FINDING 2021‐002 – Material Weakness and Material Noncompliance – Allowable Cost Principles
Assistance Listing Number: 21.023
Federal Program Name: COVID-19 Emergency Rental Assistance Program
Award Year: 2021
Criteria: 2 CFR 200.303 indicates grant recipients should establish and maintain effective internal control that provides reasonable assurance that the entity is managing their federal awards in compliance with Federal statutes, regulations and the terms and conditions of their federal awards. To ensure accurate financial reports and compliance with all rules and regulations with respect to grant awards, the payroll process of the Center should include reviews and approvals at each level to determine and support payroll expenses, including that those expenses are allowable costs, reasonable, necessary, and within budget. Documentation should be maintained to demonstrate that all pay rates were adequately approved and authorized. Additionally, all disbursements should be supported by an invoice or other documentation to substantiate costs incurred, which includes documentation of review and approval.
Condition/Context: Our testing of internal controls over compliance and testing of compliance found the following errors:
•An employee’s advance draw of $1,550 with associated benefits of approximately $176 was inappropriately charged to the grant.
•Timecard approval was lacking in 8 instances of a sample of 21 payroll expenditures.
•There was one instance, out of 21 tested, in which a timecard lacked the employee certification.
•There were four instances, out of a sample of 60, in which support was not maintained by accounting, however they were provided at a later date upon request.
•One instance, out of a sample of 60, in which a $3,500 disbursement lacked proper documentation or other supporting evidence or approval.
Cause: The Center did not design and implement internal controls to effectively manage their federal awards.
Effect: Without properly designed and implemented controls, errors and unallowed costs could be disbursed with grant funds, which may be subject to return.
Questioned Costs: $5,226
Repeat Finding: No
Recommendation: We recommend the Center devote sufficient resources to the finance department. This includes training related to federal awards and internal controls. We also recommend management emphasize the importance of developing and following financial and personnel policies and procedures in relation to internal controls and compliance with allowable costs; and that all documentation be retained.
Views of responsible officials and planned corrective actions: Management agrees with the audit findings and is implementing the following accounting policies to ensure compliance:
•Changing the company payroll draw policy to limit the number of draws annually
•Reviewing company time sheet policies with employees
•Reviewing disbursement documentation policies to ensure all disbursements contain proper documentation.
•Instituting a policy of monthly review of documentation and approvals as part of the monthly close process
Timeline: policies have been implemented and reviewed
Contact Person(s):
Linda Lauch, Executive Director
FINDING 2021‐003 – Material Weakness and Material Noncompliance – Eligibility
Assistance Listing Number: 21.023
Federal Program Name: COVID-19 Emergency Rental Assistance Program
Award Year: 2021
Criteria: In accordance with the Center’s grant award and program requirements, the Center must have procedures in place for documenting and verifying eligibility in accordance with federal requirements. Specifically, “in accordance with Consolidated Appropriations Act, 2021, for ERA 1 in sections 501(c)(2)(C)(ii) of the Act concerning documentation of payments to households, sections 501(f)(2)(A) and (B) of the Act concerning signature requirements for applications and documentation required for tenants, section 501(k)(1) concerning area median income determinations, and sections 501(k)(3)(A)(I) and (II) concerning eligible household determinations and attestation requirements.”
Condition/Context: The Center’s grant funds were awarded to provide assistance payments for rent and utilities for eligible participants. The Center is required to maintain eligibility records for those participants and calculate payments based on eligibility requirements. Using a random sample selection methodology, we selected 60 payments from a total population of 414 payments made during fiscal year 2021 to test for compliance with eligibility, and we noted the following:
•An employee of the Center was also a participant whose rent was paid for 4 months to their landlord, and the same employee and participant was paid as a landlord for the same period.
•Internal controls were not designed or implemented addressing heighted risk surrounding related party transactions.
•All 60 participants tested did not have documented review controls to ensure that support and eligibility requirements were met prior to issuance of a disbursement.
•Two instances, out of a sample of 60, were missing self-declaration forms.
Cause: It appears there were inadequate internal controls over eligibility requirements.
Effect: It is possible individuals who are not eligible to receive services may have received services.
Questioned Costs: None noted.
