Finding Text
Criteria: 24 CFR 982.155 indicates Housing Choice Voucher Program (HCVP) administrative reserves must be used to pay program administrative expenses. HUD has indicated in PIH Notice 2005-01 HCVP administrative reserves are restricted solely for the HCVP and no other Agency administrative expenses.
Condition and Context: The Agency used HCVP administrative reserves to cover Agency payroll expenses during 2022 and through the date the financial statements were available to be issued. The Agency also made errors in initially recording restricted funds received in the general ledger which resulted in journal entries and bank transfers necessary to appropriately record amounts received. The specific HCVP administrative reserves used to cover non-HCVP Agency payroll expenses were advanced as noted below.
• $500,00 advanced on January 21, 2022. Amount not repaid as of the date the financial statements were available to be issued.
• $200,000 advanced on March 10, 2022. Amount not repaid as of the date the financial statements were available to be issued.
Cause and Effect: The predominate reason for the finding is due to cash flow concerns specific to payment of payroll and lack of controls surrounding transfer of funds from restricted accounts. This finding resulted in noncompliance with allowable use of HAP.
Known Questioned Costs: $700,000 of HCV administrative reserves used to non-HCVP cover payroll expenses during 2022.
Recommendation: See finding 2022-001. The recommendations noted for achieving appropriate oversight in the finance department apply as key individuals with knowledge of the compliance are considered critical for developing an appropriate control environment for internal controls over compliance.
Views of Responsible Officials and Planned Corrective Actions: The Agency agrees with the recommendation. See the Corrective Action Plan for the Agency’s response and planned completion date.