Volunteers of America Chesapeake & Carolinas, IncNon-Profit

2025-001 – Internal Control over Compliance: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Identification of the Federal Program U.S. Department of Veteran Affairs Name of Program: VA Supportive Services for Veteran Families Program Assistance Listing Number: 64.033 Grant Award Number: 21-NC-237 Pass-through Identifying Number: N/A Grant Award Period: October 1, 2021 to September 30, 2025 U.S. Department of Veteran Affairs Name of Program: Staff Sergeant Parker Gordon Fox Suicide Prevention Grant Program Assistance Listing Number: 64.055 Grant Award Number: ZZ-SSG-1393-22 Pass-through Identifying Number: N/A Grant Award Period: September 30, 2023 to September 30, 2025 Criteria or Specific Requirements – In accordance with §200.303(a), Internal Controls, a non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition – During our audit procedures, we observed that, for the U.S. Department of Veteran Affairs VA Supportive Services for Veteran Families (SSVF) Program, two salary and wage transactions were not supported by timesheets that had been properly approved by individuals with appropriate knowledge of the federal program. Additionally, for the U.S. Department of Veteran Affairs Staff Sergeant Parker Gordon Fox (SSG FOX) Suicide Prevention Grant Program, we noted that, for one nonpayroll expenditure selected for testing, management was unable to provide documentation demonstrating that the invoice had been reviewed and approved by a responsible party familiar with the federal program, in accordance with the Organization’s established control procedures. Cause - The Organization’s current internal control system over payroll and nonpayroll expenses is not consistently followed to ensure proper supervisory approval of timesheets and supporting invoices. Potential Effect - Charges to Federal awards for salaries and wages and nonpayroll expenses may not be accurate nor valid. Questioned costs – None Context – For the SSVF Program, we selected a sample of 60 salary transactions using non-statistical sampling methods to assess controls over allowable activities and costs. Of the transactions tested, two instances were identified in which timesheets lacked evidence of proper supervisory approval. No exceptions were noted regarding the allowability of the activities performed or the costs incurred for these transactions. We selected 60 nonpayroll transactions charged to the SSG FOX program to test controls over allowable activities and allowable costs. Out of the 60 transactions tested, there was one instance where controls did not operate effectively, i.e., an invoice was not properly approved. We did not identify any exceptions with respect to the allowability of the activities performed or the costs incurred associated with this sample selection. Repeat Finding – This is not a repeat finding. Recommendation - We recommend the Organization consistently apply its established internal controls over payroll and nonpayroll expenses to ensure that all charges to federal grants are properly approved to avoid inaccuracies or noncompliance. Views of Responsible Officials - Management agrees with the federal award findings identified in the audit and effective immediately, will implement necessary procedures as described under the corrective action plan to address the findings.

2024-001 – Program Income Identification of the Federal Program U.S. Department of Housing and Urban Development Name of Program: Continuum of Care Program pass-through from Prince George’s County Assistance Listing Number: 14.267 Grant Award Number: MD023L3G002012/MD0232L3G002013 Pass-through Identifying Number: 524.1-14267-2024 Grant Award Period: July 1, 2022 to June 30, 2024 Criteria or Specific Requirements – In accordance with 2 CFR 200.80, program income means, “gross income earned by the non-Federal entity that is directly generated by a supported activity or earned as a result of the Federal award during the period of performance except as provided in § 200.307 paragraph (f).” Paragraph (f) states, “There are no Federal requirements governing the disposition of income earned after the end of the period of performance for the Federal award, unless the Federal Awarding agency regulations or the terms and conditions of the Federal award provide otherwise.” There are three methods of applying program income: deduction; addition; and cost-sharing. The Federal agency should specify what program income method(s) will be used in the terms and conditions of the Federal award. The deduction method will be used if the Federal agency does not specify a method for applying program income. Unless specified in the agency’s regulations, program income treatment is usually handled in the grant agreement terms and conditions. The pass-through grant from Prince George’s County should follow the method for applying program income outlined in the manual issued by the Behavioral Health Authority (BHA). Per the manual, the Continuum of Care (CoC) grant funds is to be used to pay the difference between the contract rent for a unit and 30% of the participant’s or family’s income (program income). Condition – The Organization failed to comply with the program income compliance requirement of the U.S. Department of Housing and Urban Development (HUD) Continuum of Care Program by not netting the $41,762 of program income (contracted rent amount per tenant) generated from the pass-through grant to the amount to be reimbursed prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA. Per the manual, BHA will utilize CoC funding to make affordable housing for program participants and families by using CoC grant funds to pay the difference between the contract rent for a unit and 30% of the participant’s or family’s income. We were informed