Audit 319507

Finding Reference Number: 2023-001 Type of Finding: Noncompliance and Significant Deficiency in Internal Control over Compliance Major Program: 14.267 - Continuum of Care (Grantor - Department of Housing and Urban Development) Compliance Requirement: Allowable Costs/Cost Principles Criteria: The requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (Uniform Guidance), Subpart E, Cost Principles, include the following: • The total cost of a federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits. • A cost is allocable to a particular federal award if the goods or services involved are chargeable or assignable to that federal award or the cost objective in accordance with the relative benefits received. • Indirect Facilities and Administrative Costs are those costs incurred for a common purpose benefiting more than one cost objective, and not readily assignable to the cost objectives specifically benefited. Indirect costs should be allocated equitably to all programs and cost centers of an organization. • A Direct Allocation Method for allocating indirect costs is acceptable provided each joint cost is prorated using a basis that accurately measures the benefits provided to each federal award and other activity of an entity. The basis must be established in accordance with reasonable criteria and supported by current data. • An organization should have appropriate internal controls in place to ensure the compliance requirements indicated above are met. Condition: During the year ended December 31, 2023, the Organization had HUD Continuum of Care grant contracts for eight of its programs. These contracts are funded on the basis of cost reimbursement. The Organization prepares monthly schedules identifying allowable direct and allocable indirect costs incurred during the month and submits to HUD for reimbursement based on the costs identified on these schedules. Our audit testing revealed that the April 2023 St. Francis Holistic Housing reimbursement included an overallocation of salary costs. Specifically, 100% of a certain employee’s salary for the month of April 2023 was reimbursed, whereas only 25% of their total salary should have been based on their actual time spent on that program. Cause: The primary cause for the finding was human error in preparing the schedule of costs that was submitted for reimbursement. Effect: The April 2023 St. Francis Holistic Housing request for reimbursement exceeded the allowable amounts based on the provision of the Uniform Guidance and the underlying contract with HUD. Recommendation: We recommend the Organization implement procedures to ensure the proper amounts of eligible costs are submitted for reimbursement.

Finding Reference Number: 2023-001 Type of Finding: Noncompliance and Significant Deficiency in Internal Control over Compliance Major Program: 14.267 - Continuum of Care (Grantor - Department of Housing and Urban Development) Compliance Requirement: Allowable Costs/Cost Principles Criteria: The requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (Uniform Guidance), Subpart E, Cost Principles, include the following: • The total cost of a federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits. • A cost is allocable to a particular federal award if the goods or services involved are chargeable or assignable to that federal award or the cost objective in accordance with the relative benefits received. • Indirect Facilities and Administrative Costs are those costs incurred for a common purpose benefiting more than one cost objective, and not readily assignable to the cost objectives specifically benefited. Indirect costs should be allocated equitably to all programs and cost centers of an organization. • A Direct Allocation Method for allocating indirect costs is acceptable provided each joint cost is prorated using a basis that accurately measures the benefits provided to each federal award and other activity of an entity. The basis must be established in accordance with reasonable criteria and supported by current data. • An organization should have appropriate internal controls in place to ensure the compliance requirements indicated above are met. Condition: During the year ended December 31, 2023, the Organization had HUD Continuum of Care grant contracts for eight of its programs. These contracts are funded on the basis of cost reimbursement. The Organization prepares monthly schedules identifying allowable direct and allocable indirect costs incurred during the month and submits to HUD for reimbursement based on the costs identified on these schedules. Our audit testing revealed that the April 2023 St. Francis Holistic Housing reimbursement included an overallocation of salary costs. Specifically, 100% of a certain employee’s salary for the month of April 2023 was reimbursed, whereas only 25% of their total salary should have been based on their actual time spent on that program. Cause: The primary cause for the finding was human error in preparing the schedule of costs that was submitted for reimbursement. Effect: The April 2023 St. Francis Holistic Housing request for reimbursement exceeded the allowable amounts based on the provision of the Uniform Guidance and the underlying contract with HUD. Recommendation: We recommend the Organization implement procedures to ensure the proper amounts of eligible costs are submitted for reimbursement.