Finding 559943 (2023-005)

Material Weakness
Requirement
BJ
Questioned Costs
-
Year
2023
Accepted
2025-05-08

AI Summary

  • Core Issue: Lack of original documentation for grant expenses makes it difficult to verify and manage funds, increasing the risk of fraud and errors.
  • Impacted Requirements: Proper documentation is essential for accountability in purchasing and procurement, as mandated by federal granting agencies.
  • Recommended Follow-Up: Ensure all expenses have complete documentation attached, including invoices and contracts, and implement new policies for oversight and management of Capital Fund Program funds.

Finding Text

Criteria:Proper documentation and maintaining adequate files are necessary in purchasing and procurement, and required by federal granting agencies, to ensure accountability, to prevent duplication of payments, and to detect fraud and prevent other errors from occurring.Condition:Grant expenses and drawdowns for the Capital Fund Program were not verifiable due to lack of original documentation.Effect:Mismanagement of files and lack of proper documentation is necessary to detect fraud and prevent other errors from occurring.Cause:Lack of oversight by management and the Board.Recommendation:Documentation should be maintained for all expenses, including grant reimbursement requests and required federal government forms and reports. Each reimbursement request and advanced funds should have all required documentation (invoices, contracts, eligibility, payroll records, etc.) attached to the request or the funds received to support those funds.Views of Responsible Officials and Planned Corrective Actions:We agree with the auditors' comments, and the following action will be taken to improve the situation. This situation was created when the previous administration removed all records and were not made available to the auditors after several requests. KMHA has taken the following actions.1. KMHA's Board has approved new written policies and procedures and are in place now.2. Appropriate staff have begun taking proper safeguards for Capital Fund Program management to ensure proper accountability. This includes the oversight of processing payments of CFP expenditures, which includes the following procedures for: 1) payment of invoices; 2) requisition of funds; 3) monitoring; and 4) reporting of CFP funds.Payment of InvoicesAll CFP invoices will be reviewed and clearly marked as approved and documented to show that the source of funds for payment are CFP grant funds by the Executive Director prior to payment. The Executive Director will specify the general ledger code, including the BLI account to be used for payment processing on the invoice before providing the invoice to the accounts payable clerk.Under no circumstances will a payment be made if KMHA has not drawdown and received the respective CFP funds.With the exception of funds associated with BLI 1406 “Operations”, PHAs have three (3) business days to issue and mail the check once the CFP funds are received.The Executive Director/accounts payable clerk will specify the BLI account and CFP grant year on the check voucher prior to sending the check voucher to the fee accountant for financial statement processing.Requisition of FundsFor each drawdown, the Executive Director will print the associated eLOCCS Voucher Payment form from the eLOCCS system.The Executive Director will document the check number(s) and vendor(s) associated with each CFP draw (i.e., the eLOCCS Voucher Payment form). In addition, each individual draw shall be numbered for reference purposes.A copy of each draw shall be submitted to the fee accountant to ensure proper reporting of the grant drawdown.With the exception of funds associated with BLI 1406 “Operations”, in no case shall a draw be made without the proper approved invoices.MonitoringThe fee accountant's monthly financial statements will include a CFP report for each grant which will be reviewed by the Executive Director for proper coding and accuracy.Folder has been created to track all required information in the management of a CFP grant to include correspondence to and from HUD, expenses, grant reimbursements, budgets, closeout documentation and EPIC management.

Corrective Action Plan

Name of Contact Person: Veronica Williams, Interim Executive DirectorCorrective Action:KHMA’s Board has approved new written policies and procedures and are in place now.Appropriate staff have begun taking proper safeguards for Capital Fund Program management to ensure proper accountability. This includes the oversight of processing payments of CFP expenditures, which includes the following procedures for: 1) payment of invoices; 2) requisition of funds; 3) monitoring; and 4) reporting of CFP funds.payment of InvoicesAll CFP invoices will be reviewed and clearly marked as approved and documented to show that the source of funds for payment are CFP grant funds by the Executive Director prior to payment. The Executive Director will specify the general ledger code, including the BLI account to be used for payment processing on the invoice before providing the invoice to the accounts payable clerk.Under no circumstances will a payment be made if KMHA has not drawdown and received the respective CFP funds.With the exception of funds associated with BLI 1406 “Operations”, PHAs have three (3) business days to issue and mail the check once the CFP funds are received.The Executive Director/accounts payable clerk will specify the BLI account and CFP grant year on the check voucher prior to sending the check voucher to the fee accountant for financial statement processing.Requisition of FundsFor each drawdown, the Executive Director will print the associated eLOCCS Voucher Payment form from the eLOCCS system.The Executive Director will document the check number(s) and vendor(s) associated with each CFP draw (i.e., the eLOCCS Voucher Payment form). In addition, each individual draw shall be numbered for reference purposes.A copy of each draw shall be submitted to the fee accountant to ensure proper reporting of the grant drawdown.With the exception of funds associated with BLI 1406 “Operations”, in no case shall a draw be made without the proper approved invoices.MonitoringThe fee accountant's monthly financial statements will include a CFP report for each grant which will be reviewed by the Executive Director for proper coding and accuracy.Folder has been created to track all required information in the management of a CFP grant to include correspondence to and from HUD, expenses, grant reimbursements, budgets, closeout documentation and EPIC management.Proposed Completion Date: Immediately

Categories

Cash Management HUD Housing Programs Procurement, Suspension & Debarment Subrecipient Monitoring Eligibility Reporting

Other Findings in this Audit

  • 559939 2023-001
    Material Weakness
  • 559940 2023-002
    Material Weakness
  • 559941 2023-003
    Material Weakness
  • 559942 2023-004
    Material Weakness
  • 559944 2023-006
    Material Weakness
  • 559945 2023-007
    Material Weakness
  • 1136381 2023-001
    Material Weakness
  • 1136382 2023-002
    Material Weakness
  • 1136383 2023-003
    Material Weakness
  • 1136384 2023-004
    Material Weakness
  • 1136385 2023-005
    Material Weakness
  • 1136386 2023-006
    Material Weakness
  • 1136387 2023-007
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
14.872 Public Housing Capital Fund $1.59M
14.850 Public Housing Operating Fund $566,741