Finding Text
Finding: 2024-007 Late Fees. Federal Programs - Continuum of Care. Federal Financial Assistance Listing - 14.267. Federal Award Number - OK0024L6I021111, OK0024L6I022113, OK0024L6I022212, OK0024L6I022213, OK0024L6I022214, OK0024L6I022215, OK0024L6I022316. Federal Agency - Department of Housing and Urban Development. Pass-through Entity - City of Oklahoma City and the City of Norman. Allowable Activities or Unallowed, Allowable Costs/Cost Principles. Significant deficiency in Internal Control over Compliance. Criteria: Uniform Guidance (2 CFR 200.302(b) ) requires recipients and subrecipients to maintain financial management systems that provide accurate, current, and complete disclosure of financial results. In addition, 2 CFR 200.403 requires costs charged to federal awards to be allowable and adequately supported. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Hope incurred rental late fees related to housing units of participants in the program. These late fees resulted from rent payments remitted after the contractual due date and were claimed as part of rental costs. Late fees represent penalties and are not an allowable cost under the program. The tenant-caused damage exception permitted under 24 CFR Part 578 does not extend to late fees. Cause: Hope did not establish internal controls to identify and exclude unallowable late fees from rent charged to the program. Additionally, reimbursement requests were not reviewed to ensure penalties were segregated from allowable rental costs. Effect or Potential Effect: Hope incurred unallowable costs. Questioned Costs: 500. Context: A nonstatistical sampling of 54 out of over 3,000 transactions were selected for testing of Activities Allowed and Unallowed, and Allowable Costs/Cost Principles. Four transactions included rental late fees in the rent expense claimed. Repeat Finding from Prior Year: No. Recommendation: Management may consider reviewing both the approval of rental expenses prior to issuing rental assistance checks as well as reimbursement processing of rental costs to ensure late fees are not included. Views of Responsible Officials: Management's response is included in the corrective action plan.