Finding 551081 (2024-002)

Finding 2024-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Section 8 Housing Choice Vouchers and Public and Indian Housing (Non-major Program) Programs Federal Assistance Listing Number: 14.850 and 14.871 Noncompliance – B. Allowable Costs/Cost Principles Noncompliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Allowable Costs/Cost Principles Criteria: The Authority's federal program expenditures must meet the requirements of 2 CFR Part 200 Subpart E Cost Principles and conflict of interest requirements of 24 CFR 982.161, and must be adequately documented. Condition: Based upon inspection of the Authority’s paid invoices and on discussion with management, there were costs that were determined to be unallowable. Additionally, reimbursements were made to employees in violation of the Authority's adopted personnel policy. There were excessive reimbursements to employees that would be considered outside the normal course of business of the Authority, and housing assistance payments were made to landlords that would be considered a conflict of interest as defined in 24 CFR 982.161. Context: The following costs were determined to be unallowable or not reasonable or necessary in the proper and efficient performance of the federal program: Meals and gifts (2 CFR section 200.438) Alcohol (2 CFR section 200.423) Professional service costs (2 CFR section 200.459) Travel (2 CFR section 200.475) Payments to landlords that represent a conflict of interest (24 CFR 982.161) Known Questioned Costs: $107,736 Cause: There is a significant deficiency in internal controls over the compliance for the allowable costs/cost principles type of compliance requirement. Housing assistance payments were made to landlords that are defined as a conflict of interest, and approval was granted to reimburse Authority personnel without properly considering the allowability of such costs in accordance with 2 CFR 200. Effect: The Public and Indian Housing and Section 8 Housing Choice Vouchers Programs expended federal funds for unallowable items and as such is in non-compliance with the allowable costs/cost principles type of compliance. Recommendation: We recommend the Authority design and implement internal control procedures that will reasonably assure compliance with the Uniform Guidance and the compliance supplement. This includes the proper internal control procedures to review invoices in accordance with program requirements, as well as compliance with the Authority's adopted personnel policy. Additionally, the Authority should establish internal controls related to the proper approval of these invoices for payment.