Finding 575598 (2023-002)

Material Weakness
Requirement
HI
Questioned Costs
$1
Year
2023
Accepted
2025-09-04
Audit: 365590
Organization: Aids Foundation Houston, Inc. (TX)

AI Summary

  • Core Issue: Internal controls over procurement and performance periods were ineffective, leading to identified fraud in questionable transactions.
  • Impacted Requirements: Compliance with 2 CFR regulations on internal controls, documentation of expenditures, and procurement procedures was not maintained.
  • Recommended Follow-Up: Retrain the Director of Housing and Supportive Services and approvers on identifying allowable costs before granting approvals.

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.

Categories

Questioned Costs Procurement, Suspension & Debarment

Other Findings in this Audit

  • 575593 2023-002
    Material Weakness
  • 575594 2023-002
    Material Weakness
  • 575595 2023-002
    Material Weakness
  • 575596 2023-002
    Material Weakness
  • 575597 2023-002
    Material Weakness
  • 575599 2023-003
    Significant Deficiency
  • 575600 2023-003
    Significant Deficiency
  • 1152035 2023-002
    Material Weakness
  • 1152036 2023-002
    Material Weakness
  • 1152037 2023-002
    Material Weakness
  • 1152038 2023-002
    Material Weakness
  • 1152039 2023-002
    Material Weakness
  • 1152040 2023-002
    Material Weakness
  • 1152041 2023-003
    Significant Deficiency
  • 1152042 2023-003
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
14.231 Emergency Solutions Grant Program $823,843
14.267 Continuum of Care Program $598,409
93.940 Hiv Prevention Activities Health Department Based $378,752
93.939 Hiv Prevention Activities Non-Governmental Organization Based $339,220
14.239 Home Investment Partnerships Program $206,641
14.241 Housing Opportunities for Persons with Aids $200,176
93.928 Special Projects of National Significance $93,023
93.941 Hiv Demonstration, Research, Public and Professional Education Projects $26,282
93.917 Hiv Care Formula Grants $26,106
93.918 Grants to Provide Outpatient Early Intervention Services with Respect to Hiv Disease $24,862