Audit 368153

Public Housing - Inter-Program Federal Agency: U.S. Department of Housing and Urban Development Federal Program Title: Public and Indian Housing Assistance Listing Number: 14.850 Federal Award Identification Number and Year: OK002 and 2024 Award Period: January 1, 2024 through December 31, 2024 Type of Finding: - Significant Deficiency in Internal Control over Compliance. - Other Matters. Criteria or specific requirement: The Operating Fund was established for the purpose of making assistance available to PHAs for the operation and management of public housing. Transfers out of the Operating Fund can only occur in very limited circumstances, such as when PHAs participate in the Moving to Work Demonstration Program (Assistance Listing 14.881) authorized by 204(c)(1) of Title II of the Omnibus Consolidated Rescissions and Appropriations Act of 1996, Pub. L. No. 104-134, 110 Stat. 1321-282. This would preclude PHAs from using Operating Funds to provide temporary loans to other programs within the PHA. Timing differences in a pooled cash environment would not be considered as temporary loans. Inter-fund transactions indicate the existence of temporary loans. Inter-fund receivables are recorded on FDS line 144 (Inter program – due from). In particular, inter-fund receivables should be reviewed to determine whether they are satisfied on a timely basis. In addition, FDS lines 10020 (Operating Transfers Out) and 10094 (Transfers Between Programs and Projects – Out) could indicate whether transfers out of the Operating Fund have been made. If PHAs have transferred funding out of the Operating Fund, proper authorization from HUD should be documented (42 USC 1437g(e)). Condition: During our audit, we noted the Authority did not have adequate controls in place to track inter-company transactions. Questioned costs: $4,738,502 – this amount is the net of FDS Lines 144 and 347 – Inter Program – Due from and Due to. Context: During our audit, we noted that the Public and Indian Housing program has amounts on FDS Line 144, Inter Program – Due From of $5,104,104. This could indicate that funds could have been used to provide temporary loans to other programs. Cause: The Authority uses a revolving fund to pay operating costs. As such, entries are made to intercompany accounts to balance adjustments. The Authority did not close out these balances at the end of the year. Effect: The authority could be potentially misstating inter-program amounts or transferring funds from the operating accounts to provide temporary loans to other housing authority programs, which would require HUD approval. Recommendation: We recommend the Authority design controls to ensure an adequate review process is in place to ensure inter-program accounts are properly stated at year-end. View of Responsible Officials: There is no disagreement with this finding.