Finding 480510 (2023-001)

Finding 2023-001 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public Housing Capital Fund Program Federal Assistance Listing Number: 14.872 Noncompliance – N. Special Tests and Provisions - Capital Funds for Operating Costs Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Special Testing and Provisions Criteria: Capital funds transferred to operations (BLI 1406) are not considered obligated until the Authority has budgeted and drawn down the funds. To meet this requirement, the funds must be budgeted in line BLI 1406 (Operations) and the Authority must submit the voucher request in LOCCs. The Authority's reported obligation amount in LOCCs must be the same amount in the Authority's accounting system since the date of the voucher request in LOCCs is the point of obligation for funds in BLI 1406. The voucher request date must occur before those funds are reported as obligated in LOCCs under the obligations and expenditures tab (24 CFR section 905.314(I)). Condition: Based upon inspection of the Authority’s voucher requests and LOCCs' obligations and expenditures tab, the Authority obligated capital funds for operations prior to submitting the voucher requests. Cause: The Authority did not follow the compliance requirement related to capital funds for operating costs by obligating capital funds for operations prior to submitting the voucher requests. Effect: The Public Housing Capital Fund Program is in non-compliance with the special tests and provisions type of compliance as it related to capital funds for operating costs. Recommendation: We recommend the Authority design and implement internal control procedures that will reasonably assure compliance with the Uniform Guidance and the compliance supplement. Authority's Response: The Authority accepts the recommendation of the auditor. The Authority has updated the practice to follow the HUD compliance supplement.