Audit 291840

Subject: Allowable Costs Cost Principles Federal Agency: Housing and Urban Development Federal Program: Public and Indiana Housing Assistance Listing Number: 14.850 Compliance Requirements: Allowable Costs Cost Principles Audit Findings: Significant Deficiency Finding Number: 2023-001 Criteria: Internal controls preventing unallowable costs must support a low assessed level of control risk as required by 2 CFR § 200.514 as a lack of internal controls could lead to unallowable cost under 2 CFR 200. Also, in accordance with 2 CFR 200 Subpart E - Cost Principles, costs must be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. Condition: During our audit, we identified deficiencies in internal controls where the Authority was not following its Board approved check signing policy. The Housing Authority of the City of Richmond's Board approved policy determined that all checks, regardless of the amount, must be signed by the Executive Director or designee and a Board member. Amount of Questioned Costs: None noted. Context: Per the Authorities Board-approved check signing policy, all checks must be signed by 2 individuals (ED or other designee, and a Board Member). Of the 25 checks tested, all of them only had one signature, which goes against this policy. Cause: The Authority's internal controls over the accounts payables and check signing processes were inadequate in monitoring and identifying where disbursements failed to adhere to the corresponding policies, allowing checks with one signature to be processed. The Authority requires all checks to be signed by the Executive Director or a designee, as well as a Board Member, all of whom are approved as a bank signatory. The Authority printed the checks for payment without having an approved board member review over the checks and supporting backup prior to making the payments. Effect: A lack of internal controls could lead to unallowable costs under 24 CFR 200. During our audit we did not identify any unallowable cost; however, the Authority could have incurred unallowable costs related to the checks that were paid during the year because of this lack of adequate internal controls over the monitoring of check disbursements. Auditor’s Recommendation: The Authority should review board approved policies to ensure that segregation of duties are adequately performed. We recommend the Authority and the Board of Commissioners review the Check Signing Policy and make the necessary amendments to this Policy to allow for this Policy to be more effective and efficient. Subsequent to year end, the Authority made the appropriate changes and implementation to its check signing policy that checks under $10,000 require one signature for approval and all non recurring monthly expenses over $10,000 require two signatures for approval. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation. The Authority requires all checks to be signed by the Executive Director as primary signer or Financial Operations manager / Director of Finance as secondary signer as well as chairman of Board in emergency role if primary or secondary is unavailable, all of whom are approved as a bank signatory. All checks under $10,000 require one signature from primary check signer (Executive Director / President-CEO) and All non-recurring monthly expenses over $10,000 require two signatures for approval consisting of any combination Executive Director as primary signer or Financial Operations manager / Director of Finance as secondary signer, or as chairman of Board in emergency role if primary or secondary is unavailable.

Subject: Allowable Costs Cost Principles Federal Agency: Housing and Urban Development Federal Program: Public and Indiana Housing Assistance Listing Number: 14.850 Compliance Requirements: Allowable Costs Cost Principles Audit Findings: Significant Deficiency Finding Number: 2023-001 Criteria: Internal controls preventing unallowable costs must support a low assessed level of control risk as required by 2 CFR § 200.514 as a lack of internal controls could lead to unallowable cost under 2 CFR 200. Also, in accordance with 2 CFR 200 Subpart E - Cost Principles, costs must be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. Condition: During our audit, we identified deficiencies in internal controls where the Authority was not following its Board approved check signing policy. The Housing Authority of the City of Richmond's Board approved policy determined that all checks, regardless of the amount, must be signed by the Executive Director or designee and a Board member. Amount of Questioned Costs: None noted. Context: Per the Authorities Board-approved check signing policy, all checks must be signed by 2 individuals (ED or other designee, and a Board Member). Of the 25 checks tested, all of them only had one signature, which goes against this policy. Cause: The Authority's internal controls over the accounts payables and check signing processes were inadequate in monitoring and identifying where disbursements failed to adhere to the corresponding policies, allowing checks with one signature to be processed. The Authority requires all checks to be signed by the Executive Director or a designee, as well as a Board Member, all of whom are approved as a bank signatory. The Authority printed the checks for payment without having an approved board member review over the checks and supporting backup prior to making the payments. Effect: A lack of internal controls could lead to unallowable costs under 24 CFR 200. During our audit we did not identify any unallowable cost; however, the Authority could have incurred unallowable costs related to the checks that were paid during the year because of this lack of adequate internal controls over the monitoring of check disbursements. Auditor’s Recommendation: The Authority should review board approved policies to ensure that segregation of duties are adequately performed. We recommend the Authority and the Board of Commissioners review the Check Signing Policy and make the necessary amendments to this Policy to allow for this Policy to be more effective and efficient. Subsequent to year end, the Authority made the appropriate changes and implementation to its check signing policy that checks under $10,000 require one signature for approval and all non recurring monthly expenses over $10,000 require two signatures for approval. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation. The Authority requires all checks to be signed by the Executive Director as primary signer or Financial Operations manager / Director of Finance as secondary signer as well as chairman of Board in emergency role if primary or secondary is unavailable, all of whom are approved as a bank signatory. All checks under $10,000 require one signature from primary check signer (Executive Director / President-CEO) and All non-recurring monthly expenses over $10,000 require two signatures for approval consisting of any combination Executive Director as primary signer or Financial Operations manager / Director of Finance as secondary signer, or as chairman of Board in emergency role if primary or secondary is unavailable.