Finding Text
Finding Reference Number: 2023-003
Title and Assistance Listing Number of Federal Program: 14.181 Supportive Housing for Persons with Disabilities
Type of Finding: Federal Award Finding
Finding Resolution Status: In Process
Information on Universe Population Size: 17 rental units
Sample Size Information: 6 rental units
Identification of Repeat Finding and Finding Reference Number: Not Applicable.
Criteria:
TheCommittee of Sponsoring Organizations of the Treadway Commission (COSO) framework is a widely recognized framework for designing, implementing, and evaluating internal control systems. The COSO framework defines internal control as a process that is designed to provide reasonable security with respect to achievement of objectives of compliance with applicable laws and regulations. The COSO framework offers useful guiding principles that can be applied in establishing and operating an effective regulatory compliance program with the goal of closing compliance gaps, and ensuring the prevention of material noncompliance. The monitoring component of the COSO framework involves periodic or ongoing evaluations to verify that each of the five components internal control, including the controls that affect the principles within each component, are present and functioning. Monitoring helps ensure that internal controls continue to operate effectively.
Statement of Condition:
Management had developed activity level controls over compliance that included compliance review of all tenant certifications of income used in determining the amount of rent amounts due from eligible PRAC 811 participants (tenants) by the Coast compliance department. However, during our testing, management had no documentation evidencing such reviews had occurred; further, during our interview process of site staff (community managers), staff asserted that no such reviews had occurred, and that no feedback on tenant certifications was provided by the compliance department.
Cause:
Management had properly designed activity level controls over compliance, but those controls were not placed in operation. Proper monitoring of the compliance department was not occurring to detect the lack of proper oversight by the compliance department.
Effect or Potential Effect:
It is reasonably possible that ineligible tenants could improperly be granted tenancy to the property and given rental assistance for which they are not eligible. Such improper payments could be material.
Auditor Non-Compliance Code: S – Internal Control Deficiencies
Questioned Costs: $0
Reporting Views of Responsible Officials:
After discussion with the auditor, senior management understands the importance of having a properly functioning monitoring system in place to ensure that controls that are properly designed are in fact placed in operation and functioning as intended. The compliance manager responsible for implementing the controls over compliance has been terminated, and senior management will institute monitoring procedures to ensure that controls over compliance are both properly designed and functioning as intended.
Context:
For the eleven files tested, no evidence existed in the files to corroborate that tenant certifications were being reviewed and approved by the compliance department.
Recommendation:
Management should have a process to review and approve all tenant certifications being prepared by site staff (community managers). The approval process should include an approval stamp or some other evidence that each file has been reviewed by the compliance department and is approved for processing. Further, senior management should have an ongoing monitoring process to ensure that the compliance department is carrying out the review process.
Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations:
Management agrees with the recommendation of the auditor, and will ensure that evidence of certification review and approval is documented with a approval stamp or some other documentary evidence.
Response Indicator: Agree (A) Completion Date: November 27, 2023
Response:
Management agrees with the recommendation of the auditor, and will ensure that evidence of certification review and approval is documented with a approval stamp or some other documentary evidence.