Finding Text
Fraudulent Checks
Finding Number: 2022-006
Assistance Listing Number and Title: AL # 14.871 - Section 8 Housing Choice Vouchers/Housing Voucher Cluster
Federal Award Identification Number / Year: 2022
Federal Agency: U.S. Department of Housing and Urban Development
Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Pass-Through Entity: N/A
Repeat Finding from Prior Audit? No
Noncompliance, Material Weakness, and Questioned Cost
2 CFR § 2400.101 gives regulatory effect to the Department of Housing and Urban Development for 2 CFR Part 200 Subpart E § 200.403 which provides that, except where otherwise authorized by statute, costs must meet certain general criteria in order to be allowable under Federal awards including being necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and being adequately documented.
State ex rel. McClure v. Hagerman, 155 Ohio St. 320 (1951), provides that expenditures made by a governmental unit should serve a public purpose. Typically, the determination of what constitutes a “proper public purpose” rests with the judgment of the governmental entity, unless such determination is arbitrary or unreasonable. Even if a purchase is reasonable, Ohio Attorney General Opinion 82006 indicates that it must be memorialized by a duly enacted ordinance or resolution and may have a prospective effect only. Auditor of State Bulletin 2003-005 Expenditure of Public Funds/Proper Public Purpose states, in part, the Auditor of State’s Office will only question expenditures where the legislative determination of a public purpose is manifestly arbitrary and incorrect.
Due to lack of proper internal controls and fraud by the previous Executive Director, expenditures totaling $324,624 were posted to the Housing Voucher Cluster in 2022. These expenditures were not related to the Housing Voucher Cluster as they pertained to fraud. There was no valid support for the expenditures. As such, the entire $324,624 is considered a questioned cost. These costs were also not for proper public purposes.
The Board and Authority management should implement proper internal controls to ensure proper segregation of duties to help prevent and deter fraud.