City of Olathe, Kansas

Assistance Number: 16.753 Congressionally Recommended Awards (CRA) Year: 2024 Name of Federal Agency: U.S. Department of Justice Name of Pass-Thru Agency: Direct award Type of Compliance Finding: B – Allowable Costs/Cost Principles Condition: 2 CFR Part 200, section 200.510 requires the City to prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the financial statements. The City’s Schedule of Expenditures of Federal Awards (SEFA) for the year ended December 31, 2024, included expenditures that were incurred in the prior fiscal year. These prior year expenditures were not reported on the 2023 SEFA and incorrectly reported in the current year Criteria: An entity that expends federal awards must have controls in place that would enable the entity to prepare a SEFA including controls that determine the accuracy of the amount of expenditures reported for each federal program. In accordance with 2 CFR §200.502(a), expenditures are to be reported on the SEFA in the fiscal year in which the activity related to the federal award occurs. Questioned Costs: N/A Context: The City did not report $705,791 of expenses on the 2023 SEFA and instead reported these amounts on the 2024 SEFA. Cause: The error occurred due to inadequate review procedures over the preparation of the SEFA. Specifically, the City did not reconcile SEFA amounts to program reports to ensure expenditures were reported correctly at year-end. Effect: The SEFA understated expenditures in the prior year and overstated expenditures in the current year, potentially misleading federal agencies and pass-through entities about the City’s use of federal funds. This could impact risk assessments, reporting accuracy, and decisions regarding future funding. The lack of an accurate and complete SEFA could lead to grant noncompliance and noncompliance with Subpart F, Audit Requirements, of 2 CFR Part 200. Recommendation: We recommend the City strengthen its SEFA preparation and review process by: • Reconciling federal expenditures reported on the SEFA to the general ledger by program and grant year. • Implementing a secondary review to verify that no prior year expenditures are included in current year reporting. • Providing staff with training on SEFA preparation requirements under 2 CFR Part 200.   Views of Responsible Officials (Unaudited): City leadership agrees with the auditor’s finding and appreciates the recommendations for improvements. The same root causes identified in Finding 2024-003 – system transition, staff turnover, and decentralized grant management – contributed to this compliance issue. The City recognizes the need for stronger internal controls, centralized oversight, and consistent review of grant management.

Assistance Number: 16.753 Congressionally Recommended Awards (CRA) Year: 2024 Name of Federal Agency: U.S. Department of Justice Name of Pass-Thru Agency: Direct award Type of Compliance Finding: I – Procurement and Suspension and Debarment Condition: During our testing, we noted that the City did not perform or document required suspension and debarment checks for certain vendors and contractors paid with federal funds. The City did not obtain or retain evidence, such as a certification from the vendor or a verification from the System for Award Management (SAM), to ensure that vendors were not suspended, debarred, or otherwise excluded from federal programs. Criteria: The Uniform Guidance (2 CFR §200.213) requires non-federal entities to ensure that federal funds are not awarded to or expended with parties that are suspended, debarred, or otherwise excluded. This requirement can be satisfied by obtaining a vendor certification or by checking the SAM.gov system prior to entering into a covered transaction. Questioned Costs: N/A Context: The City did not document the suspension and debarment check on one of the five transactions tested. The sample size was determined based upon guidelines provided by the AICPA which is not a statistically valid sample. Cause: The City did not have adequate procedures in place to ensure that suspension and debarment checks were consistently performed and documented. Effect: Without performing suspension and debarment checks, the City risks expending federal funds on ineligible vendors, which could result in questioned costs and potential repayment of federal funds. Recommendation: We recommend that the City implement procedures to ensure suspension and debarment checks are performed for all covered transactions and that evidence of such checks is retained in the procurement files. Views of Responsible Officials (Unaudited): The City is in agreement with the finding and appreciates the auditor’s recommendations for improvements. While federal contract compliance language is included in agreements that are being paid with federal funds, this case occurred because the original contract (2020) predated knowledge that federal funds would later be applied (2022). The oversight highlights the need for additional training and coordination to ensure procurement and legal staff are notified whenever federal funding is applied to an existing contract or amendment.

