the subrecipient monitoring requirements of the program during 2021.
Questioned Costs
Less than $25,000.
Context
During 2021 the Authority paid $3,815,000 in passthrough funds to one subrecipient. A risk assessment was not performed, and monitoring activities did not occur in 2021 to determine if funds were properly spent.
Repeat Finding
No.
Recommendation
We recommend that the Authority develop a procedure/internal control to ensure a risk assessment is performed for all subrecipients, as required by 2 CFR section 200.332(b). Based on this risk assessment, appropriate monitoring procedures should be performed.
Management Response
See corrective action plan included in this report package.
2021-006 ALLOWABLE ACTIVITIES, ALLOWABLE COST, AND ELIGIBILITY - MATERIAL WEAKNESS
Federal Program
Emergency Rental Assistance ALN 21.023; passed through the County of Berks
Criteria
Attachment A, #1 of the grant agreement indicates that grant funds are to be spent on rent, rental arrears, utilities and home energy costs, and utilities and home energy costs arrears and stipulates that assistance shall not be provided for a period in excess of 15 months (extended to 18 months in ERA2 agreement). The ERA1 agreements also state that assistance shall not be provided for more than 3 months of prospective rent payments unless a subsequent application for additional financial assistance is provided.
FAQ #5 issued by the Department of Treasury related to this program indicates that Grantees must obtain, if available, a current lease, signed by the applicant and the landlord or sublessor, that identifies the unit where the applicant resides and establishes the rental payment amount. Additionally, FAQ #6 notes that all payments for utilities and home energy costs should be supported by a bill, invoice, or evidence of payment to the provider of the utility or home energy service.
Attachment C, Section 2 of the grant agreement states that grants are available to households whose income does not exceed 80% of the area median household income as defined by the United States Department of Housing and Urban Development, and applicants must provide income source documentation at the time of application.
Condition/Cause
For 1 out of 60 cases tested, assistance in excess of 18 months was provided because the financial reviewer did not question the ledger indicating months of arrears.
For 14 out of 60 cases tested, prospective assistance for more than 3 months was provided without reapplications on file. In 5 of these cases, the reapplication was received, but after more than 3 months of prospective assistance had been paid. For the remaining 9 cases, reapplications were never received. Documentation was not provided to determine which payments fell under ERA1, which was subject to this requirement, or ERA2, which was not.
For 21 out of 60 cases tested, the amount paid for rent or utilities did not agree to a lease agreement or bills on file for the following reasons: (1) In 6 instances the Authority added a utility allowance to the monthly rent paid without obtaining utility bills to support the amount paid or ensuring funds were paid to the proper utility provider, (2) in 4 instances the Authority paid the same monthly rent twice, (3) in 10 instance either rent or utilities paid did not agree to documentation on file as a result of clerical errors or failing to question inconsistencies, and (4) in 1 instance the rent was paid to the incorrect landlord due to another case having a similar tenant name.
For 1 out of 60 cases tested, an individual who did not meet income eligibility requirements received assistance due to an error in how eligibility was calculated.
The Authority did not have controls in place to detect the noncompliance items noted above prior to issuing payments.
Effect
Program assistance was provided for certain individuals who did not demonstrate meeting the allowable activities/cost or eligibility criteria of the grant.
Questioned Costs
Known questioned costs are $55,938.
Context
The emergency rental assistance program was a new federal program for the Authority in 2021, and there was a push to provide payments to applicants timely, which required the Authority to put procedures into place quickly to administer the program. Additionally, guidance was being clarified after the funds were received. Within our testing of 60 cases, questioned costs comprise approximately 10.54% of the total costs tested.
Repeat Finding
No.
Recommendation
We recommend the Authority review their checklists and training for individuals who are reviewing transactions for the allowable activities, allowable cost, and eligibility criteria of grants. This training should include a thorough review of the grant agreement and allowable activities and costs for the funding stream. We also recommend that the Authority revisit and strengthen internal controls over allowable activities, allowable costs, and eligibility related to grant programs.
Management Response
See corrective action plan included in this report package.
2021-007 REPORTING - SIGNIFICANT DEFICIENCY
Federal Program
Emergency Rental Assistance ALN 21.023; passed through the County of Berks
Criteria
The grant agreements for the three grants related to emergency rental assistance each contain reporting requirements. The grant agreements for Federal ERA1 and ERA2 require the Authority to provide certain reporting information to the County within 30 days of each calendar quarter to allow the County to complete and submit the report. ERA1 funds passed through the state and County indicate that the Authority must prepare and submit a summarized monthly report in the format required by the Commonwealth no later than the 10th of each month, beginning May 10, 2021. Treasury has issued reporting guidance to all grantees.
Condition/Cause
The Authority did not maintain documentation of internal controls over reporting for the program. Additionally, while reporting spreadsheets were provided, the final reports submitted and back-up for the amounts reported were not maintained.
Effect
The Authority did not have documentation to support an internal control over reporting. Additionally, as certain files were over-written, the Authority could not produce documentation to support information reported.
Questioned Costs
Less than $25,000.
Context
During our testing, we requested all quarterly reports submitted, as well as a sample of 3 monthly reports. While the Authority could provide certain spreadsheets, the report submitted as well as a detail of supporting documentation could not be provided.
Repeat Finding
No.
Recommendation
We recommend that all grant reports are reviewed by a person independent of the preparer who has knowledge of the grant requirements. This review should include comparing the amounts reported to detailed support for accuracy. We also recommend that the Authority review their recordkeeping procedures for documentation related to grant reporting. There should be a process in place to ensure all required documentation is maintained and filed in an orderly system that allows the Authority to locate and provide documentation when required.
Management Response
See corrective action plan included in this report package.
2021-008 SUBRECIPIENT MONITORING - SIGNIFICANT DEFICIENCY
Federal Program
Emergency Rental Assistance ALN 21.023; passed through the County of Berks
Criteria
Per 2 CFR section 200.332(b), a pass-through entity must evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward. This evaluation of risk may include consideration of such factors as: (1) the subrecipient’s prior experience with the same or similar awards, (2) the results of previous audits, (3) whether the subrecipient has new personnel or new or substantially changed systems, and (4) the extent and results of federal awarding agency monitoring.
2 CFR sections 200.332(d) through (f) require that the pass-through entity monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals.
Condition/Cause
The Authority passed through funds to one subrecipient under the emergency rental assistance program in 2021. Management did not perform a risk assessment or monitoring of the subrecipient during 2021.
Effect
The Authority is not in compliance with the subrecipient monitoring requirements of the program during 2021.
Questioned Costs
Less than $25,000.
Context
During 2021 the Authority paid $3,815,000 in passthrough funds to one subrecipient. A risk assessment was not performed, and monitoring activities did not occur in 2021 to determine if funds were properly spent.
Repeat Finding
No.
Recommendation
We recommend that the Authority develop a procedure/internal control to ensure a risk assessment is performed for all subrecipients, as required by 2 CFR section 200.332(b). Based on this risk assessment, appropriate monitoring procedures should be performed.
Management Response
See corrective action plan included in this report package.