Finding Text
2025-006 Allowability of Rental Assistance Payments - Unallowable Program Expenditure U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Continuum of Care Program—Assistance Listing No. 14.267 Hennepin County Contract HS00001366; Grant Period – Year ended June 30, 2025 Significant Deficiency in Internal Control over Compliance, Noncompliance Other Matter Criteria: 2 CFR 200.403(a) requires that costs charged to Federal awards be necessary, reasonable, and allocable to the performance of the Federal award. In addition, expenditures under the Continuum of Care Program must meet program allowability requirements. Cleaning costs are not explicitly identified as allowable rental assistance expenses under 24 CFR 578.51. Condition: One instance of unallowable program costs was noted during our testing of direct program expenses. Cause: Turnover within the accounting department during 2025 resulted in policies and procedures not being consistently followed. Effect: The questioned cost and related extrapolated costs may be disallowed. Context: A statistically valid sample of 40 rental assistance payment transactions totaling $52,138 was selected for testing from a population of 393 transactions totaling $561,523. The audit identified one transaction totaling $2,325 for cleaning costs paid to a landlord, which does not appear to be an allowable expenditure under the Continuum of Care Program. In addition, the cleaning costs exceeded one month’s rent. Total extrapolated questioned costs were $25,040. Known Questioned Costs: Total known questioned costs of $2,325. Identification of Repeat Finding: Not a repeat finding. Recommendation: We recommend that Agate Housing and Services, Inc. strengthen internal controls to ensure all expenditures charged to the Continuum of Care Program are allowable and comply with applicable federal and program requirements. Views of Responsible Officials and Planned Corrective Actions: Agate Housing and Services, Inc. agrees with the finding and is in the process of strengthening its controls over its review of program expenditures prior to submitting requests for reimbursement.