2021-001 Segregation of Duties – Loan Program Significant Deficiency This is a repeat finding. The prior-year’s auditing finding number is 2020-001. Condition: The Housing Authority administers a loan program, referred to internally as the HCRI loan program. The loans are administered and accounted for by finance and management level personnel that also participate in the program, without any additional oversight. Large loan balances are outstanding from finance and management level personnel individuals. Criteria: Management is responsible for administering a loan program, referred to internally as the HCRI loan program. The loans are administered and accounted for by finance and management level personnel. Individuals who benefit from the loan program should not have complete discretion over the approval of loan requests, or the recording of balances and repayments. Cause: Many of the loans go back years and the Housing Authority does not wish to write loan balances off in case tribal members request new loans. Effect: The loan program was not carried out pursuant to sound policies. Providing large balances to a few individuals increases the possibility that the Housing Authority may not receive full payment for amounts advanced. Recommendation: The Housing Authority’s fiscal policies should be revised to ensure that preventive controls are in place over check disbursements for loan disbursements, such that checks must be signed with live signatures at least the signature of one Tribal Council member. Further, individuals who benefit from the loan program should not have complete discretion over recording and processing of advances and repayment. We recommend a complete list of outstanding balances be presented to the Tribal Council, or its designee, for continued monitoring. Views of Responsible Officials: See Corrective Action Plan.
2021-002 Support for Expenditures Material Weakness This is a repeat finding. The prior-year’s auditing finding number is 2020-002. Condition: Of the 117 voucher packages (invoice, purchase requisition, purchase order, check request, etc.) selected for testing 52 were missing approvals signatures and 2 were missing invoice support. Criteria: Part D. Cash Disbursement Contol Procedures of the Housing Authority’s policies states that “The employee designated by the Finance Manager shall initiate each transaction completing a “check request” form, which shall be presented to the Finance Manager for approval…The Finance Manager shall review the check requests and attached supporting documentation for completeness and accuracy. The Finance Manager shall ensure that the vendor’s invoice/billing statement accords with the terms of the purchase, that the goods have been received and conform to specifications or that the services billed have been rendered satisfactory…” Section 300.302 Financial Management of the Office of Management and Budget’s Uniform Guidance includes the following financial management system requirements: • Records must be maintained that adequately identify the source and application of funds for federally funded activities. These records must… be supported by source documentation. Cause: The check request forms may have been misplaced or were possibly not completed and approved prior to the purchases. Effect: The lack of support and documentation of approval of these expenditures could cause the Housing Authority to have inappropriate expenditures being paid. Recommendation: Auditors recommend the governing board require proper documentation on all types of expenditures and that only members of the board have the authority to sign checks. Views of Responsible Officials: See Corrective Action Plan.
2021-003 Procurement Material Weakness This is a repeat finding. The prior-year’s auditing finding number is 2020-003. Condition: Out of 10 procurements selected for testing 9 did not have an adequate number of bids/quotes documented or an allowable sole source justification documented. Criteria: Part III. Procurement Methods of the Housing Authority’s procurement policy states that “When satisfying its needs by procurement, the St. Croix Chippewa Housing Authority shall choose one of the following procurement methods, based on the nature and anticipated dollar value of the total requirement. The St. Croix Chippewa Housing Authority shall provide a rational in its supporting documentation as to why it selected that particular method...a. Quotes may be obtained orally (either in person or by telephone), by catalog, fax, email or supplier/vendor website. b. If the purchase is made for reasons other than price, the file must clearly describe the reason for the purchase.” Section 200.320 Methods of Procurement to be Followed of the Office of Management and Budget’s Uniform Guidance outlines the following requirements: • Price or rate quotations must be obtained from an adequate number of qualified sources if the procurement exceeds the small purchase threshold ($3,000). • Formal bidding procedures must be used if the procurement exceeds the Simplified Acquisition Threshold ($150,000). • Sole sourcing is only allowed when one or more of the following circumstances apply: (1) The item is available only from a single source; (2) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; (3) The federal agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-federal entity; or (4) After solicitation of a number of sources, competition is determined inadequate. Cause: Adopted policies do not reflect the requirements outlined in the OMB Uniform Guidance. Effect: The Housing Authority may be paying too much for goods and services. Recommendation: Update and implement policies that agree with OMB Uniform Guidance. Views of Responsible Officials: See Corrective Action Plan.
2021-004 Cash Management Material Weakness This is a repeat finding. The prior-year’s auditing finding number is 2020-004. Condition: Federal awards require that costs be charged and submitted for reimbursement to the federal grant. The Housing Authority was unable to provide any supporting documentation/payment vouchers for grant draws during the year ended March 31, 2021. Criteria: Federal awards require that costs be charged and submitted for reimbursement to the federal grant. Cause: Housing Authority personnel were unable to find documentation relating to grant draws for the fiscal year. Documentation to support grant draws may not have been prepared and used when drawing down funds in FY21. Effect: The Housing Authority could be reimbursed for excess expenditures. Recommendation: Auditors recommend filing documentation for grant draws along with payment vouchers throughout the year. Views of Responsible Officials: See Corrective Action Plan.
