Audit 385864

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Continuum of Care Program Assistance Listing Number: 14.267 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Internal controls should be in place to maintain rent documentation that supports the contracts are being paid consistently with established rent reasonableness. Condition: In a sample of 25 tenant rent records, one instance was noted where the Housing Assistance Payment (HAP) received exceeded the annual contract subsidy amount. Questioned Costs: None. Context: The Organization did not properly update the amount charged to the grant based on the annual contract for 1 of 25 tenant rent records reviewed. Cause: The error occurred due to a failure in updating the tenant’s subsidy amount in accordance with the annual contract terms. This may have resulted from a lapse in internal review or documentation procedures. Effect: The Organization paid a higher subsidy than permitted under the annual contract, resulting in noncompliance with HUD’s rent reasonableness requirements. Repeat Finding: No. Recommendation: We recommend that management strengthen internal controls to ensure timely updates of tenant subsidy amounts based on the contract terms and implement a review process to verify that HAP payments align with the most recent annual contract documentation. Views of Responsible Officials: Management of the Organization agrees with the above finding and recommendations and has established a system of internal control monitoring and review.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Continuum of Care Program Assistance Listing Number: 14.267 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Non-federal entities must verify that contractors and subrecipients are not suspended, debarred, or otherwise excluded from receiving federal funds. This verification must be documented and performed prior to entering into covered transactions. Condition: The Organization does not have formal written procedures in place to verify suspension and debarment status prior to entering into contracts or subawards. No documentation was provided to demonstrate that checks were performed against the System for Award Management (SAM.gov) for selected vendor. Questioned Costs: None. Context: During our review of the procurement policy and vendor agreements, we noted that the Organization did not have a procedure in place to document verification of vendor eligibility through SAM.gov. Cause: The Organization has not implemented formal policies or internal controls to ensure compliance with suspension and debarment verification requirements. Effect: Without proper verification procedures, the Organization risks engaging with vendors who are ineligible to receive federal funds, potentially resulting in noncompliance or financial risk. Repeat Finding: No. Recommendation: We recommend that management establish and implement written procedures to verify suspension and debarment status prior to executing vendor contracts. The SAM.gov verification procedure should be documented and retained in the procurement file. Views of Responsible Officials: Management of the Organization agrees with the above finding and recommendations and has developed and implemented a formal suspension and debarment policy.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Continuum of Care Program Assistance Listing Number: 14.267 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Uniform Grant Guidance (2 CFR Part 200) requires that payroll costs charged to grants is based on actual, documented time and effort. Condition: The Organization based its cost allocations on time studies, but did not perform and document backward-looking reconciliations of actual payroll costs charged for certain employees. Questioned Costs: None. Context: Of the 15 payroll transactions tested, a total of 7 did not have controls in place over time and effort reporting. Cause: Administrative error. Effect: Time may be inappropriately charged to a grant or not recorded against a grant. Repeat Finding: No. Recommendation: Implement strategy of using time and effort documentation in determining payroll costs charged to grants, including use of backward-looking reconciliations when necessary. Views of Responsible Officials: Management is in process of implementing a policy to track time and effort of all employees.