Assistance Number: 93.493 Mobile Integrated Health Year: 2024 Name of Federal Agency: U.S. Department of Health and Human Services Name of Pass-Thru Agency: Direct award Type of Compliance Finding: I – Procurement and Suspension and Debarment Condition: During our testing, we noted that the City did not perform or document required suspension and debarment checks for certain vendors and contractors paid with federal funds. The City did not obtain or retain evidence, such as a certification from the vendor or a verification from the System for Award Management (SAM), to ensure that vendors were not suspended, debarred, or otherwise excluded from federal programs. Criteria: The Uniform Guidance (2 CFR §200.213) requires non-federal entities to ensure that federal funds are not awarded to or expended with parties that are suspended, debarred, or otherwise excluded. This requirement can be satisfied by obtaining a vendor certification or by checking the SAM.gov system prior to entering into a covered transaction. Questioned Costs: N/A Context: The City did not document the suspension and debarment check on one of four transactions tested. The sample size was determined based upon guidelines provided by the AICPA which is not a statistically valid sample. Cause: The City did not have adequate procedures in place to ensure that suspension and debarment checks were consistently performed and documented. Effect: Without performing suspension and debarment checks, the City risks expending federal funds on ineligible vendors, which could result in questioned costs and potential repayment of federal funds. Recommendation: We recommend that the City implement procedures to ensure suspension and debarment checks are performed for all covered transactions and that evidence of such checks is retained in the procurement files. Views of Responsible Officials (Unaudited): The City is in agreement with the finding and appreciates the auditor’s recommendations for improvements. While the City does have standard procedures in place to prevent this issue from happening, this payment was made under a competition exception process that did not provide the procurement or legal team an opportunity to ensure compliance with the Uniform Guidance. This issue highlighted a need for stronger training and enhanced internal controls to capture nontraditional purchases funded with federal dollars and ensure that all purchases with federal funds follow a competitive procurement process.

Finding 2022-001 ? Assistance #14.871 ? Section 8 Housing Choice Vouchers ? Reporting (Material Weakness): Condition: A secondary review or approval of monthly and annual reporting submitted through HUD?s voucher management system was not being performed. One of the annual reports (SEMAP) had calculation errors. Criteria: Someone other than the preparer of the reports should be reviewing the submitted information. Questioned Costs: N/A Context: 3 of the 12 monthly financial reports and 62 annual performance reports were selected for review and did not contain evidence of a review or approval, and the SEMAP report was not reviewed and had calculation errors. The sample size was determined based upon guidelines provided by the AICPA which is not a statistically valid sample. Cause: The Housing Authority did not have a policy that required a secondary review or approval of the reports prior to submission to HUD. Effect: Information could be incorrectly reported or not timely reported to HUD. Recommendations: We recommend that the Housing Authority update policies and procedures to ensure that monthly and annual reports are being reviewed by someone other than the preparer, and also that copies of the submissions, along with supporting documentation, are being maintained to support the information being submitted to HUD. Views of Responsible Officials (Unaudited): Management acknowledges that secondary review of monthly and annual reports is a worthwhile internal control, and that there was a calculation error in one section of the annual SEMAP report. The Olathe Housing Authority will add secondary review of all portions of annual reporting to the Quality Control portion of the HCV procedures before the end of 2Q 2022. Secondary review of monthly reports was already adopted into the Quality Control potion of the HCV procedures in 3Q 2022. Management acknowledges that one of the monthly reports for 4Q 2022 is missing review documentation and is investigating the cause.