Repeat Finding: No
Recommendation: We recommend the Center reexamine processes and design and implement controls over participant eligibility and ensure eligibility documentation is maintained for all participants in accordance with the grant agreement and the Uniform Guidance. We also recommend the Center provide additional training related to the Uniform Guidance to their personnel who administer federal funds.
Views of responsible officials and planned corrective actions: Management agrees with the finding and will implement a regular training program to review grant requirements and uniform guidance. Management will also implement the following policies:
•Related party transaction involving staff, or an immediate relative of a staff member will require a majority approval of the board
•Implementing an eligibility questionnaire/form that will be required for any assistance payouts.
•Review grant requirements and uniform guidance with staff and implement an annual training/review program
Timeline: Updated policies and reviews have been completed.
Contact Person(s):
Linda Lauch, Executive Director
FINDING 2021‐004 – Material Weakness and Material Noncompliance – Cash Management
Assistance Listing Number: 21.023
Federal Program Name: COVID-19 Emergency Rental Assistance Program
Award Year: 2021
Criteria: In accordance with the grant award’s general terms and conditions, the Center had agreed to limit the request to draw federal funds on a reimbursement basis and to request funds within 30 calendar days of proper expenditures.
Condition/Context: The Center had approximately $183,000 of refundable advances drawn from the grant (i.e., grant funds) as of June 30, 2021, which had not been expended, and was withdrawn in advance of expenditures.
Cause: Lack of sufficient oversight on cash management requirements may have led to this noncompliance.
Effect: Based upon the grant award’s general terms and conditions, failure to adhere to these requirements may cause termination of the grant, or payments could be withheld.
Questioned Costs: None noted.
Repeat Finding: No
Recommendation: We recommend the Center implement controls, including a supervisory review process over cash management and drawdown processes to ensure compliance with the requirements.
Views of responsible officials and planned corrective actions: Management agrees with the findings and believes the updated month end close process will improve cash management. We will also implement a supervisory review process as part of the monthly close and monthly report to the board.
Timeline: In process to be completed by end of the year.
Contact Person(s):
Konnie Brockway, Finance Director
Bill Davenport, Accountant
FINDING 2021‐002 – Material Weakness and Material Noncompliance – Allowable Cost Principles
Assistance Listing Number: 21.023
Federal Program Name: COVID-19 Emergency Rental Assistance Program
Award Year: 2021
Criteria: 2 CFR 200.303 indicates grant recipients should establish and maintain effective internal control that provides reasonable assurance that the entity is managing their federal awards in compliance with Federal statutes, regulations and the terms and conditions of their federal awards. To ensure accurate financial reports and compliance with all rules and regulations with respect to grant awards, the payroll process of the Center should include reviews and approvals at each level to determine and support payroll expenses, including that those expenses are allowable costs, reasonable, necessary, and within budget. Documentation should be maintained to demonstrate that all pay rates were adequately approved and authorized. Additionally, all disbursements should be supported by an invoice or other documentation to substantiate costs incurred, which includes documentation of review and approval.
Condition/Context: Our testing of internal controls over compliance and testing of compliance found the following errors:
•An employee’s advance draw of $1,550 with associated benefits of approximately $176 was inappropriately charged to the grant.
•Timecard approval was lacking in 8 instances of a sample of 21 payroll expenditures.
•There was one instance, out of 21 tested, in which a timecard lacked the employee certification.
•There were four instances, out of a sample of 60, in which support was not maintained by accounting, however they were provided at a later date upon request.
•One instance, out of a sample of 60, in which a $3,500 disbursement lacked proper documentation or other supporting evidence or approval.
Cause: The Center did not design and implement internal controls to effectively manage their federal awards.
Effect: Without properly designed and implemented controls, errors and unallowed costs could be disbursed with grant funds, which may be subject to return.
Questioned Costs: $5,226
Repeat Finding: No
Recommendation: We recommend the Center devote sufficient resources to the finance department. This includes training related to federal awards and internal controls. We also recommend management emphasize the importance of developing and following financial and personnel policies and procedures in relation to internal controls and compliance with allowable costs; and that all documentation be retained.
