Palatka Housing AuthorityLocal Government

2025-001 Misappropriation of Funds Material Weakness in Internal Control Condition: Subsequent to the close of the fiscal year, the Authority was notified by its banking institution of potentially fraudulent activity involving disbursements made to a company owned by an employee of the Authority. Upon investigation, management determined that the employee, who had access to the Authority’s check issuance process, directed $155,706 in payments to an entity they owned and controlled. These payments were not for legitimate goods or services. The disbursements were charged across multiple accounts, including both federal and non-federal program expenditures. The federal program expenditures were charged to the Public and Indian Housing program. Context: The fraudulent activity was identified by the Authority’s bank through transaction monitoring and reported to management. The employee was subsequently terminated, criminally charged, and has pled guilty. The Authority is seeking restitution; however, specific repayment terms have not yet been finalized as of the date of this report. Criteria: Under 2 CFR 200.303, the Authority must establish and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the awards. 2 CFR 200.403 requires that costs charged to federal awards be necessary, reasonable, and allocable. Additionally, 24 CFR 990.108 limits Public Housing Operating Fund expenditures to eligible operating expenses necessary for the operation of public housing. Payments made to a company owned by an employee for which no goods or services were received do not meet these allowability requirements. Cause: The Authority did not maintain adequate segregation of duties or sufficient monitoring controls over the vendor setup, invoice processing, and check issuance functions. Specifically, one individual had authority to create vendors, approve invoices, and issue checks without independent review or secondary approval. At the time the fraud occurred, disbursement activity was not subject to an independent secondary review of the overall check run, including the listing of payees and amounts, which could have identified payments issued to an unauthorized or fictitious vendor. Effect: Unauthorized payments totaling $155,706 were made over the nineteen-month period, resulting in a misstatement of both federal and non-federal expenditures. As a result, certain federal program costs were unallowable under 2 CFR 200.403 and 24 CFR 990.108. These expenditures include $115,850 of questioned costs charged to the Public and Indian Housing program during the fiscal year. Auditor’s Recommendations: The Authority should strengthen internal controls over the accounts payable and disbursement process by segregating duties between vendor setup, invoice approval, and check issuance; implementing a dual-approval process for new vendors and all check disbursements; conduct independent reviews of payment reports; and review all expenditures charged to federal programs to identify and reimburse any unallowable costs. Management Response: See Corrective Action Plan.

2022-001 Eligibility U.S. Department of HUD - Public and Indian Housing AL 14.850 Significant Deficiency in Internal Controls Condition: Out of a total applicant population of approximately 420 tenants, 40 applicants were tested and the following deficiencies were noted: ? 1 file had a late annual recertification ? 2 files had missing or incorrect 214 declaration documents, ? 1 file was missing permanent historical documents, ? 1 file was missing a signed flat rent option sheet, ? 2 files were had missing or unsigned 9886 release of information form, and ? 1 file had incorrectly calculated tenant income.Context: The auditor randomly selected 40 tenant files out of the population, which is considered to be a statistically valid sample. The auditor reviewed the tenant files and support to ensure that proper procedure are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Criteria: The Authority?s ACOP and 24 CFR 960.259 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding complete and accurate tenant files. Effect: The Authority is not in full compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Cause: The Authority experienced staffing turnover and did not have the available staff to fully implement the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to complete a tenants file. Auditor Recommendations: The Authority should continue to train staff on the established procedures and controls in place to ensure full compliance in regards to eligibility. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor?s sample. Management Response: See the Corrective Action Plan in this report.

GSA_MIGRATION