Audit 413989

2025-001. Allowable Costs/Cost Principles United States Department of Housing and Urban Development Continuum of Care Program ALN: 14.267 Criteria: Uniform Guidance 2 CFR 200.430, covers standards for documentation of compensation-personal services. Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and time spent. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Furthermore, these records should support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: The Organization implemented procedures during the current year whereby expected payroll allocations are prepared by the Director of Finance and subsequently reviewed and signed by employees. However, the documentation maintained does not sufficiently demonstrate that employees' final payroll allocations were determined based upon a documented after-the-fact evaluation of the activities actually performed during the applicable period. The signed allocation records generally reflect the predetermined or expected allocation of employee time, and the employee certification does not specifically document that the allocation was evaluated against actual activities performed. Cause: The Organization's payroll allocation process continues to utilize expected employee activity as the basis for allocating payroll among programs. Although employees review and sign the allocation records, the Organization has not established a sufficiently documented process demonstrating that expected allocations are periodically compared with actual employee activity and adjusted as necessary. Effect: Without sufficient documentation of the after-the-fact review of expected payroll allocations, the Organization may not be able to demonstrate that compensation charged to federal awards accurately reflects work performed and is properly allocated among applicable programs and funding sources. Identification of a Repeat Finding: This is a repeat finding from the prior year, 2024-002. The Organization has implemented corrective measures during the current year; however, additional procedures are necessary to fully address the prior-year finding. Questioned Costs: Dollar amount undetermined. Recommendation: The Organization should further strengthen its payroll allocation procedures by documenting the after-the-fact review of expected payroll allocations. Employee certifications should clearly indicate that, after completion of the applicable reporting period, the employee reviewed the allocation in relation to activities actually performed and communicated any necessary adjustments prior to finalization of the payroll allocation. Evidence of adjustments identified through this review should be retained as part of the Organization's payroll allocation documentation. Views of Responsible Officials of Auditee: The Organization agrees with the finding and will maintain documentation supporting employees' after-the-fact review of payroll allocations to ensure that amounts charged to federal awards reasonably reflect actual activities performed. Any necessary adjustments identified through this review will be documented.

United States Department of Housing and Urban Development Continuum of Care Program ALN: 14.267 Criteria: Grants used to pay rent for individual housing units should document that rent paid is reasonable in relation to rents being charged for comparable units, taking into account relevant features. In addition, the portion of rental assistance paid with Continuum of Care Program funds is subject to the applicable HUD Fair Market Rent limitation. The Organization's rent reasonableness procedures provide that the proposed gross rent should not exceed the average gross rent of comparable units by more than $100. Condition: Although the Organization strengthened its procedures during the current year and maintained rent reasonableness documentation within the tenant files selected for testing, there were instances in which the proposed gross rent exceeded the average gross rent of comparable units by more than the $100 limit established by the Organization. In addition, there were instances in which rental assistance paid with federal funds exceeded the applicable HUD Fair Market Rent after consideration of the applicable utility allowance, with no documentation supporting the amounts paid in excess of the applicable limit. Cause: The Organization's review procedures did not consistently identify instances in which proposed rents exceeded the limits established by its rent reasonableness procedures or rental assistance exceeded the applicable HUD Fair Market Rent. Effect: The Organization may pay rental assistance with federal funds for amounts that do not comply with its established rent reasonableness criteria or applicable HUD Fair Market Rent limitations. Identification of a Repeat Finding: This is a repeat finding from the prior year, 2024-003. The Organization improved its procedures during the current year by maintaining rent reasonableness documentation within the tenant files; however, exceptions identified during current-year testing indicate that additional improvements to the review process are necessary. Questioned Costs: The population consisted of 21 tenant files with total federal rental assistance expenditures of $310,607. We selected 10 tenant files for testing monthly payments, representing $184,884 of federal rental assistance expenditures. Exceptions were identified for 25 monthly payments related to the Organization's rent reasonableness procedures and applicable HUD rental assistance requirements. The questioned costs associated with the exceptions totaled $6,036. Recommendation: The Organization should strengthen its review procedures to ensure that, prior to approval of federal rental assistance, proposed rents comply with the Organization's established rent reasonableness criteria and applicable HUD Fair Market Rent limitations. The review should be documented and evidence resolution of any identified exceptions prior to the payment of rental assistance with federal funds. Views of Responsible Officials of Auditee: The Organization agrees with the finding and will strengthen its review procedures to ensure that rental assistance paid with federal funds complies with established rent reasonableness criteria and applicable HUD Fair Market Rent limitations.