Finding Text
Finding 2025-001 - Internal Controls and Accounting for Capital Fund Grants – Cash Management and Special Tests and Provisions – Noncompliance and Significant Deficiency – Capital Fund Grant Program ALN 14.872; Public and Indian Housing ALN 14.850 Condition & Cause: We examined all FY 2025 capital grant draws and expenditures for our review of the programs internal control activities. We found that the Authority is paying invoices out of nonfederal COCC funds and then reimbursing itself at a later date with capital fund draws. This is explicitly against federal cash management and PIH notices issued by HUD which require the draw and disbursement to occur in a three-day window. We found that the Authority accrued $245,420 of BLI 1408 funds from grant 501-24. We noted, however, that the Authority did not have associated costs matched against those revenues. We have provided adjustments to remove this revenue from the general ledger. In the prior year, we had a similar BLI 1408 adjustment as the one above in the amount of $373,285.10. During FY 2025 the Authority expended these BLI 1408 funds on development and modernization costs. We question, however, if these costs are eligible under BLI 1408, which is the management improvement line. Costs under this BLI are for management efficiencies which improve the Public Housing Authority’s ability to govern its public housing stock. We recommend that the client review its capital fund budget and consider allocating these BLI 1408 type costs to the BLI 1480 category. In addition to the above, we found that the Authority treated all costs as “hard” costs and placed them in the work in process line in the Public Housing 14.850 column of the FDS. This includes 1410 administrative fee costs which are paid to the COCC. We have provided adjustments to reclassify some of these costs to the “soft” classification for reporting purposes. Finally, we note that the Authority still has Capital Fund Grant 501-20 open. This grant has an end disbursement date of March 2026. As of the exit conference date the Authority has $309,586 of grant funds remaining to draw and $165,313 of grant funds remaining to expend. Likewise Capital Fund Grant 501-22 is also open. This grant has an end disbursement date of May 2026. As of the exit conference date the Authority has $1,555,436 of grant funds remaining to draw and expend. The Authority should focus on these grants immediately to avoid a loss of funding. Criteria: Federal Uniform Guidance 2 CFR Part 200, The Public Housing Capital Fund Program 24 CFR Part 905, PIH Notices, OMB Compliance Supplement Effect: Failure to manage grants effectively can result in loss of federal funding. Deficiencies in the internal control activities can lead to material misstatements and errors in the financial statements. Recommendation: We recommend that the Authority implement internal controls to strengthen the existing control environment. The Authority should draw and disburse capital funds within three days of receipt. The Authority should review BLI 1408 guidance to ensure that costs attributed to this line are eligible. The Authority should also review capital fund grant end dates to ensure proper and effective use of grant funds. Questioned Costs: None Repeat Finding: No Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.