Finding 1156356 (2024-002)

2024-002 The City did not have adequate internal controls and did not comply with federal reporting requirements. Assistance Listing Number and Title: 14.241, Housing Opportunities for Persons With AIDS Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: WA-H200114, WAH21-F001, WAH22-F001, and WAH23-F001 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-002 Background The purpose of the Housing Opportunities for Persons with AIDS (HOPWA) program is to provide states and localities with resources and incentives to devise long-term strategies for meeting the housing needs of people living with HIV, including those with AIDS or related diseases, and their families. During fiscal year 2024, the City spent $4,870,191 on program funds for emergency housing, shared housing arrangements, apartments, single room occupancy dwellings, community residences, and essential care services and supplies such as food, medications, medical care, personal protective equipment and information. Of this amount, it passed through $4,784,709 to subrecipients. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System. The City must report subawards and subaward amendments by the end of the month following the month in which it made the subawards and subaward amendments. Federal regulations also require recipients to submit a HOPWA Consolidated Annual Performance and Evaluation Report (CAPER) no later than 90 days after the close of their program or operating year. This report provides information on how the recipient and each subrecipient spent the funds. Description of Condition The City’s internal controls were ineffective for ensuring it prepared accurate and complete reports based on supporting documentation and submitted them on time, as federal regulations require. Specifically, the City submitted five FFATA reports in July 2025 that it should have filed in 2024. Also, the CAPER reports were submitted with inaccurate information. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The City’s human services department is required to submit the required reports and staff were aware of the federal reporting requirements. However, the City did not dedicate adequate resources to ensure it submitted the FFATA reports on time. Also, staff were aware the CAPER reports contained errors; however, the City did not dedicate adequate resources to ensure it corrected the reports before the final submission. Effect of Condition Failing to submit the required reports on time diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The following table summarizes the discrepancies we identified related to FFATA reports. Using a nonstatistical sample, we found three out of four submitted CAPER reports contained errors. In total, the following key line items were misreported: • Total supportive services expenditures were understated by $81,073 • Housing information services expenditures were understated by $51,437 • Resource identification expenditures were understated by $13,122 • Administration expenditures were understated by $43,481 • Other activity expenditures were understated by $152,572 • Total Expenditures for operating year were understated $341,686 • TBRA rental assistance funds expended was understated by $3,891 • Permanent housing placement funds expended was understated by $48,320 • Housing information services funds expended was understated by $23,592 • Supportive services funds expended were understated by $373,766 Recommendation We recommend the City strengthen its internal control to ensure it submits accurate and complete report on time, as federal regulations require. City’s Response The Human Services Department (HSD) acknowledges this finding regarding the late submission of five FFATA reports and inaccuracies in CAPER reporting. These issues arose during a period of prolonged vacancies and while staff were in the process of being trained on reporting requirements, which reduced oversight capacity and contributed to delays and errors. To address this issue, the Department has hired a permanent Federal Grants Management Unit (FGMU) Manager to provide consistent leadership and supervision. HSD updated department-wide FFATA Reporting Policies and Procedures following the federal transition to SAM.gov. Staff completed federal training, and prior reports were reviewed and corrected. The Department implemented controls to close workflow gaps to ensure obligations and data corrections are captured before submission. Additionally, ongoing training is being provided to reinforce compliance. These actions strengthen internal controls and are intended to ensure FFATA and CAPER reports are accurate, complete, and submitted in a timely manner moving forward. Auditor’s Remarks We appreciate the City’s commitment to resolving this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during the next regular audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System. Title 24 CFR Part 574, Housing Opportunities For Persons With AIDS, section 520, Performance reports, establishes the performance reporting requirements for grant recipients.