by the Organization that they instead followed what was verbally communicated to them that they can use the program income to cover for utilities and maintenance costs of the properties being rented, which is also an acceptable use of the program income. We were also informed that BHA has not demanded that the Organization remit the program income collected during the fiscal year 2024 and BHA has not stopped the funding under this program since the Organization utilized the program income to cover program expenses. Cause - The Organization did not follow the protocol in the manual issued by BHA to net the program income from the pass-through grant with the contracted rent amount per tenant prior to submitting the reimbursement request to HUD. Instead, the Organization followed what was verbally communicated to them that they can use the program income to cover for utilities and maintenance costs of the properties being rented, which is also an acceptable use of the program income. Potential Effect - Charges to Federal awards for rent is more than what is allowed under the manual issued by BHA. Questioned costs – $41,762, this is the amount the Organization is allowed to collect from the tenants per the manual issued by BHA and represents 30% or less of the tenants’ annual income and should have been netted with the contracted rent amount per tenant prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA. Context – The condition was identified during the fiscal year 2024 audit when we reviewed and tested the program income compliance requirement applicable for Assistance Listing Number 14.267. We noted that the program income generated from the pass-through grant during the fiscal year 2024 totaling $41,762 was not netted to the amount to be reimbursed prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA. Recommendation - We recommend the Organization establish internal control and processes to properly account for program income in accordance with the protocol outlined in the manual issued by BHA, i.e., to net the program income to the contracted rent amount per tenant prior to submitting for reimbursement from HUD. Views of Responsible Officials - Management agrees with the federal award finding identified in the audit. Effective immediately, the Organization will comply with the program income compliance requirement of the U.S. Department of Housing and Urban Development (HUD) Continuum of Care Program by netting program income generated from the pass-through grant to the amount to be reimbursed prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA.

2023-001 – Allowable Costs relating to Time and Effort and Internal Controls Information on the Major Federal Program U.S. Department of Health and Human Services Name of Program: Substance Abuse and Mental Health Services Assistance Listing Number: 93.243 Grant Award Number: 1H79TI085239-01/6H79SM080760-03M001/1H79TI084237-01/ 1H79SM080760-01 Grant Award Period: September 30, 2022 to September 29, 2027, November 30, 2018 to November 29, 2023, September 30, 2021 to September 29, 2026/ November 30, 2018 to November 29, 2023 U.S. Department of Veterans Affairs Name of Program: Veterans Supportive Housing Per Diem Program Assistance Listing Number: 64.024 Grant Award Number: VOAQ754-1291-558-PD-21, VOAQ754-2080-558-CM-22, VOAQ754-2286-565-CM-22 Grant Award Period: October 1, 2022 to September 30, 2023 Criteria or Specific Requirements – In accordance with 2 CFR Section 200.430.8(i), charges to federal awards for salaries and wages must be based on records that reflect the actual work performed. The charges must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and must be incorporated into the official records of the non-Federal entity. Condition - Several charges to Federal awards for salaries and wages were not supported with properly completed time sheets and in certain instances, approval of the timesheets by individuals knowledgeable of the federal program were not documented. Cause - While there is a time keeping system implemented to track daily hours worked by employees, the Organization’s current internal control system over payroll is not consistently followed to produce properly completed time sheets nor proper supervisory approval of timesheets. Effect - Charges to Federal awards for salaries and wages may not reflect accurate time worked. Questioned costs - None Context - We selected 64 salary transactions charged to the federal programs to test controls over allowable costs. Out of the 64 transactions tested, there were 15 instances where controls did not operate effectively, i.e., timesheets were not properly completed to reflect correct number of days worked or timesheets were not properly approved by the employees’ supervisors. Repeat finding - No Recommendation - We recommend the Organization consistently enforce its internal controls over payroll to ensure that all timesheets are properly and timely completed and reviewed and verified by appropriate personnel for accuracy. Views of Responsible Officials - Management agrees with the federal award finding identified in the audit and effective immediately, will implement necessary procedures as described under the corrective action plan to address the finding. Effective immediately, the Organization will strictly enforce its policy for employees to properly complete their timesheets and for supervisors to properly review and approve employees’ timesheets. To do this, the Organization will conduct a training for all employees and supervisors about how to properly complete and review timesheets. To ensure compliance with the policy, the Organization will conduct random checks of timesheets every pay period to verify that supervisory approval is performed. Appropriate disciplinary action will be implemented for non-compliance.