Finding 2022-002 ? Assistance #14.871 ? Section 8 Housing Choice Vouchers ? Eligibility (Material Weakness): Condition: A secondary review or approval of eligibility documentation was not being performed. Criteria: Someone other than the initial preparer of the eligibility calculations should be reviewing the information to ensure that all appropriate documentation has been received and input correctly. Questioned Costs: N/A Context: Although the Housing Authority implemented a new policy in October 2022 to ensure quality control reviews were performed for all eligibility decisions going forward, none of the 60 files selected for testing contained evidence of review by someone other than the preparer. The sample size was determined based upon guidelines provided by the AICPA which is not a statistically valid sample. Cause: The Housing Authority did not have a policy that required a secondary review or approval of eligibility documentation. Effect: Eligibility and associated housing assistance payment amounts could be calculated incorrectly. Recommendations: We recommend that the Housing Authority follow the new quality control policies and procedures implemented in the 4th quarter of 2022 to ensure that eligibility calculations are being reviewed by someone other than the preparer, and also that all required documentation is being maintained in tenant files. Views of Responsible Officials (Unaudited): Management agrees that this finding has already been addressed as noted in the recommendation. This is the same exact finding as 2021-006 in the prior year?s audit, which included a recommendation to add secondary review, which the Olathe Housing Authority implemented in 4Q 2022. While the new recommended control was implemented for all 4Q eligibility determinations, management understands that the files chosen for review were instead HCV files of voucher holders who began receiving rental assistance in 2022. Any applicant found eligible in 4Q 2022 did not begin receiving assistance until after receiving a voucher, signing a lease, and moving in, which did not occur until 1Q 2023. It is unfortunate that the auditors are required to once again choose files of HCV participants who had eligibility determined prior to implementing the recommended procedure change. Management understands that most of the HCV participant files that the auditors chose to review were from the exact same time period used during the prior year?s audit which made this finding a foregone conclusion. Management agrees that the control recommended in 2022 was not implemented until 2022, and so it remains just as true today as it was last year that files from many years ago continue to lack the control implemented in 2022. Management recommends that if files from prior to 2022 will continue to be reviewed for this control, and that if this finding is going to be repeatedly included, that auditor staff always review the prior year?s audit and always include an acknowledgement that the new secondary review control was implemented in 4Q 2022.

Finding 2022-003 ? Assistance #14.871 ? Section 8 Housing Choice Vouchers ? Special Tests: Selection from the Waiting List (Material Weakness): Condition: A secondary review of waiting list decisions was not being performed. In addition, it was noted that the wait list is only maintained for 3 years so evidence of wait list position for tenants that have been in the program for longer than 3 years could not be provided. Criteria: Tenant selection must include requirements for applications and waiting lists, a description of the policies for selection of applicant from the waiting list, and policies for verification and documentation of information relevant to acceptance or rejections of an applicant. Questioned Costs: N/A Context: Although the Housing Authority implemented a new policy in October 2022 to ensure quality control reviews were performed for all waitlist decisions going forward, 46 of the 60 files selected for testing were for tenants that entered the program more than 3 years ago and therefore wait list support could not be provided. In addition, none of the tenant files contained evidence of review of the waitlist decision. The sample size was determined based upon guidelines provided by the AICPA which is not a statistically valid sample. Cause: The Housing Authority did not have a policy that required a secondary review or approval of wait list documentation. Effect: Improper wait list decisions could be made. Recommendations: We recommend that the Housing Authority follow the new quality control policies and procedures implemented in the 4th quarter of 2022 to ensure that wait list documentation is being reviewed and approved, and also that a copy of the waitlist documentation be kept in each tenant file so that there is a historical record of the wait list process once the actual wait list is no longer being maintained. Views of Responsible Officials (Unaudited): Management agrees that this finding has already been addressed as noted in the recommendation. This is the same exact finding as 2021-007 in the prior year?s audit, which included a recommendation to add secondary review, which the Olathe Housing Authority implemented in 4Q 2022. While the new recommended control was implemented for all 4Q waiting list determinations, management understands that the files pulled for review were instead HCV files of voucher holders who began receiving rental assistance in 2022. Any eligible applicant pulled from the Waiting List in 4Q 2022 did not begin receiving assistance until after receiving a voucher, signing a lease, and moving in, which did not occur until 1Q 2023. It is unfortunate that the auditors are required to once again choose files of HCV participants who were pulled from the Waiting List prior to implementing the recommended procedure change. Management understands that most of the HCV participant files that the auditors chose to review were from the exact same time period used during the prior year?s audit which made this finding a foregone conclusion. Management agrees that the control recommended in 2022 was not implemented until 2022, and so it remains just as true today as it was last year that files from many years ago continue to lack the control implemented in 2022. Management recommends that if files from prior to 2022 will continue to be reviewed for this control, and that if this finding is going to be repeatedly included, that auditor staff always review the prior year?s audit and always include an acknowledgement that the new secondary review control was implemented in 4Q 2022.

