Finding Text
Finding Number: 2023-011 Prior Year Finding Number: 2022-003 Program: Emergency Rental Assistance (ERA) ALN: 21.023 Compliance Requirement: Eligibility Criteria --- Pursuant to 2 CFR §200.303, non-Federal entities are required to establish and maintain effective internal control over Federal awards to provide reasonable assurance of compliance with applicable laws, regulations, and award terms. In addition, the Emergency Rental Assistance (ERA) program, as established under the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021, requires that funds be provided only to eligible households meeting specified criteria. The 2023 Compliance Supplement further requires grantees to obtain and retain documentation supporting residency, lease agreements, and rental obligations. Condition --- We sampled and selected 60 of 505 emergency rental assistance payment and noted for 57 samples multiple exceptions, including: • Missing or unsigned lease agreements • Lack of landlord ownership verification • Unsupported costs • Missing identification documentation • Incomplete or unapproved payment request forms • Incomplete or improperly notarized application documentation No exceptions were noted in the remaining three transactions tested. Questioned Costs --- $68,934.72 Context --- The condition was identified through testing performed using a statistically valid sample of program transactions. Effect --- Failure to maintain adequate supporting documentation increases the risk that ineligible beneficiaries may receive assistance, resulting in noncompliance with Federal program requirements. Cause --- Management did not consistently adhere to established policies and procedures requiring the retention of complete documentation supporting eligibility determinations. Recommendation --- We recommend that management strengthen internal controls to ensure that all required documentation is obtained, reviewed, and retained prior to approval of assistance. Views of Responsible Officials Management acknowledges the findings and appreciates the opportunity to provide clarification and context regarding the noted exceptions. First, with respect to landlord ownership verification, it should be noted that proof of property ownership was only required for private landlords in accordance with program policies and procedures. As such, this requirement was not applicable to all transactions reviewed. The documentation samples provided for audit testing were sourced from ERAP program files accessible to program staff. While some payment request forms within these files may appear incomplete or unsigned, the official, fully approved versions are maintained by Accounting. In certain cases, ERAP did not receive copies of the executed forms for inclusion in its files. Accordingly, although the sampled documents may not reflect final approval, the fully approved payment request forms are on file with Accounting and can be provided to support the transactions. Management also notes that staffing and process limitations during the earlier phases of program implementation contributed to documentation inconsistencies. The Grant Administrator position, which plays a critical role in oversight and compliance, was filled in February 2023. Since that time, significant improvements have been made to internal controls and operational procedures, including: o Strengthening document collection and verification processes o Improving timeliness in application review and approval to reduce bottlenecks o Enhancing case file completeness and organization o Transitioning from primarily paper-based records to electronic file management systems These procedural enhancements were formally documented in the ERAP Review Process to ensure consistency, accountability, and ongoing compliance with federal requirements. Additionally, administrative expenses exceeding the 15% threshold were reviewed and approved by Treasury, as the overage was directly attributable to the recapturing of $16 million by Treasury prior to the ERA1 closeout. Furthermore, Housing Stability Services’ expenditure remained within the 10% threshold for ERA2. Management remains committed to continuous improvement and has taken corrective actions to strengthen internal controls, ensure proper documentation retention, and maintain full compliance with applicable federal regulations.