Finding 388118 (2023-006)

Significant Deficiency
Requirement
B
Questioned Costs
$1
Year
2023
Accepted
2024-03-28

AI Summary

  • Core Issue: Approximately $290,000 in federal funds were improperly recorded as expenditures due to a vendor holding credits that were not applied correctly.
  • Impacted Requirements: Noncompliance with the Uniform Guidance Cost Principles, specifically regarding allowable costs and the need to offset credits against program expenditures.
  • Recommended Follow-Up: DSHA should enhance internal controls to ensure timely application of credits and prevent future noncompliance issues.

Finding Text

United States Department of the Treasury Reference Number: 2023-006 Program: 21.026 COVID-19 Homeowner Assistance Fund Program Federal Award Number: HAF0034 Type of Finding: Noncompliance; Significant Deficiency in Internal Controls over Compliance Compliance Requirement: Allowable Cost Condition: Reconciliation of the HAF client assistance expenditures for the year ended June 30, 2023, revealed approximately $290,000 of federal funds were held by a vendor and were reported as federal expenditures. During the operation of the program, the vendor received refunds that were not timely remitted to DSHA or utilized to fund assistance. Criteria: The Uniform Guidance Cost Principles requires DSHA to offset credits against program expenditures in 2 CFR 200.406(a): Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Questioned Costs: $290,000. The funds held by the vendor were initially recorded as program costs. During the audit of the year ended June 30, 2023, program costs and revenue were reduced by an audit adjusting journal entry for the amount held by DSHA’s vendor. Effect: Unallowed costs were recorded to the Homeowner Assistance Fund Program during the year ended June 30, 2023. Cause: DSHA was notified by the vendor that a credit was available to be applied to fund future assistance. The vendor did not apply the credit without DSHA’s explicit approval. Recommendation: We recommend DSHA review the design and implementation of internal controls to address the identified weaknesses in internal control.

Corrective Action Plan

DSHA has implemented the process of requiring the reduction of applicable credits to be applied to all future payment batches and be utilized to fund assistance. This as a result, will eliminate the funds being held by the vendor and remove the need to report as a federal expenditure. The responsibility for implementing this corrective action lies with the following DSHA staff: HAF Program Manager, Director of Housing Finance, Financial Accounting & Reporting Section Manager, and the Director of Financial Management. They will oversee the necessary adjustments to the process and ensure that future payment batches adhere to the revised guidelines. Responsible Official: Brian Rossello, Director of Housing Finance Completion Date: December 2023

Categories

Questioned Costs Allowable Costs / Cost Principles

Other Findings in this Audit

  • 388116 2023-004
    Significant Deficiency Repeat
  • 388117 2023-005
    Significant Deficiency Repeat
  • 388119 2023-007
    Significant Deficiency
  • 388120 2023-008
    Significant Deficiency
  • 388121 2023-009
    Significant Deficiency
  • 388122 2023-010
    Significant Deficiency
  • 964558 2023-004
    Significant Deficiency Repeat
  • 964559 2023-005
    Significant Deficiency Repeat
  • 964560 2023-006
    Significant Deficiency
  • 964561 2023-007
    Significant Deficiency
  • 964562 2023-008
    Significant Deficiency
  • 964563 2023-009
    Significant Deficiency
  • 964564 2023-010
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
21.023 Emergency Rental Assistance Program $58.73M
14.327 Performance Based Contract Administrator Program $43.68M
21.026 Homeowner Assistance Fund $30.77M
21.027 Coronavirus State and Local Fiscal Recovery Funds $1.19M
14.239 Home Investment Partnerships Program $851,144
14.326 Project Rental Assistance Demonstration (pra Demo) Program of Section 811 Supportive Housing for Persons with Disabilities $803,428
14.880 Family Unification Program (fup) $342,600
14.881 Moving to Work Demonstration Program $246,365
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $166,385
14.231 Emergency Solutions Grant Program $129,903
14.241 Housing Opportunities for Persons with Aids $127,539
14.879 Mainstream Vouchers $18,259
14.275 Housing Trust Fund $14,929
14.871 Section 8 Housing Choice Vouchers $5,516