2025 – 002: Internal Controls over Compliance with Allowable Costs/Cost Principles Information on the Federal Program: United States Department of Housing and Urban Development Assistance Listing Number: 14.218 Program Name: CDBG – Entitlement Grants Cluster Pass-through Awards under the Uniform Guidance Requirements: Pass-through Entity Award Number Award Period City of Cleveland Multiple Multiple Cuyahoga County Multiple Multiple Type of Finding: Material Weakness Criteria: In accordance with §200.303, Internal Controls, the non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: During our internal controls over compliance testing of non-payroll disbursements (allowable costs/cost principles), we noted instances where management was unable to locate approved reimbursement request forms with evidence of approval prior to being submitted. We tested 60 transactions noting 15 internal control exceptions relating to internal controls over allowable costs/cost principles. Cause: Management indicated that it could not provide support for the proper review of reimbursement requests prior to submission due to personnel changes in the accounting department. Effect or Potential Effect: An ineffective control system related to internal controls over compliance can lead to noncompliance with laws and regulations and loss of funding for the related program. Perspective on Prevalence: We tested a non-statistical sample of 60 non-payroll disbursements for the CDBG – Entitlement Grants cluster. Internal control exceptions were noted in 15 items (25% of items tested), totaling $45,864 out of total tested of $149,424 (31%). The nature and frequency of the errors indicate that the control deficiency is more than an isolated occurrence. Questioned Costs: We are not reporting questioned costs for this finding as the finding relates to the lack of evidence as to the control activity of review and approval of reimbursement request forms. Based on our additional audit procedures, the underlying non-payroll disbursements tested appear to be allowable and properly supported under the Uniform Guidance cost principles and program requirements. Repeat Finding: Repeat finding of 2024-003 Recommendation: We recommend the Organization review, and revise as needed, its controls over review of the reimbursement packets. The Organization should maintain documentation of the review of the reimbursement packet in a designated location and retain such documentation in accordance with the relevant requirements. Views of Responsible Officials: The Organization’s management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the material weakness identified.
2025 – 003: Internal Control over Compliance with Allowable Costs/Cost Principles Information on the Federal Program: United States Department of Housing and Urban Development Assistance Listing Number: 14.218 Program Name: CDBG – Entitlement Grants Cluster Pass-through Awards under the Uniform Guidance Requirements: Pass-through Entity Award Number Award Period City of Cleveland Multiple Multiple Cuyahoga County Multiple Multiple United States Department of Housing and Urban Development Assistance Listing Number: 14.913 Program Name: Healthy Home Production Program Type of Finding: Material Weakness Criteria: In accordance with §200.303, Internal Controls, the non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: During our internal controls over compliance testing relating to payroll disbursements (allowable costs/cost principles), we noted instances where the internal controls designed to ensure costs being requested for reimbursement agreed to approved timesheets and payroll records did not operate as designed. We noted the following: • 12 instances where the approved timecards did not match the hours reported in the reimbursement submission. • 2 instances where the timecards did not agree to the ADP payroll report. We also noted one instance where the timecard was not approved prior to submission for reimbursement Cause: The internal controls established did not operate as designed to detect errors in the information submitted for reimbursement and approval of timecards. Effect or Potential Effect: An ineffective control system related to internal controls over compliance can lead to noncompliance with laws and regulations and loss of funding for the related program. Perspective on Prevalence: We tested a non-statistical sample of 60 payroll disbursements for the CDBG – Entitlement Grants cluster. The following exceptions were noted: • 10 instances (17% of items tested) where the approved timecards did not match the hours reported in the reimbursement submission. These resulted in the federal program being undercharged by $3,528 out of total tested of $179,420 (-2%). • 2 instances (3%) where the timecards did not agree to the ADP payroll report. These resulted in the federal program being undercharged by $2,663 out of total tested of $179,420 (-1%). We tested a non-statistical sample of 12 payroll disbursements for the Healthy Home Production Program. The following exceptions were noted: • 2 instances (17%) where the approved timecards did not match the hours reported in the reimbursement, resulting in the federal program being overcharged by $563 out of total tested of $46,218 (1%). • 1 instance (8%) where the timecard was not approved prior to submission for reimbursement, resulting in the federal program being overcharged by $877 out of total tested of $46,218 (2%) The nature and frequency of the errors indicate that the control deficiency is more than an isolated occurrence. Questioned Costs: We are not reporting questioned costs for this finding because, based on our additional audit procedures, the underlying payroll costs for the exceptions tested were either undercharged to the program or the likely error does not meet the $25,000 reporting threshold. The finding relates solely to the design and operation of internal control over allowable costs. Repeat Finding: Repeat finding 2024 - 004 Recommendation: We recommend the Organization review, and revise as needed, its controls over review of the payroll disbursement support prior to submission for reimbursement to ensure all information agrees and is properly reviewed and approved. Views of Responsible Officials: The Organization’s management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the material weakness identified.