Finding 1175150 (2025-006)

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: HOME Investment Partnerships Program Assistance Listing Number: 14.239 Federal Award Identification Number and Year: M20-MC350209 - 2020 M21-MC350209 - 2021 Award Period: 5/29/2020 - 9/01/2028 8/03/2021 - 9/01/2029 Type of Finding: • Significant Deficiency in Internal Control over Compliance and Other Matters Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, the recipient and subrecipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. According to §200.403 Factors affecting allowability of costs of 2 CFR Part 200, costs must conform to any limitations or exclusions set forth in these principles or in the federal award as to types or amount of cost items. Additionally, according to §200.431 costs of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences should be equitably allocated to all related activities, including Federal awards. Condition: During our testing, we noted the City did not have adequate internal controls designed to ensure proper allocation of fringe benefits. Management 's Progress for Repeat Findings: This is a repeated and modified finding. While the City has improved its efforts, there are still opportunities for improvement to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements as well as compliance with City policy. Questioned costs: $973.77 Context: During our testing, it was noted that for one of twenty-four samples, the City applied incorrect fringe benefits to the grant, resulting in $371.11 that should have been allocated to the grant. Additionally, for one of twenty-four samples, the City did not accurately apply sick leave conversion to wages, resulting in $973.77 of wages improperly allocated to the grant. Cause: Management oversight. The city did not have adequate controls in place to ensure proper allocation of fringe benefits. Effect: The auditor noted instances of noncompliance. Noncompliance results in potential pay back of federal funds. Recommendation: We recommend the City review fringe benefits charged to the grant to equitably allocate fringe benefits between federal and city funding sources. Management Response: The City concurs with the finding. The Department of Health, Housing & Homelessness will review the allocation of fringe benefits to grant payroll charges on a quarterly basis to ensure fringe benefits are properly allocated to funding sources. The reconciliations will be prepared by fiscal staff and approved by the Fiscal Manager. Additionally, the DFAS Grant Administrator will perform a semi-annual review of excess leave payouts to ensure they are charged to the correct grant funding string. Timeline and Responsible Position: June 2026 – Department of Health, Housing and Homelessness Fiscal Manager