Views of responsible officials and planned corrective actions: Management agrees with the audit findings and is implementing the following accounting policies to ensure compliance:
•Changing the company payroll draw policy to limit the number of draws annually
•Reviewing company time sheet policies with employees
•Reviewing disbursement documentation policies to ensure all disbursements contain proper documentation.
•Instituting a policy of monthly review of documentation and approvals as part of the monthly close process
Timeline: policies have been implemented and reviewed
Contact Person(s):
Linda Lauch, Executive Director
FINDING 2021‐003 – Material Weakness and Material Noncompliance – Eligibility
Assistance Listing Number: 21.023
Federal Program Name: COVID-19 Emergency Rental Assistance Program
Award Year: 2021
Criteria: In accordance with the Center’s grant award and program requirements, the Center must have procedures in place for documenting and verifying eligibility in accordance with federal requirements. Specifically, “in accordance with Consolidated Appropriations Act, 2021, for ERA 1 in sections 501(c)(2)(C)(ii) of the Act concerning documentation of payments to households, sections 501(f)(2)(A) and (B) of the Act concerning signature requirements for applications and documentation required for tenants, section 501(k)(1) concerning area median income determinations, and sections 501(k)(3)(A)(I) and (II) concerning eligible household determinations and attestation requirements.”
Condition/Context: The Center’s grant funds were awarded to provide assistance payments for rent and utilities for eligible participants. The Center is required to maintain eligibility records for those participants and calculate payments based on eligibility requirements. Using a random sample selection methodology, we selected 60 payments from a total population of 414 payments made during fiscal year 2021 to test for compliance with eligibility, and we noted the following:
•An employee of the Center was also a participant whose rent was paid for 4 months to their landlord, and the same employee and participant was paid as a landlord for the same period.
•Internal controls were not designed or implemented addressing heighted risk surrounding related party transactions.
•All 60 participants tested did not have documented review controls to ensure that support and eligibility requirements were met prior to issuance of a disbursement.
•Two instances, out of a sample of 60, were missing self-declaration forms.
Cause: It appears there were inadequate internal controls over eligibility requirements.
Effect: It is possible individuals who are not eligible to receive services may have received services.
Questioned Costs: None noted.
Repeat Finding: No
Recommendation: We recommend the Center reexamine processes and design and implement controls over participant eligibility and ensure eligibility documentation is maintained for all participants in accordance with the grant agreement and the Uniform Guidance. We also recommend the Center provide additional training related to the Uniform Guidance to their personnel who administer federal funds.
Views of responsible officials and planned corrective actions: Management agrees with the finding and will implement a regular training program to review grant requirements and uniform guidance. Management will also implement the following policies:
•Related party transaction involving staff, or an immediate relative of a staff member will require a majority approval of the board
•Implementing an eligibility questionnaire/form that will be required for any assistance payouts.
•Review grant requirements and uniform guidance with staff and implement an annual training/review program
Timeline: Updated policies and reviews have been completed.
Contact Person(s):
Linda Lauch, Executive Director
FINDING 2021‐004 – Material Weakness and Material Noncompliance – Cash Management
Assistance Listing Number: 21.023
Federal Program Name: COVID-19 Emergency Rental Assistance Program
Award Year: 2021
Criteria: In accordance with the grant award’s general terms and conditions, the Center had agreed to limit the request to draw federal funds on a reimbursement basis and to request funds within 30 calendar days of proper expenditures.
Condition/Context: The Center had approximately $183,000 of refundable advances drawn from the grant (i.e., grant funds) as of June 30, 2021, which had not been expended, and was withdrawn in advance of expenditures.
Cause: Lack of sufficient oversight on cash management requirements may have led to this noncompliance.
Effect: Based upon the grant award’s general terms and conditions, failure to adhere to these requirements may cause termination of the grant, or payments could be withheld.
Questioned Costs: None noted.
Repeat Finding: No
Recommendation: We recommend the Center implement controls, including a supervisory review process over cash management and drawdown processes to ensure compliance with the requirements.
Views of responsible officials and planned corrective actions: Management agrees with the findings and believes the updated month end close process will improve cash management. We will also implement a supervisory review process as part of the monthly close and monthly report to the board.
Timeline: In process to be completed by end of the year.
Contact Person(s):
Konnie Brockway, Finance Director
Bill Davenport, Accountant