2021-005 Timely Bank Reconciliations Material Weakness This is a repeat finding. The prior-year’s auditing finding number is 2020-005. Condition: Management is not performing monthly bank reconciliations. Criteria: Part 9. Cash Management Policy of the Housing Authority’s financial Policies states that “On a monthly basis, the Finance Director shall provide a report that shows the cash position from all sources that are accounted for in the cash accounts and investment accounts, along with bank and investment statements.” Cause: A lot of change-over in the Finance Department personnel. Effect: The Housing Authority’s Financial accounting software system reports may be inaccurate. Recommendation: Implement currently adopted policies over bank reconciliations. Prepare monthly bank reconciliations by the end of the subsequent month. Views of Responsible Officials: See Corrective Action Plan.
2021-006 Minutes/Resolutions Material Weakness This is a repeat finding. The prior-year’s auditing finding number is 2020-006. Condition: The Housing Authority was unable to provide any meeting minutes or resolutions for the fiscal year. Criteria: Adequate council oversight is essential to insure the proper monitoring over federal grants and awards. One major source of support for this monitoring activity is the actual council minutes and resolutions. Under the Sarbanes-Oxley Act, the council is required to maintain a high level of oversight in fulfilling its function. The minutes are critical in documenting the council’s oversight role in the organization. Cause: Lack of filing system may have caused documented meeting minutes to be misplaced. Effect: No documentation exists to document the fulfillment of the Council’s oversight responsibilities or their decisions (resolutions). Recommendation: Written minutes should be prepared for each council meeting along with any approved resolutions/recommendations. The minutes and resolutions should be centrally filed, maintained by the Council’s Secretary, and easily accessible to the auditor. Views of Responsible Officials: See Corrective Action Plan.
2021-007 Tenant Eligibility Material Weakness This is a repeat finding. The prior-year’s auditing finding number is 2020-007. Condition: Deficiencies noted in maintenance of tenant files. Of the 10 tenant files reviewed by auditors, 3 were missing. The following deficiencies were noted in the remaining seven (7) files reviewed: - 4 files did not have an annual recertification completed - 6 files did not have a timely inspection completed Criteria: 24 CFR 92.253 Tenant Protections and Selection - requirements for Indian Housing eligibility. Effect: The Housing Authority has not been in complete compliance with the above HUD requirements. Cause: The Housing Authority’s deficiency in its resident files stems from a lack of performing the necessary annual follow-ups and a lack of controls to ensure the assigned clerks are performing these recertifications timely and properly. Recommendation: In general, we continue to recommend a review of the re-certification process to determine areas of weakness. Specifically, we recommend the use of a standard checklist in the re-certification process. We further recommend that each re-certification clerk’s work be routinely audited. We also recommend more standardization in resident files organization of information, and procedures established to make sure all files are maintained adequately in order to be compliant. Views of Responsible Officials: See Corrective Action Plan.
2021-008 Character Investigations This is a repeat finding. The prior-year’s auditing finding number is 2020-008. Condition: The Housing Authority is not performing or documenting character investigations (background checks) on employees. Criteria: The OMB’s Compliance Supplement states, “The Indian Child Protection and Family Violence Act (25 USC 3201 et seq.) requires Indian tribes and tribal organizations that receive funds under the ISDEAA or the Tribally Controlled Schools Act to conduct an investigation of the character of each individual who is employed or is being considered for employment by such Indian tribe or tribal organization in a position that involves regular contact with, or control over, Indian children. The Act further states that the Indian tribe or tribal organization may employ individuals in those positions only if the individuals meet standards of character, no less stringent than those prescribed under subpart B – Minimum Standards of Character and Suitability for Employment (25 CFR part 63). Cause: No written policies and procedures to guide Human Resources personnel. Effect: Individuals with criminal histories that would preclude them from being hired into certain positions (with access to cash, access to personally identifiable information and/or close proximity to children and the elderly) may be hired for such positions. Recommendation: Adopt and implement policies over the performance of character investigations, the filing of character investigations and the criteria to be used to preclude the hiring of individuals for certain positions. Views of Responsible Officials: See Corrective Action Plan.
2021-009 Late Audit Submission This is a repeat finding. The prior-year’s auditing finding number is 2020-009. Condition: The Housing Authority’s audit was not completed and the data collection form and reporting package were not submitted within nine months after the end of the audit period. Criteria: Section 200.512 Report Submission of the Office of Management and Budget’s Uniform Guidance states, “The audit must be completed and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day.” Cause: The Housing Authority’s financial statements and records were not ready for audit in a timely fashion that allowed for a timely audit submission. Effect: Late submission of Single Audits can lead to a reduction of overall federal funding or effect the timing of funding. Recommendation: Ensure your books are closed in a timely fashion and schedule audit work to begin early enough so that your reporting package will be submitted on time. Views of Responsible Officials: See Corrective Action Plan.
