Finding Text
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness)
U.S. Department of Housing and Urban Development
14.267 Continuum of Care Program
2023-2024 Funding
Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award.
Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end.
Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance.
Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing.
Questioned Costs: $33,439
Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager.
Repeat Finding: No
Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests.
Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.