Finding Text
Finding Reference Number: 2025-002 - Reportable Finding Considered a Significant Deficiency and Noncompliance Finding - Reporting Title and ALN Number of Federal Program: Economic Development Initiative, Community Project Funding - 14.251 and Eviction Protection Grant Program - 14.537 Type of Finding: Federal Award Finding Finding Resolution Status: Unresolved Identification of Repeat Finding and Finding Reference Number: Not applicable. Criteria: 2 CFR § 200.303 requires recipients and subrecipients to establish and maintain effective internal controls over federal awards. Such controls should include documented evidence of management review and approval of financial and performance reports submitted to the awarding agency. Maintaining documentation of the review and approval process provides evidence that control activities were performed and supports compliance with federal award requirements. Statement of Condition: As part of testing over the Reporting compliance requirement, we reviewed financial and performance reports submitted to HUD and inquired of management regarding the review and approval process. Management indicated that the reports and supporting documentation were reviewed and verbally approved prior to submission. We note that for one of the selections tested, no documentation was maintained to evidence management's review and approval of the reports. Accordingly, we could not verify through documentation that the control operated as designed for the reports tested. Cause: The condition occurred because MEDA's review and approval process for financial and performance reports relied on verbal management authorization prior to submission. While management reviewed the reports and supporting documentation, procedures were not in place to require the retention of documented evidence of the review and approval. As a result, MEDA was unable to demonstrate that the control had been performed in accordance with internal control requirements. Effect or Potential Effect: Although no material errors were identified in the reports tested, the absence of documented evidence of management review and approval prevented us from verifying that the control operated effectively. As a result, there is an increased risk that inaccuracies or omissions in future financial and performance reports could occur and remain undetected prior to submission. Questioned Costs: $- Context: This finding represents a control deficiency in MEDA's reporting review and approval process rather than an isolated instance affecting a single report. As part of testing over the Reporting compliance requirement, we reviewed financial and performance reports submitted during the audit period and noted that documented evidence of management review and approval was not maintained for the reports tested. The condition indicates that MEDA's control relied on verbal approval rather than documented evidence of review, which could affect all reports subject to management review and approval Recommendation: We recommend that MEDA strengthen its reporting controls by implementing procedures to document management's review and approval of all financial and performance reports prior to submission to HUD. Such documentation may include signed approval forms, documented email approvals, electronic workflow approvals, or other evidence demonstrating that the review control was performed. In addition, MEDA should retain this documentation in accordance with its record retention policies to provide evidence that reports were reviewed for accuracy, completeness, and compliance with federal award requirements before submission Response: See Corrective Action Plan 13