Finding 581948 (2022-002)

2022-002—ALLOWABLE COSTS AND ACTIVITIES Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Housing Opportunities For Persons With Aids Assistance Listing Number: 14.241 Federal Award Identification Number and Year: NMH200032-2020 and NMH2001W068- 2020 Award Period: 6/9/2020 – 06/9/2023 for Grant68 and 05/20/2021 – 05/20/2024 for Grant32 Questioned Costs: $453,784.05 Type of Finding • (D) Material Weakness in Internal Control Over Compliance of Federal Awards • (F) Instances of Noncompliance related to Federal Awards Statement of Condition During our testing of allowable activities and costs, we noted a lack of evidence of internal controls over compliance and lack of evidence of compliance for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068.   Context Internal Control over Compliance 40 transactions out of 40 tested did not have evidence of approval of review of budget to actual, review of allowable activities and allowable costs. The dollar amount of the exceptions were $469,439.37. Compliance 21 transactions out of 40 tested did not have evidence of supporting documentation necessary to determine if the transaction was in compliance with grant requirement. The dollar amount of the exceptions were $453,784.05. Criteria As set forth in 2 CFR part 200 internal controls should be put in place to ensure costs and activities allowable under a Federal award are made in accordance with the government-wide cost principles in the Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards In addition, § 200.430 Compensation—personal services. (I) Standards for Documentation of Personnel Expenses: charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Examples of illustrative control activities can be found in OMB Compliance Supplement, part 6—Internal Control, Appendix 2. Some examples of control activities as follows: • Supervisors review and approve invoices, cost allocations, efforts of personnel, fringe benefits and indirect charges for allowability, adherence to cost principles, accuracy, and completeness. • Grant supervisor reviews the budget vs. actual report investigating unusual or unexpected variances and documents results of follow-up work performed. • Journal entries to transfer costs from one project to another are reviewed for appropriateness and approved. Effect The organization does not appear to have sufficient internal controls in place and does not appear to be in compliance with grant requirements as set forth in 2 CFR part 200. The lack of compliance has resulted in a disclaimer of opinion for allowable costs for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068. A potential effect of noncompliance of the federal award or future funding decisions could result in disallowance of costs, suspension or termination of the award, or reduction of future allocations. Cause Internal controls over compliance do not appear to have been adequately implemented due to lack of training, oversight, or resources. Recommendation We recommend the organization prevent recurrence of noncompliance by developing and implementing written policies and procedures, conducting regular reviews and reconciliations, provide training and guidance to staff and monitoring compliance View of Responsible Officials and Corrective Action Plan Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances. Corrective Action Plan Timeline: Immediately Designation Of Employee Position Responsible For Meeting Deadline: Business Operations Manager