Finding 567412 (2024-005)

2024-005 ALN 14.872 – Public Housing Capital Fund Program – Allowable Costs Condition and Criteria: In accordance with the cost principles under 2 CFR part 200, subpart E, costs must be necessary and reasonable for the performance of the Federal award, conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E, and be adequately documented. During our audit, it was determined that internal control deficiencies over compliance existed related to the Authority’s compliance with the Capital Fund Program’s allowable costs/cost principles compliance provisions. Identified control and compliance deviations included costs that were not adequately documented. Amount of Questioned Costs: $121,917 Context: Lack of supporting documentation, insufficient number of signatures, improper coding, or unallowable costs were observed for 17 out of the 40 check disbursements tested during our audit, including check disbursements from the public housing and capital fund programs. Cause: The Authority’s prior management’s internal controls over the Public Housing Operating Fund and Capital Fund Program’s allowable costs/cost principles compliance provision that were in place were deficient. Staff who had the ability to make purchases and procure contracts did not adequately follow the cost principles included in 2 CFR part 200, subpart E, and therefore, the Authority did not have adequate support for check disbursements as the current management was unable to locate and provide sufficient documentation that should have been maintained by the prior management. Effect: The Authority could incur costs that are unallowable and that are not necessary or reasonable. These internal control deficiencies could result in a possibility that errors or irregularities relating to costs can exist and not be detected by the Authority’s internal controls. Auditor’s Recommendation: We recommend that the Authority’s management perform the necessary steps to ensure that all disbursements are sufficiently documented and supported by adequate backup. We recommend the Authority implement controls to detect when check disbursements do not have adequate support in accordance with 2 CFR part 200, subpart E. Grantee Response: Management agrees with the finding and will follow the Auditor's recommendations.