Finding 2022-004 ? Assistance #21.027 ? Coronavirus State and Local Fiscal Recovery Funds ? Suspension and Debarment (Significant Deficiency): Condition: The contracts used by the City did not include required language or items related to suspension and debarment. Criteria: The City is required to perform a verification check, by checking SAM.gov, collecting a certification, or adding a clause to the covered transaction for each vendor. Questioned Costs: N/A Context: For 2 contracts tested, the City used a cooperative procurement contract but there was no evidence the City performed a verification check, collected a certification, or added a clause to the covered transaction for each vendor. The sample size was determined based upon guidelines provided by the AICPA which is not a statistically valid sample. Cause: The City believed this step had already been completed by the government entity that was a party to the cooperative procurement contract. Effect: The City may not detect vendors who are suspended or debarred from receiving federal funds. Recommendations: Revise policies to ensure the City performs a verification check, collects a certification, or adds a clause to the covered transaction for each vendor receiving federal funds. Views of Responsible Officials (Unaudited): Management acknowledges that there was a lapse in procurement internal controls and duties related to the verification of vendors receiving Coronavirus State and Local Fiscal Recovery Funds due to staff turnover and new positions within the Procurement Division. Management is in the process of reviewing its internal controls, processes, and procedures related to procurement. Updated procedures will include the verification of vendors through SAM.gov, collecting a certification, or adding a clause to the covered transaction for each vendor receiving federal funds.

Finding 2022-005 ? Assistance #21.027 ? Coronavirus State and Local Fiscal Recovery Funds ? Procurement (Significant Deficiency): Condition: The contracts used by the city did not include required language related to procurement. Criteria: If a contract was entered into, the provisions of Appendix II of 2 CFR 200 were included as applicable provisions with the contract. Questioned Costs: N/A Context: For 2 contracts tested, the City used a cooperative procurement contract but there was no evidence the City included the required language related to procurement requirements. The sample size was determined based upon guidelines provided by the AICPA which is not a statistically valid sample. Cause: The City believed this step had already been completed by the government entity that was a party to the cooperative procurement contract. Effect: Vendors may not receive adequate communication of requirements for receiving federal funds. Recommendations: Revise policies to ensure the City includes the required procurement language in the contract for each vendor receiving federal funds. Views of Responsible Officials (Unaudited): Management acknowledges that there was a lapse in procurement internal controls and duties that resulted in contracts that received Coronavirus State and Local Fiscal Recovery Funds not including the provisions of Appendix II of 2 CFR 200. Management is in the process of updating its internal controls, processes, and procedures related to procurement and will update contract policies to include the provisions of Appendix II of 2 CFR 200 in all future contracts for vendors receiving federal funds.

Finding 2021-005 ? Assistance #14.871 ? Section 8 Housing Choice Vouchers ? Reporting (Material Weakness): Condition: A secondary review or approval of monthly reporting submitted through HUD?s voucher management system was not being performed. Criteria: Someone other than the preparer of the reports should be reviewing the submitted information each month. Questioned Costs: N/A Context: 3 of the 12 monthly reports were selected for review and did not contain evidence of review or approval. Cause: The Housing Authority did not have a policy that required a secondary review or approval of the reports prior to submission to HUD. Effect: Information could be incorrectly reported to HUD. Recommendations: We recommend that the Housing Authority update policies and procedures to ensure that monthly reports are being reviewed by someone other than the preparer, and also that copies of the submissions, along with supporting documentation, are being maintained to support the information being submitted to HUD. Views of Responsible Officials: Management acknowledges that there have been some lapses in the segregation of duties due to staff turnover and open positions not being filled in a timely manner during the COVID-19 pandemic. A partial corrective action is already in place as of February 22, 2022, with the filling the Financial Coordinator position. With this position filled, the Executive Director position has been relieved of some additional duties that had been assumed by the position on a temporary basis The Financial Coordinator with the Executive Director will design a process to ensure that the VMS report is reviewed and approved someone other than the preparer prior to being submitted to HUD.

