Finding 47615 (2022-001)

Material Weakness
Requirement
A
Questioned Costs
$1
Year
2022
Accepted
2023-03-02

AI Summary

  • Core Issue: Weak controls in the vendor payment process led to unauthorized access and fraud.
  • Impacted Requirements: Management failed to maintain proper safeguards for financial reporting and asset protection.
  • Recommended Follow-Up: Strengthen internal controls and enhance authentication procedures for vendor payments.

Finding Text

Finding 2022-001 Material Weakness Criteria: Management should have a system in place to reduce the likelihood of errors in financial reporting and to ensure the safeguarding of assets. Condition: Controls over the vendor payment process was not properly followed. Cause: The Organization experienced high turnover in the finance department resulting in a failure to safeguard program assets. Effect: The result of the vendor process being circumvented allowed a malicious actor to gain electronic access to the checking account for the Section 8 Housing Choice Vouchers program and implement $56,944 of unreimbursed fraudulent disbursements from the account. Questioned Costs: $56,944 Recommendation: The Organization should monitor the internal controls over the vendor payment process and implement additional procedures for authentication. Views of Responsible Officials and Corrective Action Plan: Management concurs with this finding and will adhere to the Corrective Action Plan in this audit report.

Corrective Action Plan

Finding 2022-001 ? Material Weakness Contact Persons: Marcie Jeffries, Finance Officer, or Trudy Murray, Executive Director Corrective Action: The Finance Department and the Management Department has worked closely with Bank of America at the onset of fraudulent activities from Section 8 Housing Choice Voucher Program to safeguard the assets. Through this process ACH Positive Pay was established for all ECHSA, Inc., bank accounts. This system allows CashPro to block unauthorized ACH transactions from posting to an account and allows the Finance Department to establish ACH authorization online. Further, the system safeguards the accounts by contacting the assigned contact person by phone or by sending a secure message via email of any fraudulent looking ACH pull downs. These activities will not be allowed to pass through the accounts without approval from the Finance Officer. The plan is to continue utilizing the ACH Positive Pay CashPro process to prevent fraudulent activities. As with other issues, COVID-19 Pandemic, for one reason or another, caused a high turnover with staff including the Finance Officer, who left without any notice, which resulted in the Finance Department being without an Officer in charge and payments to vendors becoming the sole responsibility of the Finance Technicians. After advertising the Finance Officer?s position unsuccessfully through several avenues, including local CPA offices, a candidate, Marcie Jeffries, was interviewed and hired effective July 25, 2022. Hiring Ms. Jeffries has allowed the internal controls for the Finance Department to be reestablished and the implementation of the current Finance Manual carried out. The Management Department, with the supervision of the Board of Directors Finance Officer will continue to make every effort necessary to safeguard ALL accounts, in particular, the Section 8 account that experienced the fraudulent activities.

Categories

Questioned Costs HUD Housing Programs Material Weakness Reporting Internal Control / Segregation of Duties

Other Findings in this Audit

  • 624057 2022-001
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
14.871 Section 8 Housing Choice Vouchers $3.83M
93.569 Community Services Block Grant $2.07M
14.879 Mainstream Vouchers $292,895
14.896 Family Self-Sufficiency Program $39,717
14.218 Community Development Block Grants/entitlement Grants $11,474