Finding Text
Finding No. 2024-002: Cash Disbursements and Classification (Material Weakness)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Supportive Housing for Persons with Disabilities (Section 811)
Federal Assistance Listing Number: 14.181
Compliance Requirement: Allowable costs, Activities allowed or unallowed
Statement of condition
During the year ended June 30, 2024, the Organization:
did not properly classify certain expenditures between expense accounts;
did not properly cut off disbursements at fiscal year end, resulting in expenses not being recorded within the current audit period; and
recorded expenses in the current audit period that apply to future periods.
Criteria
Management must review invoices after fiscal year end to ensure all expenses related to the fiscal period are being accurately captured. Additionally, management should review expenditures for accurate expense account classification and review revenue classifications to the appropriate revenue account recording to ensure proper financial and HUD reporting.
Cause
Review procedures were not sufficient to ensure expenditures were recorded in accurate expense accounts and that revenue was recorded in the appropriate revenue account. Review procedures were not adequately followed to review subsequent invoices for relevance to the current fiscal period.
Effect
Certain utility expenses presented for the current fiscal year relate to the prior fiscal year, resulting in overstated expenses. Certain vendor bills related to both the current and next fiscal year were recorded as expense in the current fiscal yar, resulting in overstated expenses. Additionally, inaccurate expense classifications could result in improper financial and HUD reporting.
Recommendation
Management should revisit and enhance its internal controls and procedures over expenditures to ensure expenses are captured in the correct fiscal period. Management should implement an additional period-end review to ensure proper classification of expenses.
Identification of repeat finding
The finding is a repeat of Finding No. 2023-003.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
In process