Finding 504425 (2023-002)

Information on Federal Program - Department of Housing and Urban Development, Assistance Listing Number 14.267 - Continuum of Care Program Criteria –The Code of Federal Regulations Section 200 infers where a funding period is specified, a recipient may charge to the grant only allowable costs resulting from obligations incurred during the funding period and any pre-award costs authorized by the Federal awarding agency. Condition – During our testing of direct expenditures at contract period beginning and end dates, the following exceptions were noted: • Three of the forty expenditures sampled related to rent subsidies in which the rents expended and paid were higher than the amount the Agency was required to pay in accordance with the lease agreement and participant subsidy agreement in place. • One of the forty expenditures sampled was incorrectly recorded to the program. Cause – Review and approval protocols were not appropriately adhered to in certain instances to ensure that costs being charged to the federal program were properly supported. Potential Effect – While the impact of the exceptions and projection of other potential exceptions did not result in any questioned costs, insufficient controls in place could result in reportable questioned costs in future periods. Questioned Costs – Likely questioned costs were projected to be less than $25,000 based on the sampling procedures that were performed. Context – We selected a sample of forty direct expense transactions at contract beginning and ending dates using a statistically valid sample. During our testing, we found four exceptions that resulted in charges that were in whole or in part overstated during the contract period by a total of $710. An exception extrapolation was then performed which resulted in a projected error below the reportable questioned costs threshold. Recommendation – The approval protocols that were not appropriately adhered to related to a lack of communication between the fiscal approvers and program directors. In order to ensure proper recognition and accuracy, BDO recommends that management design and implement more stringent protocols for the review and approval of expenditures that requires the communication and collaboration between the Agency’s departments be documented prior to approval. Views of Responsible Officials – Management agrees with the finding and recommendation set forth within and has developed a corrective action pan to address the lapses in internal control over compliance.