Finding Text
Finding 2024-001 – Capital Fund Program Accounting – Cash Management & Program Compliance
ALN 14.872 – Grant years 2018, 2019, 2021, 2022 – Noncompliance & Material Weakness
Criteria:
Appropriate cash management policies and procedures should facilitate the timely request and reimbursement of allowable HUD grant expenses. Per the Capital Fund Guidebook, “once funds are disbursed, i.e. transferred from LOCCS to the PHA’s bank account, the PHA must pay the applicable bill(s) within 3 business days after the deposit of the funds into the PHA’s bank account. PHAs cannot expend nonfederal funds first to pay the applicable bills and then use Capital Funds to reimburse themselves.”
Condition & Cause:
During the fiscal year 2023 audit, we established an allowance to offset HUD receivables whose collection was deemed uncertain. During the 2024 audit, we found that HUD did not allow the PHA to draw these funds. Additionally, the PHA failed to obligate the funds for 501-21 and 501-22 by the obligation deadlines. The authorization for these two grants totaled $1,474,707, which was forfeited due to this oversight. Lastly, due to the Housing Authority’s unwillingness to utilize the capital fund grants, it is expending operating funds for modernization purposes. We noted purchases of $441,902 in elevator repairs and $186,950 in water heaters that was paid from operating funds.
Effect:
Failure to request reimbursements for incurred grant costs in a timely fashion led to HUD disallowing the drawdown of those grants, which required using funds from other sources to cover the capital fund program costs. Failure to obligate grant costs by the obligation deadline led to the forfeiture of those grants. Ineligible modernization costs in the Public Housing program.
Recommendation:
We recommend that the PHA establish an appropriate cash management procedure that facilitates timely requests and reimbursements of grant costs as incurred. We also recommend that the applicable PHA staff undergo Capital Fund training to ensure grant requirements are met prior to their deadlines.
Questioned Costs: None
Repeat Finding: Yes