Finding Text
Criteria: Project Amistad is a sub-recipient of the U.S. Department of Treasury?s Emergency Rental Assistance Program (?ERA?). The ERA program is established by the 2021 Consolidations Appropriations Act, and defines eligible households that may receive financial assistance under the program. To be considered an eligible household, the beneficiaries must be obligated to pay rent on a residential dwelling. Condition: During the initial design of the ERA program?s eligibility screening process, Project Amistad did not distinguish between homeowners and renters as one of the criteria. Project Amistad initiated corrective action that included a full review of all clients that received ERA assistance up to January 2022 and an identification of all clients that are homeowners. In performing this corrective action, Amistad reviewed property tax records for all clients that received assistance, and identified all those property owners that were ineligible to receive ERA assistance as established by the Federal statute. As a result, Amistad identified a total of $876,464 in unallowable expenses and this amount was refunded to the pass-through entity on August 31, 2022. During our review of eligibility for individuals receiving ERA assistance, we noted that in 1 out of 98 instances tested, (exception #1) the supporting client file indicated the individual selected for testing was a homeowner, and therefore disqualified from receiving ERA assistance. Such individual client was not included in Amistad?s list of ineligible clients reported to the pass-through entity. In two other separate instances tested, (exceptions #2 and #3) we noted that management originally identified the clients selected for review as homeowners, but further rounds of assistance for the same clients were not included in Amistad?s list of ineligible clients that was reported to the pass-through entity. Cause: Amistad received initial rounds of ERA funds before the final executed award contract was received from the pass-through entity. Therefore, the design of the ERA program?s eligibility screening was not fully implemented until January 2022 when management initiated corrective action to identify ineligible clients. The result of the audit procedures revealed an exception rate of 1 out 98 (1.02%) of cases in which management?s review process did not identify information in the client?s file that should have led management to conclude those clients were homeowners. Further review by management confirmed that the first exception noted (exception #1) was clearly a homeowner that had not previously been identified and was excluded from management?s corrective action, thus considered a non-compliance with a total impact of $1,386.92. Upon further review of exceptions #2 and #3, management was able to provide evidence that such clients were not in fact homeowners and thus incorrectly classified as ineligible expenses for a portion of the total ERA assistance provided. Questioned Costs: Likely questioned costs are projected to be as much as $20,647.51. From these costs there are known non-compliance costs of $1,386.92, which represent 0.76% of the sample value, and a remaining projected amount of $19,260.59 (the sample represents 7% of the entire population). Effect: The corrective action initiated by management is likely to have not identified ineligible homeowners in approximately 1.02% of the total client cases. The estimated likely questioned costs to be contained within the population of ERA expenditures incurred during the year ended August 31, 2022 is $20,647.51. Recommendations: Management has previously implemented a corrective action, which consisted of reviewing all client files as of January 2022, identifying ineligible clients, reporting such ineligible clients to the pass-through entity, and reimbursing $876,464 prior to August 31, 2022. In addition to the corrective action plan already implemented by management, we recommend that the known questioned costs of $1,386.92 be refunded to the pass-through entity. While the circumstances that led to the issuance of the ERA award are unusual, we recommend that for future awards, a thorough contract review be performed for each grant award, and that program design procedures are evaluated by a committee of members of management, to include as a minimum the program director in charge of the program and the Chief Operating Officer. We also recommend that management consider implementing a dual review process of client intake forms for all existing and future government-funded programs that require individual eligibility determination. This process will ensure that all inconsistencies in client intake are corrected timely. Management response: Management agrees with the auditor?s recommendation. See corrective action plan.