HOME BUILDERS INSTITUTENon-Profit

Finding No. 2021-002: Federal Financial Reporting Requirements ? Material Weakness (Program Level) U.S. Department of Labor (17.268) H-1B Job Training Grants Condition: The financial statements and schedule of expenditures of federal awards (SEFA) for the year ended December 31, 2021, included amounts for equipment purchases that had been ordered by HBI under the Life Cycle Equipment (LCE) program in accordance with the most recent terms of the grant. Under the LCE program, equipment totaling $534,450 that had been ordered by HBI but had not yet been received was improperly included in accounts payable at December 31, 2021. Context: During the year ended December 31, 2021, the contracting office of the U.S. Department of Labor that is responsible for the Job Corps program approved grant funds totaling $3,874,594 that were to be used by HBI to purchase equipment for the LCE program through March 31, 2022. As such, HBI originally recorded expenditures totaling $3,874,594 for the LCE program during the year ended December 31, 2021. The equipment expenditures were based on a) the receipt of and payment for equipment; and b) the issuance of purchase orders for equipment not yet received during the year ended December 31, 2021. Related to the purchase orders, HBI did not have either possession of or title to equipment totaling $534,450 at December 31, 2021. As a result, an adjustment to the financial statements was necessary in order to remove both accounts payable and related expenses and accounts receivable and revenue and support totaling $534,450. The expenditures reported on the SEFA for the DOL award was also adjusted to remove expenditures totaling $534,450. Criteria: Title 2, Code of Federal Regulations (2 CFR) Section 200.303(b) requires non-federal entities to establish and maintain effective internal control over federal awards that provide reasonable assurance that the non-federal entity is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. 2 CFR Section 200.502(a) states that the determination of when a federal award is expended should be based on when the activity related to the federal award occurs. 2 CFR Section 200.510 states that the auditee must 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 2 CFR Section 200.502. Cause: HBI placed orders totaling $3,874,594, which was the entire amount of approved equipment to be ordered under the LCE program, during the year ended December 31, 2021. HBI typically issues a purchase order when a vendor has been identified and records the expected amount due in accounts payable based on the purchase order because delivery of the related purchased item historically would have occurred within a reasonable time frame after the order was placed. However, given the supply chain and transportation delays resulting from the COVID-19 pandemic, HBI encountered significant delays receiving equipment after the issuance of a purchase order. Since the equipment had not been received and title had not yet been transferred, a liability should not have been recorded for the equipment that was ordered during the year but not yet in HBI?s possession at December 31, 2021. Effect: The inclusion of the liability related to equipment purchases that were ordered but not yet received at December 31, 2021, caused inaccurate amounts to be reported in the financial statements and in the SEFA at the start of the audit. Questioned Costs: None. Repeat Finding?: Yes. Finding No. 2020-001. Recommendation: HBI should establish internal controls to ensure that recording accounts payable and federal expenditures is based on when goods are received or when the title to the goods has been transferred to HBI. Views of Responsible Individuals: Management concurs with and will implement the recommendation. See Corrective Action Plan.

Finding No. 2021-003: Procurement and Suspension and Debarment ? Material Weakness (Program Level) U.S. Department of Labor (17.268) H-1B Job Training Grants Condition: For all eight vendors in our procurement sample, HBI could not provide documentation of their verification that the vendors were not suspended, debarred or otherwise excluded. Context: HBI did not maintain adequate support to provide evidence that appropriate suspension and debarment searches were performed. Despite the lack of documentation, a search was performed after the fact to verify that the eight vendors in our sample were not suspended, debarred or otherwise excluded. Therefore, no questioned costs have been reported related to the sample that was tested. Criteria: 2 CFR Section 200.214 requires that, for covered transactions, a non-Federal entity must verify that entities are not suspended, debarred or otherwise excluded. This verification may be accomplished by checking the System for Award Management (SAM) website maintained by the General Services Administration. Cause: HBI did not maintain documentation related to its suspension and debarment assessments, which were performed verbally with vendors. In addition, HBI did not perform searches on the SAM website. Effect: HBI was not in compliance with the procurement documentation requirements of the Uniform Guidance. As a result, HBI could have entered into contract with vendors that were suspended, debarred, or otherwise excluded. Questioned costs: None. Repeat Finding?: No. Recommendation: HBI should establish internal controls to ensure proper documentation is maintained as evidence to support that HBI performed the required suspension and debarment searches on the SAM website. Views of Responsible Individuals: Management concurs with and will implement the recommendation. See Corrective Action Plan.

Finding No. 2020-002: Federal Financial Reporting Requirements ? Significant Deficiency U.S. Department of Housing and Urban Development (14.228) City of Houston (4600016183) Community Development Block Grants / State?s Program and Non-Entitlement Grants in Hawaii Condition: The schedule of expenditures of federal awards (SEFA) for the year ended December 31, 2020 included both federal and non-federal expenditures related to the major program referenced above. Context: The grant agreement with the City of Houston requires that HBI obtain non-federal funding to supplement the federal funding that supports budget for the project. Criteria: Code of Federal Regulations (CFR) Section 200.303(b) requires non-federal entities to establish and maintain effective internal control over federal awards that provide reasonable assurance that the non-federal entity is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. CFR Section 200.502(a) states that the determination of when a federal award is expended should be based on when the activity related to the federal award occurs. CFR Section 200.510 states that the auditee must 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. Cause: HBI did not establish separate project codes within the accounting system to track federal versus non-federal expenditures related to the project that is funded by this federal award. Effect: The inclusion of non-federal expenditures caused inaccurate amounts to be reported in the SEFA at the start of the audit. This could cause an inaccurate major program determination and resulted in testing of non-federal expenditures. Repeat Finding?: No. Recommendation: We recommend that HBI establish separate project codes within the accounting system to track federal versus non-federal expenditures related to this project. Views of Responsible Individuals: Management concurs with and will implement the recommendation. See corrective action plan.