Finding Text
Duplicate Payments to Vendors Type of Finding Material Weakness - Internal Control Over Financial Reporting Material Noncompliance - Material to the Financial Statements Material Weakness - Internal Control Over Compliance Material Noncompliance - Material to the Major Program New or Repeat Finding New Federal Program Community Development Block Grant/State's Program (ALN 14.228) Federal Agency U.S. Department of Housing and Urban Development Pass-through Entity and Identifying Number(s) Texas General Land Office (22-119-003-D373, 22-085-017-D253) Compliance Requirement(s) A. Activities allowed or unallowed B. Allowable costs/cost principles Criteria 2 CFR 200.303(a) requires entities to maintain effective internal control over federal awards. 2 CFR 200.302(b)(3) requires entities to maintain accountability over funds to ensure they are used for authorized purposes and safeguarded against loss or misuse. Condition The City paid a vendor twice for the same invoices and also submitted duplicate reimbursement requests to the pass through entity for the same expenditures. These errors resulted in a material misstatement of expenditures recorded in the City’s accounting records and in federal reimbursement requests. Cause The same individual entered invoices and released them for payment without secondary review. Inconsistent invoice naming prevented the accounting system’s duplicate invoice controls from identifying previously processed and paid invoices. Effect or Potential Effect Duplicate payments may occur or go undetected, and duplicate reimbursement requests may be submitted to the grantor. Questioned Costs $721,272 Context During the audit period, the City experienced significant turnover within the finance department. Reduced staffing and inconsistent invoice entry practices prevented system controls from recognizing duplicate invoices, resulting in duplicate vendor payments. Because the City relied on these records when requesting grant reimbursements, duplicate requests were also submitted. The errors were identified by the auditors and corrected by the City prior to September 30, 2024. Recommendation The City should segregate duties so one individual enters invoices and another reviews and releases payments. The City should also adopt a standardized invoice naming convention to allow system controls to identify potential duplicates. Views of Responsible Officials City management agrees with the finding. Duplicate payments and reimbursement requests occurred during a period of financial department turnover, compounded by insufficient segregation of duties and inconsistent invoice referencing. The City has recovered the duplicate payments, returned the duplicate reimbursements, implemented a standardized invoice numbering convention, and revised procedures to ensure appropriate review before payments are released. Management is also evaluating additional system controls to prevent recurrence.