Finding Text
Section III - Federal Award Findings and Questioned Costs
Finding 2023-001: Significant Deficiency in Internal Control
Federal Program: Section 202 Project Rental Assistance Contract
Assistance Listing Number: 14.157
Federal Agency: U.S. Department of Housing and Urban Development
Pass-Through Agency: N/A
Award Number: 033-EH303
Award Year: 2023
Compliance Requirement: Eligibility
Questioned Costs: Not Determinable
Criteria: HUD regulations require the eligibility of each resident to be reassessed and rent to be
recalculated on an annual basis. At each reassessment date, necessary financial information
including income, assets, and medical expense must be updated and confirmed in order to accurate
calculate the resident's portion of rental payment for the next twelve months.
Condition and Context: The Corporation, largely due to employee turnover and leaves of absence,
lacked proper segregation of duties with respect to these calculations. Proper segregation of duties is
necessary to prevent a situation where one individual handles a transaction from beginning to end in
order to reduce the potential for noncompliance due to error or fraud. During the audit of the eligibility
requirements, one resident file out of six resident files tested contained an error in the medical
expenses, which were input incorrectly into the calculation from the source documents in error. Using
the correct medical expense amounts would result in an additional $264 of annual medical expenses
for the resident.
Cause: The lack of segregation of duties is due to turnover and leaves of absence at the project
manager position. Resulting in calculations being completed without a separate review process.
Effect or Potential Effect: As a result of the lack of proper segregation of duties, noncompliance due
to error or fraud could occur without being detected and corrected, timely.
Recommendation: Management should implement a review process for these calculations.
Management's Response: The Corporation will implement a standard review process over these
calculations to prevent and detect errors on a timely basis.