Audit 382641

U.S. Department of Housing and Urban Development, ALN # 14.218 Community Development Block Grants/Entitlement Grants Reporting Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: The Uniform Guidance, Section 200.303 Internal Controls, requires that the non-Federal entity must establish and maintain documentation of effective internal controls over Federal awards that provide reasonable assurance that awards are being managed in compliance with Federal statutes, regulations and the terms and conditions of the Federal award. Condition: During testing of reporting compliance for the CDBG program, we reviewed three quarterly PR29 Cash on Hand reports submitted to HUD. One of the three reports contained an inaccurate amount in Line 13 – Revolving Funds Received During the Reporting Period. The incorrect figure did not reflect actual program activity for the quarter, resulting in a discrepancy between reported and actual cash activity. As such, ending Cash on Hand does not agree to underlying accounting records. Additionally, we tested the annual PR26 CDBG Financial Summary Report for Program Year 2023 which was filed during the City’s current fiscal year. The City was unable to support the accuracy of the amount reported within line 5, current program income. Cause: The City’s internal review process for CDBG reporting was insufficient to detect and correct errors prior to submission. Specifically, the lack of a documented secondary review and reconciliation of source data to the PR29 and PR26 reports contributed to the inaccurate reporting within both reports. Effect: The submission of inaccurate information to HUD could lead to misinterpretation of program cash flow and compliance status. While the error was isolated, it indicates a weakness in internal controls that could result in future reporting inaccuracies, potentially impacting Federal oversight and funding decisions. Questioned Costs: None Reported Context/Sampling: A nonstatistical sample of 4 reports out of 6 were selected for Reporting testing. Repeat Finding from Prior Year: No Recommendation: We recommend the City ensure review and approval controls are in place to ensure all required reports are accurate and submitted timely. Views of Responsible Officials: Agree