Finding Text
2022-006 FEDERAL COMPLIANCE - DISBURSEMENTS Federal Program Name: Housing Choice Voucher Program Catalog of Federal Domestic Assistance Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Compliance Requirement: Allowable Costs Criteria: The City?s internal controls require that all disbursements be approved by the finance department prior to payment and that bank reconciliations be performed on all accounts. Condition: During our audit, we noted several check runs for the Section 8 program that did not include the finance department?s approval for payment. Additionally, we noted four checks that cleared for amounts other than the amount included on the check register, including two checks whose payee did not agree to the register, a check that was issued twice, and other checks that did not appear on the register. These errors caused increased difficulty in reconciling the bank statements in a timely manner. Additionally, we noted one instance where the direct deposit information for one landlord was entered incorrectly, which resulted in a payment of approximately $2,000 being sent to the wrong bank account. Cause: According to the PHA director, these differences were caused by the check registers being printed by program instead of check number. Therefore, the payment amount for several tenants for a certain check were listed in a separate section. Other errors were due to misfeeds in the check printer. Based on discussions with City management, the direct deposit error was a result of taking the change over the phone and not obtaining documentation of the correct checking account number. Effect and Questioned Costs: Reduced effectiveness of internal controls with the possibility of incorrect payments being processed. Repeat Finding: No Recommendation: We recommend that the PHA implement procedures to ensure that checks written agree to the check register prior to mailing and the finance department approve all Section 8 check runs. These procedures should include printing the check register by check number and comparing the printed checks to the register prior to mailing. If any differences are noted due to misfeeds in the check printer, the register should be updated to reflect correct information. Furthermore, an updated check register should be provided to the finance department with a memorandum documenting the changes. The City may consider investing in printing equipment that allows check numbers to be printed on the checks instead of utilizing preprinted checks. Additionally, we recommend that all direct deposit changes be appropriately documented (i.e. cancelled check, deposit ticket, completed direct deposit form, etc.) from the landlord and be reviewed prior to processing the first payment. Management?s Response: Our agency is now printing check registers by check number which will alleviate the appearance of incorrect check amounts. We will be comparing checks to register prior to sending to finance for approval. Our staff will continue to confirm account numbers by using the direct deposit forms and canceled checks when available. We have started contacting finance prior to processing any Hold Harmless requests to ensure the original check hasn't cleared the bank before requesting a duplicate check.