Finding 1161141 (2024-001)

Material Weakness Repeat Finding
Requirement
E
Questioned Costs
-
Year
2024
Accepted
2025-10-22
Audit: 371153
Organization: Grace House INC (MS)

AI Summary

  • Core Issue: Current controls are inadequate to detect fraudulent properties and tenants in grant programs.
  • Impacted Requirements: Management must enhance internal controls to prevent fraud and ensure compliance.
  • Recommended Follow-Up: Implement stricter verification processes for tenants and properties, and involve more reviewers to reduce collusion risks.

Finding Text

Criteria or Specific Requirement — Management is responsible for establishing and maintaining internal control over compliance. Internal control should allow management or employees, to identify fraudulent properties and fraudulent tenants before entering into the program. Condition — The external auditors noted that while there are some controls in place, they were not sufficient to identify the fraudulent properties and tenants that were approved for the granting programs. In addition, there was collusion involved by two case managers that could not have been prevented by controls in place. Due to these reasons, the external auditors determined that the control finding is only a significant deficiency and not a material weakness. Effect — The lack of controls around monitoring of new properties and tenants enrolled in the grant programs resulted in fraudulent reimbursement requests being submitted under the following grants: a) Housing Opportunities For Persons With Aids (ALN #14.241) b) Emergency Solutions Grant (ALN #14.231) Cause — Lack of sufficient monitoring controls over applicants, specific to property and tenant validation. Recommendation — The Organization should implement more stringent controls to verify the applying tenant is who they claim to be, verify the ownership and history of the property being rented, and involve more individuals at various stages in the review process to strengthen the risk against collusion.

Corrective Action Plan

Views of Responsible Officials and Planned Corrective Action — Grace House has created and will implement the following new controls: a) Every reimbursement request made by any employee will require approval from the Executive Director, Assistant Director, or board of directors vote where appropriate. b) For rental invoices, the immediate supervisor must approve all rental invoices for payment processing before being submitted to the administrative office. If the immediate supervisor is absent, the invoice must be approved by the Executive Director or Assistant Director. c) When a new client invoice is submitted for approval for an existing approved landlord, the invoice along with the traditional client identifying information will be reviewed by both the immediate supervisor and the Executive Director. d) When a new client invoice is submitted for approval for a new landlord, the invoice will be reviewed by both the immediate supervisor and the Executive Director. Each invoice requires a W9 form to validate the legal name, property records verifying ownership matching the legal name on the W9, a picture ID of the individual listed on the W9, and a copy of the agreement if a property management company is listed on the W9 instead of an individual. e) All new clients and landlords will be researched through an investigative software to prove there is no evidence of false identity. f) Grace House has contracted an independent certified fraud investigator to conduct periodic reviews for compliance with fraud prevention policies at least semiannually but beginning quarterly through 2025.

Categories

Subrecipient Monitoring Cash Management Material Weakness Significant Deficiency Internal Control / Segregation of Duties

Other Findings in this Audit

  • 1161134 2024-001
    Material Weakness Repeat
  • 1161135 2024-001
    Material Weakness Repeat
  • 1161136 2024-001
    Material Weakness Repeat
  • 1161137 2024-001
    Material Weakness Repeat
  • 1161138 2024-001
    Material Weakness Repeat
  • 1161139 2024-001
    Material Weakness Repeat
  • 1161140 2024-001
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
14.241 HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS $803,210
14.267 CONTINUUM OF CARE PROGRAM $405,504
14.231 EMERGENCY SOLUTIONS GRANT PROGRAM $258,260
97.024 EMERGENCY FOOD AND SHELTER NATIONAL BOARD PROGRAM $38,690