Finding Text
Finding 2024-002 Information on the federal program: Subject: Home Investment Partnership Program – Internal Controls Federal Agency: Department of Housing and Urban Development Federal Program: Home Investment Partnership Program Assistance Listing Number: 14.239 Pass-Through Entity: N/A - Direct Grant Compliance Requirement: Special Tests and Provisions - Underwriting Requirements Audit Findings: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 29 CFR 92.250(b) states in part: Participating jurisdictions must underwrite and evaluate projects to ensure that Home funds are not invested in projects with unreasonable costs, that the project is financially viable, and that the level of Home investment is not more than necessary. Additionally, the Uniform Guidance requires entities to maintain adequate documentation to demonstrate compliance with federal program requirements. Condition: The Consortium did not have a documented review control in place to ensure the underwriting calculation was prepared, reviewed, and maintained. Cause: The Consortium's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Consortium at risk of noncompliance with the grant agreement and the underwriting compliance requirements. Questioned Costs: There were no questioned costs identified. Context: In a sample of three, the following items were noted: • For the first selection, project underwriting support was not available. The underwriting calculation was prepared by a former employee. Review of the calculation was also performed by a former employee. The Consortium does not have record of the calculation. • For the second selection, the underwriting calculation did not have formal sign off by the reviewer. Only the preparer signed the calculation. • For the third selection, the underwriting calculation did not have formal sign off by the preparer. Only the reviewer signed the calculation. Identification as a repeat finding: No. Recommendation: We recommend the Consortium implement a formal process to ensure the required underwriting calculations are prepared, reviewed, and maintained. Adequate documentation should be maintained to support the underwriting calculations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.