Finding Text
Finding Number: 2021-SA5 Material Weakness – Program Income – Compliance and Control Finding Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program Federal Agency: U.S. Veterans Administration Pass-Through Entity: Not applicable Repeat Finding: Yes – 2021-SA5 Criteria or Specific Requirement: 2 CFR section 200.307, Program Income, states that ordinary program income must be deducted from total allowable costs to determine the net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Program income that the non-Federal entity did not anticipate at the time of the Federal award must be used to reduce the Federal award and non-Federal entity contributions rather than increase the funds committed to the project. 38 CFR 61.82, Participant fees for supportive housing, states that participant fees may be used for costs of operating the supportive housing or to assist supportive housing residents’ move to permanent housing and must have a therapeutic benefit. Condition: It does not appear that program income was tracked and expended for use of operating supportive housing or assisting housing residents. Cause: Factors beyond the control of current management, including poorly designed policies and procedures, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards. Effect or Potential Effect: Potential noncompliance related to requesting additional reimbursement before program income was spent. Additionally, as noted in Finding 2021-SA1 program income expended was not appropriately included on the SEFA. Questioned Costs: Related questioned costs are unknown. Context: These issues stem from policies and procedures established by former key accounting personnel, predate current management’s oversight, and were therefore outside their direct control. Recommendation: Policies and procedures should be designed and implemented to ensure program income is tracked and expended appropriately. View of Responsible Officials: In response to Finding No. 2022-SA5, management agrees with the finding. Corrective actions were implemented in subsequent fiscal years, including the establishment of policies and procedures to ensure that program income is tracked by contract and expended in accordance with applicable federal requirements.