2023-002 Compliance and Internal Controls over Procurement (Material Weakness and Material Noncompliance) U.S. Department of Housing and Urban Development 14.267 – Continuum of Care Program 2023 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: While the Organization has approved policies and procedures for procurement, these are not consistently followed and therefore no observable evidence was available to verify that proper procurement procedures were followed for 4 out of 8 selected products and services for our testing. Cause: Majority of the purchases subject to potential procurement were from recurring vendors from prior years for whom documentation was not available at the Organization. For any new vendors, the policies were not applied consistently by the upper management. Effect: Not following procurement policies may result in funds to be returned back to grantor and / or impact future funding. Questioned Costs: Known costs of $169,575 and likely costs of $198,266. Perspective: As a result of not having a devoted, full-time employee in the senior financial management position, required controls and record keeping were not properly established. Repeat Finding: Yes Recommendation: The Organization should establish procedures to ensure that controls related to procurement are consistently implemented and that all written records are maintained to support that the compliance requirement is met. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-003 Compliance and Internal Controls over Matching (Material Weakness) Internal Controls over Period of Performance and Earmarking (Material Weakness) U.S. Department of Housing and Urban Development 14.267 – Continuum of Care Program 2023 Funding Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 24 CFR Section 578.73, the Organization must match all grant funds, except for leasing funds, with no less than 25 percent of funds or in-kind contributions from other sources. Furthermore, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Condition: Payroll costs that could be potentially chargeable to the grant but were not, were claimed as a matching contribution under the grant by the Organization. However, as noted in finding 2023-001 above, payroll cost allocated to the grants did not agree to the grant hours reported in the approved timesheets for certain samples selected for testing. Because of this finding, we cannot establish the accuracy of payroll claimed as a match for the grant. Review and approval of each payroll batch was conducted, but in 6 out of 6 instances tested, errors in grant allocation were not detected. Cause: While there is a process in place for upper management to review and approve each payroll batch based on hours incurred per timesheet, it appears that the control was not operating effectively as the payroll cost charged to the grant in several instances exceeded the corresponding hours charged to the grant per the timesheet. Effect: Unmatched funds may be required to be returned back to grantor and / or impact future funding. Questioned Costs: Undeterminable Perspective: Payroll charged to the grants exceeded time incurred in 7 out of the 60 samples tested, including 1 out of the 17 samples for contract TX0275L6E002112 where payroll was used as a match. Repeat Finding: Yes. Recommendation: We recommend that part of the review process for payroll include verification that the cost charged to the grant does not exceed the grant hours reported on employee timesheet. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-004 Compliance and Internal Controls over Earmarking (Significant Deficiency) U.S. Department of Housing and Urban Development 14.267 – Continuum of Care Program Contract No. TX0425L6E002106 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 24 CFR Section 578.59, the Organization may use up to 10 percent of any grant awarded under this part for the payment of project administrative costs related to the planning and execution of Continuum of Care activities. Condition: Administrative costs exceeded 10 percent of the total award spent for one of the grants closed during the year. Cause: While the administrative costs drawn on the grant were below the maximum allowed by the grant, not all program costs were drawn on the grant, resulting in administrative costs to be over 10% of funds drawn on the grant. Additionally, as a result of not having a devoted, full-time employee in the senior financial management position, there was no reconciliation performed to check that the administrative costs were limited to 10% of all funds drawn. Effect: Overdrawn administrative costs may be required to be returned back to grantor and / or impact future funding. Questioned Costs: $1,321 Perspective: Required reconciliations to verify the administrative costs as a percentage of amounts drawn were not performed. Controls over earmarking requirements were not implemented. Repeat Finding: Yes Recommendation: The Organization should establish procedures to ensure that controls related to earmarking are consistently implemented which should include reconciling the administrative costs to all drawn funds on individual grants. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-005 Compliance and Internal Controls over Program Income (Significant Deficiency) U.S. Department of Housing and Urban Development 14.267 – Continuum of Care Program 2023 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 24 CFR Section 578.57, recipients or subrecipients must examine a program participant's income initially, and at least annually thereafter, to determine the amount of the contribution toward rent payable by the program participant. Condition: While the entity has adopted controls over compliance related to program income, these controls have not been consistently implemented during the year. Additionally for a sample of files selected for scattered locations, no evidence of income calculations to support program income was available within the participant’s files. Cause: Turnover / inadequate staffing in the Organization throughout the year and absence of a senior financial management position resulted in these controls not being consistently implemented. Effect: Without internal controls operating effectively, it is possible that the Organization would be at risk to be out of compliance with the compliance requirements. The Organization cannot effectively manage its federal program with controls that do not operate effectively. Questioned Costs: Undeterminable Perspective: No observable evidence of controls being implemented consistently on the above compliance requirement. Additionally, for 5 of the 7 files selected for scattered locations, no evidence of income calculations to support program income was available within the participant’s files. Repeat Finding: Yes Recommendation: The Organization should establish procedures to ensure that controls related to program income are consistently implemented. In addition, documentation should be included in each participant's files to support income calculations and the participant's share of rent payable to the program. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-006 Internal Controls and Compliance over Special Tests and Provisions – Reasonable Rental Rates (Significant Deficiency) U.S. Department of Housing and Urban Development 14.267 – Continuum of Care Program 2023 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 24 CFR Section 578.49, when grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units, taking into account the location, size, type, quality, amenities, facilities, and management services. In addition, the rents may not exceed rents currently being charged for comparable units, and the rent paid may not exceed HUD-determined fair market rents. Condition: While the entity has adopted controls over compliance requirements related to special tests and provisions – reasonable rental rates, these controls have not been consistently implemented during the year. Additionally for a sample of files selected for scattered locations, no evidence of current rental reasonableness verification was available within the participant’s files. Cause: Turnover / inadequate staffing in the Organization throughout the year and absence of a senior financial management position resulted in these controls not being consistently implemented. Effect: Without internal controls operating effectively, it is possible that the Organization would be at risk to be out of compliance with the compliance requirements. The Organization cannot effectively manage its federal program with controls that do not operate effectively. Questioned Costs: Undeterminable Perspective: No observable evidence of controls being implemented consistently on the above compliance requirement. Additionally, for 6 of the 7 sample of files selected for scattered locations, no evidence of current year rental reasonableness verification was available within the participant’s files. Repeat Finding: Yes Recommendation: The Organization should establish procedures to ensure that controls related to special tests and provisions – reasonable rental rates are consistently implemented including maintaining documentation of the verification of rental reasonableness in the program participant's file. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-007 Internal Controls over Suspension and Debarment (Significant Deficiency) U.S. Department of Housing and Urban Development 14.267 – Continuum of Care Program 2023 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Condition: While the entity has adopted controls over compliance requirements related to suspension and debarment, these controls have not been consistently implemented during the year. Cause: Turnover / inadequate staffing in the Organization throughout the year and absence of a senior financial management position resulted in these controls not being consistently implemented. Effect: Without internal controls operating effectively, it is possible that the Organization would be at risk to be out of compliance with the compliance requirements. The Organization cannot effectively manage its federal program with controls that do not operate effectively. Questioned Costs: None Perspective: No observable evidence of controls being implemented consistently on the above compliance requirement. Repeat Finding: Yes Recommendation: The Organization should establish procedures to ensure that controls related to suspension and debarment are consistently implemented. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.