Finding Text
2023-004 Compliance and Internal Controls over Earmarking (Significant Deficiency) U.S. Department of Housing and Urban Development 14.267 – Continuum of Care Program Contract No. TX0425L6E002106 Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 24 CFR Section 578.59, the Organization may use up to 10 percent of any grant awarded under this part for the payment of project administrative costs related to the planning and execution of Continuum of Care activities. Condition: Administrative costs exceeded 10 percent of the total award spent for one of the grants closed during the year. Cause: While the administrative costs drawn on the grant were below the maximum allowed by the grant, not all program costs were drawn on the grant, resulting in administrative costs to be over 10% of funds drawn on the grant. Additionally, as a result of not having a devoted, full-time employee in the senior financial management position, there was no reconciliation performed to check that the administrative costs were limited to 10% of all funds drawn. Effect: Overdrawn administrative costs may be required to be returned back to grantor and / or impact future funding. Questioned Costs: $1,321 Perspective: Required reconciliations to verify the administrative costs as a percentage of amounts drawn were not performed. Controls over earmarking requirements were not implemented. Repeat Finding: Yes Recommendation: The Organization should establish procedures to ensure that controls related to earmarking are consistently implemented which should include reconciling the administrative costs to all drawn funds on individual grants. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.