Finding Number: 2022-004
Prior Year Finding Number: N/A
Compliance Requirement: Reporting and Special Tests and Provisions - #2 ERA Funds
Reallocation
Program: U.S. Department of the Treasury Emergency Rental Assistance
(ERA) Program
AL #: 21.023
Award #: ERA1 and ERA2
Grant Award Period: 01/11/2021 to 09/30/2022 (ERA1) and 06/08/2021 to 09/30/2025
(ERA2)
Award Year: 10/01/2021 to 09/30/2022
Criteria – The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award
Per review of the 2022 Compliance Supplement, grantees are required to submit reports in accordance with the guidance beginning in the first quarter of 2021 through September of 2022 for ERA1 (and December 2022 for recipients receiving reallocated funds) and through September of 2025 for ERA2. ERA1 grantees—excluding Indian tribes, tribally designated housing entities, and the Department of Hawaiian Home Lands consistent with the reporting allowances provided in section 501(g) of the Consolidated Appropriations Act, 2021—are required to submit monthly reports. The key lines on the monthly reports form are:
1. Total number of participating households that received ERA assistance of any kind; and
2. Total amount of ERA funds expended by the ERA grantee to or for participating households on behalf of eligible households. This is a key line item because it feeds into Treasury’s reallocation formula, as detailed in guidance at Treasury.gov.
Per review of the Emergency Rental Assistance Program (ERA2) Reporting Guidance, each ERA2 Recipient must submit cumulative quarterly and final reports. The key line items in the form are:
1. The cumulative amount obligated by the grantee; and
2. The cumulative amount expended by the grantee
For the Special Tests and Provisions compliance requirement for ERA Funds Reallocation, pursuant to section 501(d) of the Consolidated Appropriations Act, 2021, the Treasury is required to reallocate “excess” ERA1 award funds. Treasury’s objective in reallocations is to ensure ERA1 award funds remain available to grantees in accordance with their jurisdictional needs and demonstrated capacity to deliver assistance while the ERA appropriations remain available. Treasury’s ERA1 reallocation guidance on Treasury.gov describes how grantees that have expenditure ratios below designated thresholds as of September 30, 2021, were subject to involuntary recapture, in the absence of mitigating actions, requiring the grantee to return funds to Treasury within the provided timeframes. For the first assessment using data as of September 30, 2021, grantees could mitigate the impact of recapture by submitting a certification that the grantee’s financial assistance activity had since increased to a level beyond the minimum threshold, committing to a voluntary reallocation, or by providing a Performance Improvement Plan.
Per the U.S. Department of the Treasury, Emergency Rental Assistance Under the Consolidated Appropriations Act, 2021 Reallocation Guidance “A Grantee whose Expenditure Ratio is below 30% for the First Assessment will be considered to have excess funds. Beginning with the 30% threshold established for September 2021, the minimum Expenditure Ratio will increase by 5% each calendar month (and, as indicated above, assessments will occur approximately every two months). For each g whose Expenditure Ratio is below the then-applicable minimum threshold at the time of an assessment, Treasury will calculate the grantee’s amount of excess funds as the difference between (i) the amount of expenditures needed for the grantee to achieve the minimum Expenditure Ratio applicable to that assessment and (ii) the grantee’s reported total assistance expenditures. As a result, the amount subject to recapture will be less for grantees whose Expenditure Ratios are closer to the minimum.”
Per the 2022 Compliance Supplement, “the financial information certified as part of reallocation includes monthly expenditure and cumulative obligations levels, as described in the Treasury reallocation guidance. ERA1 expenditures reported monthly by the grantee are inputs to the Treasury’s reallocation expenditure ratio. ERA1 obligations certified in the Request for Reallocated Funds form (1505-0266), including in the Request for Voluntarily Reallocated Funds, are inputs into determining eligibility to receive reallocated funds. The reallocation expenditure ratio determines whether the grantee is subject to involuntary reallocation due to an insufficient ratio and the amount of excess funds subject to recapture by the Treasury.
Condition – During the testing of the reporting requirements over the ERA Monthly Reports (1505-0266), we noted that for five (5) of the six (6) monthly reports tested for the ERA1 and ERA2 grants, supporting documentation was not provided at the time of testing to validate the “Number of Unique Households that Received ERA Assistance of Any Kind in the Reporting Period” reported on the monthly reports. In addition, for four (4) of these reports, supporting documentation was not provided to validate the “Total amount of ERA funds expended by the ERA grantee to or for participating households on behalf of eligible households” as reported on the report.
During the testing of the reporting requirements over the ERA Quarterly Reports (1505-0266), we noted that for three (3) of the three (3) quarters tested for the ERA1 and ERA2 grants, supporting documentation was not provided at the time of testing to validate the cumulative amount obligated by the grantee reported on the quarterly reports. In addition, for one (1) of the three quarters, supporting documentation was not provided to validate the cumulative amount expended by the grantee. Further, for one (1) of these three (3) quarterly reports tested, supporting documentation was not provided to verify that the report was reviewed by the authorized personnel prior to submission to the federal grantor.
We further noted that during the testing of the Special Tests and Provisions - ERA Funds Reallocation, supporting documentation was not provided to validate that the ERA1 expenditures reported monthly by the grantee through March 2022 (which are inputs to Treasury’s reallocation expenditure ratio) were accurate and supported by incurred expenditures.
Questioned Costs – Undeterminable.
Context – This condition is identified per review of VIHFA’ compliance with specified requirements.
Effect – Without proper internal controls and policies and procedures in place over the review and approval of the ERA Monthly (1505-0266) and ERA Quarterly (1505-0266) reports, the ERA program may not report amounts that are supported by the expenditures incurred in the fiscal year 2022. In addition, failure to properly maintain underlying supporting documentation may affect the federal grantor’s reallocation calculation.
Cause – Management did not have proper internal controls and policies and procedures in place over the review and approval of the ERA report to ensure that amounts are properly reported. In addition, supporting documentation was not provided for the Key Line Items reported on the ERA Monthly (1505-0266) and ERA Quarterly (1505-0266) reports.
Recommendation – We recommend that VIHFA strengthen its policies, procedures, and controls over the review and approval of the ERA Monthly (1505-0266) and ERA Quarterly (1505-0266) reports to ensure that amounts reported for each grant are accurate for the ERA report prior to approval. In addition, we recommend that VIHFA adequately retain support for the information reported in the Key Line Items for the ERA Monthly (1505-0266) and ERA Quarterly (1505-0266) reports.
Views of Responsible Officials and Planned Corrective Actions – The information provided in the reports were compiled using data from different sources: demographic information from HMIS and program expenditures from SAP. `The source data exists, but the working papers were not retained.
Since the onboarding of the ARP Administrator, VIHFA improved its process through the creation of the Master Tracker (spreadsheet), which is updated daily and tracks each application and client file submitted for review. Going forward the Master Tracker is now used as the basis for reporting.
Corrective Action Date: March 2023