Finding 1120908 (2024-004)

2024-004 ALN 14.850 – Public Housing Operating Fund – Allowable Costs - Disbursements Condition and Criteria: In accordance with the cost principles under 2 CFR part 200, subpart E, cost must be necessary and reasonable for the performance of the Federal award, conform to any limitation or exclusions set forth in 2 CFR part 200, subpart E, and be adequately documented. During our audit, it was determined that internal control deficiencies over compliance existed related to the Authority’s Public Housing Operating Fund Program's allowable cost/cost principal’s compliance provisions. Identified control and compliance deviations included costs that were not adequately documented. During our audit, a lack of supporting documentation was observed for 9 out of the 23 check disbursements tested, including disbursements from the Public Housing Operating Fund Program. Further, it was observed in 5 out of the 23 check disbursements tested that the Authority was unable to locate copies of physical checks to ensure correct signatories are being used to endorse disbursements. Amount of Questioned Costs: None Context: During our audit, a lack of supporting documentation was observed for 9 out of the 23 check disbursements tested, including disbursements from the Public Housing Operating Fund Program. Further, it was observed in 5 out of the 23 check disbursements tested that the Authority was unable to locate copies of physical checks to ensure correct signatories are being used to endorse disbursements. Cause: The Authority's prior management's internal controls over the Public Housing Operating Fund Program's allowable costs/cost principal compliance provision that were in place were deficient. Staff who had the ability to make purchases and procure contracts did not adequately follow the cost principals included in 2 CFR part 200, subpart E, and therefore, the Authority did not have adequate support for check disbursements. Effect or Potential Effect: The Authority could incur costs that are unallowable and that are not necessary or reasonable. These internal control deficiencies could result in a possibility that errors or irregularities relating to cost can exist and not be detected by the Authority's internal controls. Auditor’s Recommendation: We recommend that the Authority's management take the necessary steps to ensure that all disbursements are sufficiently documented and supported by adequate backup. We also recommend that the Authority implement internal controls to detects when check disbursements do not have adequate support in accordance with 2 CFR part 200, subpart E. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.