Finding 2021-002 ? Internal Control over Compliance with Reporting (Preparation of the Schedule of Expenditures of Federal Awards) Information on the Federal Program: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.235 Assistance Listing Name: Supportive Housing Program U.S. Department of Housing and Urban Development Assistance Listing Number: 14.267 Assistance Listing Name: Continuum of Care Program Criteria: The Uniform Guidance, CFR Section ?200.510(b) states in part: ?The auditee must also prepare a schedule of expenditures of federal awards for the period covered by the auditee?s financial statements which must include the total federal awards expended as determined in accordance with CFR Section ?200.502 Basis for determining federal awards expended.? The schedule must provide total federal awards expended for each individual federal program. In accordance with ?200.302 Financial Management, a non-federal entity?s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: 1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. 2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in ?200.327 Financial Reporting and ?200.328 Monitoring and Reporting Program Performance. 3) Records that identify adequately the source and application of funds for federally-funded activities. 4) Effective control over, and accountability for, all funds, property, and other assets. Condition: The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. BDO identified the following matters during our testing of the SEFA: ? The Organization?s SEFA inaccurately presented the assistance listing number (ALN) of one program. The ALN should have been 14.235 versus 14.191 for the Supportive Housing Program. The error noted by the auditors was corrected in the accompanying SEFA. ? The SEFA was not properly supported by the award document for the Section 8 Housing Assistance Payments Program as the award document for one grant was not available. The amount reported on the SEFA for this program is $130,069. ? The SEFA was overstated by $3,449 for assistance listing number 14.267. The error noted by the auditors was corrected in the accompanying SEFA. Cause: The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not fully operate as designed. The Organization only prepares the SEFA once per year in conjunction with the annual audit. This annual process lends itself to less familiarity with the processes necessary to provide a complete SEFA reporting package due to the multiple steps required to address ?200.510(b). Effect or Potential Effect: The SEFA provided to BDO required several clerical modifications to present all elements in accordance with Section ?200.510(b). Failure to correctly identify the ALN and obtain all supporting documentation is necessary to be sure that the entity complied with all requirements under the award. Questioned Costs: None. Context: The nature of these findings is detailed in the condition section above. Repeat Findings: This finding is partially a repeat finding from prior year. This was reported as finding 2020-003 and 2020-004 in the 2020 schedule of findings and questioned costs. Recommendation: We recommend management continue to focus on training for both preparer and reviewers of the SEFA to ensure the documented policies and procedures can be performed as prescribed to comply with Section ?200.510(b). This will ensure that the SEFA provides all relevant information as prescribed.

Finding 2021-003 ? Compliance with Activities Allowed or Unallowable and Allowable Costs and Cost Principles Information on the Federal Program: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.267 Assistance Listing Name: Continuum of Care Program Criteria: The Uniform Guidance in 2 CFR Section ?200.411, Adjustment of previously negotiated indirect cost rates containing unallowable costs, requires that for rates covering the current period, either a rate adjustment or a refund must be required by the cognizant agency for indirect costs. The choice of method must be at the discretion of the cognizant agency for indirect costs, based on its judgment as to which method would be most practical. In accordance with ?200.422, Advisory councils, costs incurred by advisory councils or committees are unallowable unless authorized by statute, the Federal awarding agency or as an indirect cost where allocable to Federal awards. In accordance with ?200.434(a) and ?200.434(b), Contributions and donations, costs of contributions and donations, including cash, property, and services from the non-Federal entity to other entities, are unallowable. The value of services and property donated to the non-Federal entity may not be charged to the Federal award either as a direct or indirect cost. In accordance with ?200.438, Entertainment costs, costs of entertainment, including amusement, diversion, and social events, and any associated costs are unallowable. In accordance with ?200.441, Fines, penalties, damages, and other settlements, costs resulting from non-Federal entity violations of, alleged violations of, or failure to comply with, Federal, state, tribal, local or foreign laws and regulations are unallowable. Condition: During our testing of the allowability of the expenses included within the pool of indirect costs, we identified six instances from the 60 samples tested, where expenses should have been excluded as unallowable. Our testing also revealed that grants and contributions were improperly included in the indirect cost pool. Cause: The Organization failed to identify the unallowable costs that were included in the pool of indirect costs. Effect or Potential Effect: The lack of adherence to the established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements which could ultimately lead to disallowed costs for the major programs. Questioned Costs: Not determined. Context: We tested a sample of 60 items and found six exceptions as noted in the condition section above. Total unallowable costs identified totaled $1,131. Samples were selected using a non-statistical method. We also reviewed the general ledger details, noting that grants and contributions, totaling $15,085, were also improperly included within the indirect cost pool. The population was the total expenditures within the pool of indirect costs that totaled $5,842,112. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the organization adhere to its documented policies and procedures regarding authorization and approval of expenditures. We also recommend that management continue to focus on training both the preparer and reviewer of the indirect cost rate calculation on allowable cost and indirect cost allocations.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVLOPMENT Section 8 Housing Assistance Payments Program ? CFDA No. 14.195; Grant period: Year ended June 30, 2020 Significant Deficiency: As discussed in finding 2020-006, cash receipts should be deposited into the bank and posted in the accounting system by separate individuals. During our audit, we identified instances where cash was deposited into the bank and posted in the accounting system by the same individual. Lack of effective controls in place over cash receipts increases the risk of misstatements, fraud, or errors occurring and not being detected and corrected in a timely manner. Questioned Costs: None above required reporting thresholds.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVLOPMENT Section 8 Housing Assistance Payments Program ? CFDA No. 14.195; Grant period: Year ended June 30, 2020 Significant Deficiency: As discussed in finding 2020-007, cash receipts should have proper supporting documentation. During our audit, we identified an instance where cash receipts did not have proper supporting documentation to support the nature and timing of the revenue recognition. Lack of effective controls in place over cash receipts increases the risk of misstatements, fraud, or errors occurring and not being detected and corrected in a timely manner. Questioned Costs: None above required reporting thresholds.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT AND U.S. DEPARTMENT OF LABOR Section 8 Housing Assistance Payments Program ? CFDA No. 14.195; Grant period: Year ended June 30, 2020 Reintegration of Ex-Offenders ? CFDA No. 17.270; Grant period: Year ended September 30, 2021 Condition/Criteria: The program award letters requires the following reports to be submitted: HUD-52663, Requisition for Partial Payment of Annual Contributions, HUD-52681, Voucher for Payment of Annual Contributions and Operating Statement and, HUD-50059, Owner's Certification of Compliance with HUD's Tenant Eligibility and Rent Procedures and quarterly ETA-9130, U.S. DOL ETA Financial Report. The Organization did not comply with this requirement. Context: During our audit procedures, it was identified that the above-mentioned HUD reports were not submitted. The DOL ETA Financial Report for the 3rd and 4th quarter were filed 130 and 10 days late, respectively. Cause: Internal controls were not operating effectively to ensure all required reports were submitted to the granting agency in the required timeline. Effect: Due to failure of internal controls, none of the required reports were submitted. Recommendation: The Organization should have effective internal controls in place to ensure that required reports for granting agencies are prepared and submitted timely. Questioned Costs: None above required reporting thresholds.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Supportive Housing for the Elderly (Section 202) ? CFDA No. 14.157; Grant period: Year ended June 30, 2020 Significant Deficiency: As discussed in finding 2020-004, the regulatory agreement requires one of the Organization?s subsidiaries, VOA Hickory Knoll, Inc., to make monthly deposits of $1,126 into their replacement reserve account. VOA Hickory Knoll, Inc. did not comply with this requirement. Due to failure of internal controls, the Organization?s replacement reserve was underfunded by $2,251. Questioned Costs: None above required reporting thresholds.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT AND DEPARTMENT OF VETERAN AFFAIRS Supportive Housing for the Elderly (Section 202) ? CFDA No. 14.157; Grant period: Year ended March 30, 2020 Community Development Block Grants/Entitlement Grants ? CFDA No. 14.218; Grant period: Year ended June 30, 2020 VA Supportive Services for Veteran Families Program ? CFDA No. 64.033; Grant period: Year ended September 30, 2020 Significant Deficiency: As discussed in finding 2020-008, GAAP requires expenses to be recorded in the fiscal period they are incurred. It was noted $15,836, $4,661, and $2,500 of expenses were recorded in the incorrect fiscal period for CFDA No.?s 14.157, 14.218 and 64.033, respectively. Due to the deficiency in internal control, $22,997 of expenses were recorded in the incorrect fiscal period. Questioned Costs: None above required reporting thresholds.

U.S. DEPARTMENT OF VETERAN AFFAIRS VA Supportive Services for Veteran Families Program ? CFDA No. 64.033; Grant period: Year ended September 30, 2020 Condition/Criteria: Under the Uniform Guidance, certain expenses are considered unallowable. The Organization did not comply with this requirement Context: It was identified that the Organization expended amounts that were unallowable under the award. Cause: Internal controls were not operating effectively to ensure all expenses were allowable. Effect: Due to failure of internal controls, $249 was spent improperly as it was considered unallowable under the grant agreement. Recommendation: The Organization should have effective internal controls in place to ensure that only allowable expenses are charged to federal awards. Questioned Costs: None above required reporting thresholds.

