Audit 412644

Material Weakness Finding No. 2023-005: Allowable Costs/Cost Principles U.S. Department of Housing and Urban Development Passed Through the State of Hawaii Department of Human Services Emergency Solutions Grant Program Coronavirus Federal Assistance Listing Number 14.231 Criteria Pursuant to the Uniform Guidance, 2 CFR 200.403, Allowable Costs, costs must be necessary, reasonable, and adequately documented to be allowable under federal awards. Futhermore, 2 CFR, 200.303 states that the non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the award in compliance with federal statutes and regulations. Condition We noted that during 2023, KMNH’s chief executive officer performed accounting functions including recording cash disbursement transactions and reconciliation of the monthly bank statement balances to the cash balances in the general ledger. In addition, there was no evidence of a supervisory review of supporting documentation for expenditures. Cause Due to the limited number of employees, there is not only a lack of consistent supervisory review of supporting documentation of expenditures, but also a lack of segregation of duties to ensure that disbursement transactions are accurately recorded and are compliant with the Uniform Guidance allowable costs/cost principles. Effect Without proper segregation of duties and supervisory review of supporting documentation of expenditures, there is a reasonable possibility that a material misstatement of KMNH’s expenditures of federal awards will not be prevented or detected and corrected on a timely basis. Recommendation We recommend that KMNH engage an accountant to provide relevant services and to implement a supervisory review process of supporting documentation of expenditures and to develop appropriate policies and procedures to ensure proper segregation of duties. Views of Responsible Officials and Planned Corrective Action KMNH agrees with the finding and recommendation and will continue its efforts to hire a bookkeeper.

Significant Deficiency Finding No. 2023-006: Procurement U.S. Department of Housing and Urban Development Passed Through the State of Hawaii Department of Human Services Emergency Solutions Grant Program Coronavirus Federal Assistance Listing Number 14.231 Criteria Pursuant to the Uniform Guidance, a non-Federal entity, including subrecipients of a State, must have and use documented procurement standards that conform to the procurement standards of §200.318 through §200.327 of the Uniform Guidance. Condition We noted that KMNH did not adopt procurement standards compliant with sections §200.318 through §200.327 of the Uniform Guidance. Cause Management had not updated its policies and procedures to incorporate the relevant Uniform Guidance procurement standards. Effect The lack of the procurement standards consistent with the Uniform Guidance could result in a material misstatement of KMNH’s expenditures as reported in the statement of expenditures of federal awards. Identification of a Repeat Finding This finding was reported as a federal award finding in the immediate previous audit as Finding No. 2022-004. Recommendation We again recommend that KMNH incorporate §200.318 through §200.327 of the Uniform Guidance procurement standards to their policies and procedures manual to ensure compliance with Federal standards. Views of Responsible Officials and Planned Corrective Action KMNH agrees with the finding and recommendation and effective on April 26, 2024 has implemented procurement standards per the Uniform Guidance.

Significant Deficiency Finding No. 2023-007: Reporting U.S. Department of Housing and Urban Development Passed Through the State of Hawaii Department of Human Services Emergency Solutions Grant Program Coronavirus Federal Assistance Listing Number 14.231. Criteria A non-Federal entity that expends $750,000 or more in Federal awards during the year must have a single audit conducted in accordance with 2 CFR §200.514. Pursuant to 2 CFR §200.512, the audit must be completed and Form SF-SAC: Data Collection Form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditors’ report(s), or nine months after year end of the audit period. Condition We noted that KMNH has not submitted the single audit reports required by the Uniform Guidance, including the Data Collection Form to the Federal Audit Clearinghouse for the year ended December 31, 2023, within the stipulated nine months after the end of the audit period. Cause KMNH has not adhered to established Uniform Guidance terms and conditions regarding the submission dates of the single audit reports and Data Collection Form for the year ended December 31, 2023. Effect KMNH is not in compliance with the Uniform Guidance terms and conditions regarding the submission dates of the single audit report and Data Collection Form for the year ended December 31, 2023. Identification of a Repeat Finding This finding was reported as a federal award finding in the immediate previous audit as Finding No. 2022-005. Recommendation We again recommend that KMNH incorporate internal controls to ensure compliance with the Uniform Guidance with respect to the submission deadline of single audit reports and the Data Collection Form. Views of Responsible Officials and Planned Corrective Action KMNH agrees with the finding and recommendation and have updated internal controls to monitor audit submissions to the Federal Audit Clearinghouse.