Finding Text
2025-001 Unsupported Capital Fund Accounts Receivable and Related Excess Federal Cash Drawdown Public Housing Capital Fund Program, ALN 14.872 Significant Deficiency in Internal Controls Other Matter to be Reported Under the Uniform Guidance Condition: During the testing of Capital Fund Program drawdowns, the auditor identified two drawdowns for costs that had not been paid. The first drawdown related to revenue recorded with a due from HUD balance in the prior year. The Authority drew down the funds to make a payment to reduce the net pension liability, but the payment was never made. The second drawdown was due to the Authority receiving a duplicate invoice that had not been paid; the funds were drawn down before the invoice was identified as a duplicate. As a result, the Capital Funds held in the Authority’s bank accounts were not eligible for payment and are due back to HUD. The unsupported prior year due from HUD amount also resulted in a correction of error in the current-year financial statements. Context: The auditor haphazardly selected 19 drawdowns, representing approximately 70% of total Capital Fund drawdowns, from the population, which we consider to be a statistically valid sample size. The auditor reviewed the drawdowns and supporting documentation to ensure proper procedures are being followed and that the Authority is in compliance with HUD requirements. Criteria: Per 2 CFR 200.302(b)(6), the Authority is required to maintain financial management systems and written procedures that minimize the time between receipt of federal funds and disbursement for program purposes. Advance draws must be limited to the minimum amounts needed and timed to the Authority’s actual, immediate cash requirements. HUD regulations require the Authority maintain complete records of Capital Fund Program obligations and expenditures per 24 CFR 905.326. Cause: The Authority’s controls were not effective to prevent or detect the missed payment. The process for drawdown funds prior to payment did not allow for the controls to detect the duplicate invoice until the packet moved to the accounts payable process. Effect: The Authority recorded an unsupported Capital Fund accounts receivable and drew federal funds for costs that had not been paid. A material correction of error was recorded in the current year financial statements, and the Authority owes the related funds back to HUD. Questioned Costs: $0, the Authority did not misspend any funds related to these identified issues. The excessive draws totaled $293,151, representing the Capital Fund amounts drawn for the unpaid prior year accounts receivable balance and duplicate invoice. The Authority is required to return these funds and any interest earned on them to HUD. Auditor’s Recommendations: The Authority should continue to develop and implement internal controls over grant drawdowns and financial reporting to ensure reporting will be accurate and timely and that variances between expected and actual outcomes are investigated.