Finding 513905 (2023-003)

2023-003 – ALN 14.850 – Public & Indian Housing – Activities Allowed or Unallowed Condition and Criteria: The Authority operates several distinct programs. Allocated expenses are paid from the Public and Indian housing funds and reimbursed using inter-program accounts. Reimbursement between programs was not made timely and has caused an increase in inter-program receivables and payables over time. Cash management is the process of managing the Housing Authority (PHA) to optimize its use of funds. This process involves the timing of receipts and disbursements to assure the availability of funds to meet expenditures and to maximize the yield from the investment of temporary surplus funds. The Authority incurred unallowable cost for the inter-program balances between the Public and Indian Housing program, Housing Choice Voucher program, Blended Component Units, and Business Activities’ programs due to poor cash management controls. Amount of Questioned Costs. $4,187,263, resulting in unallowable costs created over years. Context: The Authority’s management failed to ensure inter-program advances were reimbursed properly and timely. Costs assigned to the Public and Indian Housing programs, Housing Choice Voucher program, other HUD programs or Business Activities’ programs could be unallowable and/or unreasonable. Cause: Public and Indian Housing programs cash balances are unable to resolve outstanding inter-program balances due to less unrestricted cash than existing inter-program balances. This causes cash not to be settled during the year hindering oversight of cash balances at a program level. Effect: The Public and Indian Housing program does not have sufficient cash to satisfy inter-program balances due. The restriction of cash to cover inter-fund imbalances can limit the liquidity and operational flexibility of the program. There is an increased risk of non-compliance with federal guidelines. Auditor’s Recommendation: We recommend the Authority settle interfund balances on a monthly basis and implement a process to review net cash balances during its budgetary procedures to reduce the risk of further noncompliance. Further, the Authority need to implement stricter processes around inter-program balances to ensure the Authority can properly assess cash balances at a program level. Grantee Response: Current management acknowledges the finding and is following the auditor’s recommendations.