FAC Explorer

Finding 540331 (2024-001)

-
Requirement
P
Questioned Costs
$1
Year
2024
Accepted
2025-03-28
Audit: 350209
Organization: Hughes Neighborhood Housing, Inc.c/o L.hayes & Associates (MD)
Auditor: Pkf O'Connor Davies LLP

AI Summary

  • Core Issue: Unauthorized use of project funds due to fraudulent checks resulted in a loss of $6,170.
  • Impacted Requirements: Project funds must be used for related costs as per regulatory agreements.
  • Recommended Follow-Up: Seek reimbursement from the Maryland Banking Commission and consult with HUD for further solutions.

Finding Text

Finding No. 2024-001 – Unauthorized use of project funds for unrelated costs Federal Assistance Listing Number Name of Federal Program or Cluster 14.181 Supporting Housing for Persons With Disabilities FHA/Contract Number 000-HD020-WPD Questioned Costs $6,170 Information on the Universe Population Size Operating cash was reviewed throughout the audit period and at year-end. Sample Size Information Operating cash was reviewed throughout the audit period and at year-end. Identification of Repeat Finding Reference Number None noted Criteria The regulatory agreement requires that project funds are used for related costs. Statement of Condition Due to a fraudulent transaction by an unknown perpetrator, unauthorized funds were withdrawn from the operating cash account and misappropriated. Cause The unknown and unrelated perpetrator created three fraudulent checks that they were able to cash at the bank from the Entity’s operating account. Effect or Potential Effect An unauthorized withdrawal of $6,170 was withdrawn from the operating cash account for unrelated project costs. Auditor Non-Compliance Code Z – Other Questioned Costs $6,170 Section III – Federal Award Findings and Questioned Costs (continued) Perspective Although the perpetrator of the fraud did not have access to the Entity’s check stock, the perpetrator was able to create fraudulent checks and was able to withdraw cash from the Entity’s bank account. The bank is disputing their obligation to reimburse the Entity for the fraudulent checks. Recommendations We recommend that the Entity pursue reimbursement from the Maryland Banking Commission and discuss potential solutions with their HUD representative. Views of Responsible Officials See corrective action plan Contact Person Cathy Voundy-Thomas

Corrective Action Plan

A. Comments on Finding and Recommendations Comments: It is important to note that at no time did L. Hayes & Associates, Inc. (LHA), Managing Agent, use project funds for unrelated costs. This finding No. 2024-001 refers specifically to fraudulent check charges that were posted to the Hughes operating account in March 2024 by an unknown person. There was a total of three (3) checks written by the same person. This person is unknown to us and did not have access to our check stock nor our office. Therefore, it appears that the perpetrator used some type of machine to reproduce copies of our checks and the signature of Ms. Voundy-Thomas, Operations Manager. Recommendations: Based on the recommendation of our auditor, our office contacted the Maryland Banking Commission to report and pursue reimbursement of the fraudulent charges deducted from the Hughes Neighborhood Housing operating bank account and they referred us to contact the Office of the Comptroller of Currency. Our auditor also suggested that we discuss potential solutions with our HUD Account Executive. B. Actions Taken or Planned Actions Taken: Upon reconciliation of the Project’s March 2024 bank accounts and the discovery of the fraudulent charges, Ms. Voundy, Thomas immediately contacted Wells Fargo’s Fraud Claims Department to report our findings, request reimbursement of the charges, and to place an alert of the account. In addition, Ms. Voundy-Thomas and Mr. Merrick, Hughes, BOD President, visited a Wells Fargo branch to discuss this matter directly with an Account Representative. Unfortunately, the bank denied our request for reimbursement of the fraudulent charges stating that our claim was not processed within 30-days of the posted charges. Actions Planned: Per the guidance from the Maryland Banking Commission, our office has contacted the Office of the Comptroller of Currency to further pursue reimbursement of the fraudulent charges. Also, upon completion and submission of the above-mentioned audit, we plan to pursue any further actions recommended by our HUD Account Executive regarding this finding. Status of Corrective Action on Prior Findings No prior findings were noted.

Categories

Questioned Costs Cash Management HUD Housing Programs

Other Findings in this Audit

Programs in Audit

ALN Program Name Expenditures
14.181 Supportive Housing for Persons with Disabilities $213,038