Finding 540920 (2024-005)

Significant Deficiency Repeat Finding
Requirement
B
Questioned Costs
$1
Year
2024
Accepted
2025-03-31

AI Summary

  • Core Issue: Approximately $433,522 of federal funds were improperly held by a vendor and recorded as program costs instead of being credited against expenditures.
  • Impacted Requirements: This situation violates the Uniform Guidance Cost Principles, which require timely offsetting of credits against federal expenditures.
  • Recommended Follow-Up: DSHA should enhance internal controls to prevent similar issues in the future and ensure proper handling of vendor credits.

Finding Text

Condition: Reconciliation of the HAF client assistance expenditures for the year ended June 30, 2023, revealed approximately $290,000 of federal funds were held by a vendor contracted to process and disburse client assistance and were reported as federal expenditures. This amount had increased to $433,522 by October 26, 2023. The funds were offset against assistance payments processed by the vendor on November 14, 2023. During the operation of the program, the vendor received refunds of client assistance that were not timely remitted to DSHA or utilized to fund assistance. A similar finding was noted during the audit of the year ended June 30, 2023. Refer to finding 2023-006. Criteria: The Uniform Guidance Cost Principles requires DSHA to offset credits against program expenditures in 2 CFR 200.406(a): Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Questioned Costs: $433,522 Effect: The funds held by the vendor were initially recorded as program costs. Cause: DSHA was notified, by the vendor, that a credit was available to be applied to fund future assistance. The vendor did not apply the credit without DSHA’s explicit approval, which was not granted until November 14, 2023. Recommendation: We recommend DSHA review the design and implementation of internal controls to address the identified weaknesses in internal control.

Corrective Action Plan

DSHA has implemented the process of requiring the reduction of applicable credits to be applied to all future payment batches and be utilized to fund assistance. This as a result, will eliminate the funds being held by the vendor and remove the need to report as a federal expenditure. The responsibility for implementing this corrective action lies with the following DSHA staff: HAF Program Manager, Director of Housing Finance, Financial Accounting & Reporting Section Manager, and the Director of Financial Management. They will oversee the necessary adjustments to the process and ensure that future payment batches adhere to the revised guidelines.

Categories

Questioned Costs Allowable Costs / Cost Principles

Other Findings in this Audit

  • 540918 2024-003
    Significant Deficiency Repeat
  • 540919 2024-004
    Significant Deficiency Repeat
  • 540921 2024-006
    Significant Deficiency Repeat
  • 540922 2024-007
    Significant Deficiency Repeat
  • 540923 2024-008
    Significant Deficiency
  • 1117360 2024-003
    Significant Deficiency Repeat
  • 1117361 2024-004
    Significant Deficiency Repeat
  • 1117362 2024-005
    Significant Deficiency Repeat
  • 1117363 2024-006
    Significant Deficiency Repeat
  • 1117364 2024-007
    Significant Deficiency Repeat
  • 1117365 2024-008
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
14.327 Performance Based Contract Administrator Program $48.21M
21.026 Homeowner Assistance Fund $16.27M
21.023 Emergency Rental Assistance Program $2.83M
21.027 Coronavirus State and Local Fiscal Recovery Funds $1.55M
14.239 Home Investment Partnerships Program $994,450
14.326 Project Rental Assistance Demonstration (pra Demo) Program of Section 811 Supportive Housing for Persons with Disabilities $851,078
14.880 Family Unification Program (fup) $401,089
14.881 Moving to Work Demonstration Program $271,102
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $200,462
14.241 Housing Opportunities for Persons with Aids $194,082
14.231 Emergency Solutions Grant Program $105,450
14.275 Housing Trust Fund $91,038
97.042 Emergency Management Performance Grants $78,275
14.871 Section 8 Housing Choice Vouchers $22,603
14.879 Mainstream Vouchers $13,858