Finding Text
Compliance Requirement: HAP project funds may be used only for expenses that are reasonable and necessary to the operation of the project as provided for in the HAP contract. Type of Finding: Significant deficiency in Internal Control and Instance of Noncompliance Criteria: The Uniform Guidance Compliance Supplement requires only expenditures of the entity be included in project costs. Condition: Internal controls over payables were not implemented to detect that vendor invoices of a related party were recorded to the books of the entity which resulted in an overstatement of gas expense. Context: Expenses for gas expense billings of a related party were posted to the books and records of Jefferson East, Inc. And gas expense billings of Jefferson East, Inc. were not recorded. Effect: This resulted in an overstatement of gas expense of $7,857. Cause: Lack of attention to the vendor invoice as it related to the entity’s gas expenses, and not investigating with the gas company when the expenses posted averaged three times the normal monthly charges before the energy provider switch. Recommendation: We recommend controls over review and approval process surrounding allowable costs that are reasonable and necessary for the operation of the project should be emphasized with appropriate personnel. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff.