FAC Explorer

Finding 563602 (2024-003)

Significant Deficiency
Requirement
C
Questioned Costs
-
Year
2024
Accepted
2025-06-03
Audit: 357879
Organization: Olmsted County Housing and Redevelopment Authority (MN)
Auditor: Hawkins Ash CPAS

AI Summary

  • Core Issue: The Authority is improperly using non-federal funds to pay for Capital Fund expenses before reimbursing with Capital Funds, violating HUD guidelines.
  • Impacted Requirements: Cash management procedures are not aligned with the Capital Fund Handbook, leading to non-compliance.
  • Recommended Follow-Up: Implement stronger internal controls and conduct monthly reviews to ensure compliance with updated cash management procedures.

Finding Text

Program: Public Housing Capital Fund Requirement: When expending capital funds the Authority cannot expend nonfederal funds first to pay the applicable bills and then use Capital Funds to reimburse themselves (Capital Fund Handbook). Condition: During review of capital fund cash management procedures it was determined that the Authority was using non-federal funds to pay for Capital Fund expenditures and then drawing Capital Funds to reimburse itself. Cause: The Authority does not have the appropriate internal controls in place to ensure that Cash Management procedures are done in accordance with HUD requirements. Effect: Capital Fund cash management draws are not being completed in accordance with the Capital Fund Handbook requirements. Questioned Cost: Not applicable. Information: Sampling was statistically valid and a systemic problem. Prior Year Finding: New deficiency in the current year. Recommendation: It is recommended that the Authority implements and applies the appropriate controls to ensure that Cash Management draws are being done in accordance with the HUD Capital Fund Handbook. Management’s Response: In response to these findings, the Authority has reviewed and revised its Capital Fund cash management procedures to ensure full compliance with the Capital Fund Handbook. The updated procedures have been reviewed in collaboration with both the Housing Project Manager and the Housing Program Manager. Invoices will be organized to fulfil the monthly obligation and paid within three days of the fund draw. To prevent recurrence and ensure ongoing compliance, the Authority will hold monthly meetings to review project timelines and cash flow needs. Communication frequency will increase during complex, multi-phase projects to support effective oversight and coordination. Furthermore, updated policy and payment procedures will be clearly communicated to all current and future vendors to ensure alignment with federal regulations. These corrective actions reflect the Authority’s commitment to improved financial oversight and adherence to all applicable funding regulations.

Corrective Action Plan

Audit Finding Number: 2024-003 Cash Management Agency: Department of Housing and Urban Development Responsible Person, Title: Karla Strain, Assistant Controller Completion date: 5/15/2025 Agency Response: Concur Corrective Action Plan: In response to these findings, the Authority has reviewed and revised its Capital Fund cash management procedures to ensure full compliance with the Capital Fund Handbook. The updated procedures have been reviewed in collaboration with both the Housing Project Manager and the Housing Program Manager. Invoices will be organized to fulfil the monthly obligation and paid within three days of the fund draw. To prevent recurrence and ensure ongoing compliance, the Authority will hold monthly meetings to review project timelines and cash flow needs. Communication frequency will increase during complex, multi-phase projects to support effective oversight and coordination. Furthermore, updated policy and payment procedures will be clearly communicated to all current and future vendors to ensure alignment with federal regulations. These corrective actions reflect the Authority’s commitment to improved financial oversight and adherence to all applicable funding regulations.

Categories

HUD Housing Programs Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties Cash Management

Other Findings in this Audit

  • 563603 2024-001
    Material Weakness Repeat
  • 563604 2024-002
    Material Weakness
  • 563605 2024-001
    Material Weakness Repeat
  • 563606 2024-002
    Material Weakness
  • 563607 2024-001
    Material Weakness Repeat
  • 563608 2024-002
    Material Weakness
  • 1140044 2024-003
    Significant Deficiency
  • 1140045 2024-001
    Material Weakness Repeat
  • 1140046 2024-002
    Material Weakness
  • 1140047 2024-001
    Material Weakness Repeat
  • 1140048 2024-002
    Material Weakness
  • 1140049 2024-001
    Material Weakness Repeat
  • 1140050 2024-002
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
14.871 Section 8 Housing Choice Vouchers $1.08M
14.872 Public Housing Capital Fund $971,926
14.879 Mainstream Vouchers $852,076
14.181 Supportive Housing for Persons with Disabilities $647,200
14.267 Continuum of Care Program $535,611
14.850 Public Housing Operating Fund $363,989
14.149 Rent Supplements Rental Housing for Lower Income Families $49,833
10.427 Rural Rental Assistance Payments $28,970
10.415 Rural Rental Housing Loans $17,607