2021-010 Inventory Significant Deficiency This is a repeat finding. The prior-year’s auditing finding number is 2020-010. Condition: The Housing Authority did not perform a physical count of it’s maintenance inventory during FY21. Criteria: Part D. Types of Maintenance of the Housing Authority’s Maintenace Policy states that “In accordance with audit requirements, the Housiing Department will conduct an annual physical inventory. These procedures shall be part of the routine maintenance scheduling.” Cause: The Housing Authority did not follow it’s policies for inventory. Effect: Items of inventory could be stolen and would go undetected by management. Recommendation: Management should use a quarterly physical count as a starting point, track purchases and uses of inventory throughout the quarter in order to calculate the inventory balance that should be on hand at the end of the quarter. Management should then compare the calculated ending inventory against the related quarterly physical count and determine if there are any large variances that require further investigation. Written policies and procedures should be adopted accordingly. Views of Responsible Officials: See Corrective Action Plan.
2021-011 Timely Grant Draws Material Weakness This is a repeat finding. The prior-year’s auditing finding number is 2020-011. Condition: Grant dollars were not drawn in a timely fashion during the year to cover current grant expenditures. The Housing Authority’s grant funded cost reimbursable program was carrying in excess of 60 days operating capital in grants receivable. Concurrently, the Housing Authority’s cash and cash equivalents were insufficient to cover its unearned revenue, which totaled $2,287,973. Had the grant draws been completed in a timely manner, the cash received would have been sufficient to cover the unearned revenue. Criteria: The Housing Authority does not have written policies to address the timeliness of grant draw procedures. Grant funds should be drawn as grant expenditures occur. Carrying anything in excess of 60 days operating capital in grants receivable is considered untimely and indicates that the expenditures carried within these grant funded cost reimbursable programs are being “floated” by other funds. 2 CFR section 200.305 of the Uniform Guidance states that “For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Cause: Lack of a written grant draw policy and procedures as well as a lack of staff “hands-on” training in those necessary areas. Effect: The untimely HUD grant draws have created a significant liquidity risk and forced the Housing Authority to use its unearned revenue funds from the Department of Treasury for purposes other than their intended use. This misapplication of funds places the Housing Authority at risk of failing to meet its financial obligations and jeopardizes compliance with terms of multiple grant awards. Recommendation: The Housing Authority should adopt written grant draw policies into its financial policies and procedures manual. Financials should be reviewed monthly, and drawdowns made as needed. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plan.
2021-012 Financial Statement Reconciliations/Tie-In Procedures Material Weakness This is a repeat finding. The prior-year’s auditing finding number is 2020-012. Condition: A weakness existed in the overall reconciliation/tie-in procedures performed over the Housing Authority’s financial statement accounts for the fiscal year ended March 31, 2021. Financial accounts were not reconciled on a timely, monthly basis. The major areas where reconciliation procedures were weak included: A) Bank Reconciliations B) Grant Receivables C) Account Receivables and associated allowance for doubtful accounts D) Capital Assets E) Accounts Payable F) Payroll and Other Current Liabilities Criteria: OMB Uniform Guidance states the following in section 200.302, “(2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.327 Financial reporting and 200.328 Monitoring and reporting program performance. Cause: Lack of written policies and procedures over financial tie-in procedures that identify who is responsible for performing these tie-in/reconciliation procedures. Effect: In the course of performing the audit, the auditor recommended 4 adjusting journal entries be made to the financial statements for fiscal year ending March 31, 2021. Many of these adjustments could have been avoided if timely reconciliation and tie-in procedures had been conducted by the finance department. Many of these audit adjustments were material in nature. Recommendation: The Housing Authority should adopt written reconciliation and tie-in procedures into its financial policies and procedures manual. These policies should require timely reconciliations to take place as defined under policy. Views of Responsible Officials: See Corrective Action Plan.
2021-013 Support for Payroll Material Weakness Condition: All expenditures should include proper documentation and approval. During the audit we noted 12 out of the selected 58 timesheets selected for testing were missing. Criteria: Part E. Special Procedures Regarding Payroll Disbursement of the Housing Authority’s policies states that “The Finance Manager or his/her designee shall establish adequate timekeeping controls (including the use of time sheets) and there shall be supervisory review and approval of all employee time/leave records prior to issuance of a check.” Section 300.302 Financial Management of the Office of Management and Budget’s Uniform Guidance includes the following financial management system requirements: • Records must be maintained that adequately identify the source and application of funds for federally funded activities. These records must…be supported by source documentation. Cause: The executive director has authority to sign checks and therefore, approve of his own expense reimbursements. The approval process is not a reliable control. Effect: The lack of support and documentation of approval of these expenditures could cause the Housing Authority to have inappropriate expenditures being paid. Questioned Costs: $13,310. Recommendation: Auditors recommend the governing board require proper documentation on all types of expenditures and that only members of the board have the authority to sign checks. Views of Responsible Officials: See Corrective Action Plan.