Finding 2021-006 ? Assistance #14.871 ? Section 8 Housing Choice Vouchers ? Eligibility (Material Weakness): Condition: A secondary review or approval of eligibility documentation was not being performed. Criteria: Someone other than the initial preparer of the eligibility calculations should be reviewing the information to ensure that all appropriate documentation has been received and input correctly. Questioned Costs: N/A Context: None of the 60 files selected for testing contained evidence of review by someone other than the preparer. Cause: The Housing Authority did not have a policy that required a secondary review or approval of eligibility documentation. Effect: Eligibility and associated housing assistance payment amounts could be calculated incorrectly. Recommendations: We recommend that the Housing Authority update policies and procedures to ensure that eligibility calculations are being reviewed by someone other than the preparer, and also that all required documentation is being maintained in tenant files. Views of Responsible Officials: Management acknowledges that secondary review of eligibility calculations is a worthwhile internal control and plans to update the Section 8 Housing Choice Voucher written procedures to require this. This will be accomplished by the end of the third quarter 2022.

Finding 2021-007 ? Assistance #14.871 ? Section 8 Housing Choice Vouchers ? Special Tests: Selection from the Waiting List (Material Weakness): Condition: A secondary review of waiting list decisions was not being performed. In addition, it was noted that the wait list is only maintained for 3 years so evidence of wait list position for tenants that have been in the program for longer than 3 years could not be provided. Criteria: Tenant selection must include requirements for applications and waiting lists, a description of the policies for selection of applicant from the waiting list, and policies for verification and documentation of information relevant to acceptance or rejections of an applicant. Questioned Costs: N/A Context: 40 of the 60 files selected for testing were for tenants that entered the program more than 3 years ago and therefore wait list support could not be provided. In addition, none of the tenant files contained evidence of review of the waitlist decision. Cause: The Housing Authority did not have a policy that required a secondary review or approval of wait list documentation. Effect: Improper wait list decisions could be made. Recommendations: We recommend that the Housing Authority update policies and procedures to ensure that wait list documentation is being reviewed and approved, and also that a copy of the waitlist documentation be kept in each tenant file so that there is a historical record of the wait list process once the actual wait list is no longer being maintained. Views of Responsible Officials: Management acknowledges that secondary review of waiting list decisions is a worthwhile internal control. The Olathe Housing Authority is currently in complete compliance with all HUD-mandated records retention regarding all waitlists and all tenant files. Management plans to update the written procedures for all waitlists to require secondary review. Management will also recommend that the Board of Housing Commissioners (Board) update the Housing Authority?s Records Retention Policy to require retention of secondary review documentation until three (3) years after a tenant has exited the Public Housing program or Section 8 program. These updates and recommendations to the Board will be accomplished by the end of the third quarter 2022.

Finding 2021-008 ? Assistance #14.850 ? Public and Indian Housing ? Special Tests: Environmental Contaminants Testing and Remediation (Significant Deficiency): Condition: Housing Authority policies do not require annual inspections as required by HUD. However, due to COVID-19, inspections were waived for a period of time, and then required to begin again in 2021. Criteria: HUD requires annual inspections for all tenants. Questioned Costs: N/A Context: Due to staffing issues during the year, documentation and evidence of inspections was not maintained and/or available for review. Cause: The Housing Authority did not have an inspector for part of the year and utilized multiple employees to perform inspections. Effect: Timely inspections might not occur. Recommendations: We recommend that the Housing Authority update policies and procedures to ensure that inspection documentation is maintained and policies are in accordance with HUD requirements. Views of Responsible Officials: Management acknowledges that updating the Public Housing inspection policies and procedures is worthwhile. The Olathe Housing Authority is currently in complete compliance with all HUD-mandated inspection requirements. Despite the vacancy of an inspector position during 2021, the Olathe Housing Authority used several other staff to successfully complete all required annual inspections of its Public Housing units. Management acknowledges that some of the documentation of those inspections showed room for improvement. Management plans to update the written procedures to require annual inspections and proper documentation. Management will also recommend that the Board of Housing Commissioners update the applicable Housing Authority policies to require annual inspections of Public Housing units. These updates and recommendations to the Board will be accomplished by the end of the third quarter 2022.