U.S. DEPARTMENT OF LABOR Reintegration of Ex-Offenders ? CFDA No. 17.270; Grant period: Year ended June 30, 2019 Condition/Criteria: Timesheets should be reviewed and approved by the appropriate level of management. During our audit, it was identified that the review and approval of the Program Director's timesheet was not performed or documented. Context: A sample of 23 payroll transactions totaling $40,730 were selected for audit from a population of 84 transactions totaling $160,345. Audit tests revealed there were 4 instances where an individual?s timesheet was not reviewed and approved. Cause: The Organization did not perform or document the review and approval of the Program Director's timesheet. Effect: Lack of effective controls in place over payroll processing increases the risk of misstatements, fraud, or errors occurring and not being detected and corrected in a timely manner. Recommendation: The Organization should review their payroll policies and procedures to ensure the review and approval of the Program Director's timesheets are adequately documented. Questioned Costs: None above required reporting thresholds. Views of Responsible Officials and Planned Corrective Action Plan: The Organization?s policy is that all time sheets must be reviewed and approved by a supervisor. In July, 2019, the Organization implemented a new payroll system that is fully automated. Prior to the implementation, all time sheets were completed manually. Internal controls improved significantly under the new system as employees will not be paid unless his or her time sheet is properly approved.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Community Development Block Entitlement Grants ? CFDA No. 14.218; Grant period: Year ended June 30, 2019 Condition/Criteria: The program award letter requires annual Federal Financial Report, SF-425, to be submitted 45 days after close of the grant period. The Organization did not comply with this requirement. Context: During our audit procedures, it was identified that the Federal Financial Report, SF-425, was not submitted. Cause: Internal controls were not operating effectively to ensure all required reports were submitted to the granting agency in the required timeline. Effect: Due to failure of internal controls, the Federal Financial Report was not submitted. Recommendation: The Organization should have effective internal controls in place to ensure that required reports for granting agencies are prepared and submitted timely. Questioned Costs: None above required reporting thresholds. Views of Responsible Officials and Planned Corrective Action Plan: Since the inception of the grant, Management was told by the regional grantor office, who is a pass through entity, that the report was due within 90 days of the grant year end. During the current year audit, Management learned that the federal agency needs to provide the extension not the pass through entity. Management has made note of the 45-day deadline and will complete the SF-425 report timely for the grant year ending September 30, 2019.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Supportive Housing for the Elderly (Section 202) ? CFDA No. 14.195; Grant period: Year ended June 30, 2019 Condition/Criteria: The regulatory agreement requires one of the Organization?s subsidiaries, VOA Hickory Knoll, Inc., to make monthly deposits of $1,126 into their replacement reserve account. VOA Hickory Knoll, Inc. did not comply with this requirement. Context: During our audit procedures, it was identified that VOA Hickory Knoll, Inc. did not make required replacement reserve deposits for three months of the fiscal year. As of June 30, 2019, the VOA Hickory Knoll, Inc.?s replacement reserves were underfunded by $3,377. Cause: Internal controls were not operating effectively to ensure required replacement reserve deposits were made in accordance with the regulatory agreement. Effect: Due to failure of internal controls, the Organization?s replacement reserve was underfunded. Recommendation: The Organization should have effective internal controls in place to ensure that required replacement reserve deposits are made timely and in accordance with the regulatory agreement. Questioned Costs: None above required reporting thresholds. Views of Responsible Officials and Planned Corrective Action Plan: The subsidiary, Hickory Knoll, is management by Volunteers of America, Inc. and the accounting is performed by a 3rd party accountant. The Organization will review the underfunding with the manager to ensure that the replacement reserves are properly funded in future periods. Additionally, the Organization will review the trial balance and financials on a quarterly basis to ensure timeliness and regulatory compliance.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Section 8 Housing Assistance Payments Program ? CFDA No. 14.195; Grant period: Year ended June 30, 2019 Significant Deficiency: As discussed at Finding 2019-005, due to contracts not being maintained in a central location available to management, the Section 8 Housing Assistance Payments Program amount of $149,341 reported on the SEFA is unsupported. The Organization should have a centralized location to maintain documents Questioned Costs: None above required reporting thresholds.

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