Audit 408287

Reportable Finding Considered a Significant Deficiency – Reporting Matching Agency: Department of Housing and Urban Development Program: Rural Capacity Building for Community Development and Affordable Housing Grants ALN# 14.265 Program Year: 2025 Criteria: 2 CFR §200.328 requires that recipients submit financial reports using OMB approved data elements, specifically the Federal Financial Report (SF-425), and such reports must be submitted as required by the Federal award and include all required financial information. The SF-425 is designed to report the cumulative federal share and recipient (matching) share of program expenditures. Condition: During testing of financial reporting for ALN 14.265, we noted that SF-425 reports submitted during the audit period did not include the required matching (non-federal) component. Specifically, the recipient share (matching contributions) was not reported. Cause: The condition appears to be due to inadequate understanding of SF-425 reporting requirements and lack of internal controls to ensure that matching contributions are properly included in required federal financial reports. Effect: Failure to report matching contributions on the SF-425 results in incomplete and inaccurate financial reporting to the federal awarding agency. This may impair the federal agency’s ability to monitor compliance with matching requirements and increase the risk of questioned costs or funding disallowances if matching requirements are not properly reported. Questioned costs: None Perspective: Statistical sampling was not used but sampling methodology followed AICPA guidelines. Repeat finding: This is not a repeat finding. Recommendation: We recommend management implement procedures to ensure all SF-425 reports include complete and accurate reporting of both federal and matching components. Controls should be established to track and reconcile matching contributions to supporting documentation and a supervisor should review to ensure completeness and compliance with reporting requirements prior to submission. Management’s response (unaudited): See Corrective Action Plan

Reportable Finding Considered a Significant Deficiency – Procurement Compliance Agency: Department of Housing and Urban Development Program: Rural Capacity Building for Community Development and Affordable Housing Grants ALN# 14.265 Program Year: 2025 Criteria: 2 CFR §200.320(a)(2) requires that procurements exceeding the micro-purchase threshold use small purchase procedures, including obtaining price or rate quotations from an adequate number of qualified sources. Additionally, 2 CFR §200.318(i) requires non-federal entities to maintain documentation sufficient to detail the history of the procurement, including the rationale for the method of procurement, contractor selection, and the basis for price reasonableness. Further, 2 CFR §200.320(c) permits noncompetitive (sole-source) procurement only when specific conditions are met and requires appropriate justification and documentation. Condition: During testing of procurement for ALN 14.265, we noted that the entity procured services totaling $17,500, exceeding the micro-purchase threshold and requiring small purchase procedures. Review indicated that the procurement was conducted under small purchase procedures; however, price quotations from multiple qualified vendors or other cost analysis were not obtained. In addition, the entity’s internal policy requires at least two price quotes for procurements within this dollar range, and no such quotes were documented. Although management stated the vendor was selected due to the unique nature of the training and specialized qualifications of the provider, the procurement file does not include contemporaneous documentation supporting sole-source eligibility or a formal sole-source justification. Cause: The deficiency occurred due to inadequate internal controls over procurement processes and lack of sufficient understanding and consistent application of procurement requirements. Specifically, management did not ensure that required price quotations were obtained and documented or that sole-source procurements were properly justified and supported. Effect: As a result, the entity did not comply with federal procurement requirements or its internal policy. This increases the risk that full and open competition was not achieved and that the entity may not have obtained services at the most reasonable price. Additionally, insufficient documentation reduces transparency and accountability and may result in questioned costs or increased scrutiny by federal or pass-through entities. Questioned costs: None Perspective: Statistical sampling was not used but sampling methodology followed AICPA guidelines. Repeat finding: This is not a repeat finding. Recommendation: We recommend that management strengthen procurement controls to ensure compliance with 2 CFR 200 and internal policy. Specifically, procedures should be implemented to require and document price quotations from an adequate number of qualified vendors for all procurements above the micro-purchase threshold. For noncompetitive procurements, management should prepare and retain contemporaneous written justification demonstrating that the procurement meets one of the allowable criteria under 2 CFR §200.320(c), supported by appropriate documentation such as market research or evidence of exclusivity. In addition, management should provide training to personnel responsible for procurement to ensure proper and consistent application of procurement requirements. Management’s response (unaudited): See Corrective Action Plan