Finding 11920 (2021-006)

2021-006 ALLOWABLE ACTIVITIES, ALLOWABLE COST, AND ELIGIBILITY - MATERIAL WEAKNESS Federal Program Emergency Rental Assistance ALN 21.023; passed through the County of Berks Criteria Attachment A, #1 of the grant agreement indicates that grant funds are to be spent on rent, rental arrears, utilities and home energy costs, and utilities and home energy costs arrears and stipulates that assistance shall not be provided for a period in excess of 15 months (extended to 18 months in ERA2 agreement). The ERA1 agreements also state that assistance shall not be provided for more than 3 months of prospective rent payments unless a subsequent application for additional financial assistance is provided. FAQ #5 issued by the Department of Treasury related to this program indicates that Grantees must obtain, if available, a current lease, signed by the applicant and the landlord or sublessor, that identifies the unit where the applicant resides and establishes the rental payment amount. Additionally, FAQ #6 notes that all payments for utilities and home energy costs should be supported by a bill, invoice, or evidence of payment to the provider of the utility or home energy service. Attachment C, Section 2 of the grant agreement states that grants are available to households whose income does not exceed 80% of the area median household income as defined by the United States Department of Housing and Urban Development, and applicants must provide income source documentation at the time of application. Condition/Cause For 1 out of 60 cases tested, assistance in excess of 18 months was provided because the financial reviewer did not question the ledger indicating months of arrears. For 14 out of 60 cases tested, prospective assistance for more than 3 months was provided without reapplications on file. In 5 of these cases, the reapplication was received, but after more than 3 months of prospective assistance had been paid. For the remaining 9 cases, reapplications were never received. Documentation was not provided to determine which payments fell under ERA1, which was subject to this requirement, or ERA2, which was not. For 21 out of 60 cases tested, the amount paid for rent or utilities did not agree to a lease agreement or bills on file for the following reasons: (1) In 6 instances the Authority added a utility allowance to the monthly rent paid without obtaining utility bills to support the amount paid or ensuring funds were paid to the proper utility provider, (2) in 4 instances the Authority paid the same monthly rent twice, (3) in 10 instance either rent or utilities paid did not agree to documentation on file as a result of clerical errors or failing to question inconsistencies, and (4) in 1 instance the rent was paid to the incorrect landlord due to another case having a similar tenant name. For 1 out of 60 cases tested, an individual who did not meet income eligibility requirements received assistance due to an error in how eligibility was calculated. The Authority did not have controls in place to detect the noncompliance items noted above prior to issuing payments. Effect Program assistance was provided for certain individuals who did not demonstrate meeting the allowable activities/cost or eligibility criteria of the grant. Questioned Costs Known questioned costs are $55,938. Context The emergency rental assistance program was a new federal program for the Authority in 2021, and there was a push to provide payments to applicants timely, which required the Authority to put procedures into place quickly to administer the program. Additionally, guidance was being clarified after the funds were received. Within our testing of 60 cases, questioned costs comprise approximately 10.54% of the total costs tested. Repeat Finding No. Recommendation We recommend the Authority review their checklists and training for individuals who are reviewing transactions for the allowable activities, allowable cost, and eligibility criteria of grants. This training should include a thorough review of the grant agreement and allowable activities and costs for the funding stream. We also recommend that the Authority revisit and strengthen internal controls over allowable activities, allowable costs, and eligibility related to grant programs. Management Response See corrective action plan included in this report package.