HOUSING AUTHORITY OF THE CITY OF HARTSELLELocal Government

2021-001 CFDA#14.850 ? Low Rent Public Housing Program and Low Rent Public Housing CARES Act - Allowable Costs/Cost Principles Condition and Criteria: During our audit, it was determined that internal control deficiencies over compliance existed related to the Authority?s compliance with the allowable costs/cost principles compliance provisions of both the Low Rent Public Housing Program and Low Rent Public Housing CARES Act. Identified control and compliance deviations included costs that were considered unallowable. In accordance with the cost principles under 2 CFR part 200, subpart E, costs must be necessary and reasonable for the performance of the Federal award, conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E. Amount of Questioned Costs: $39,066 Context: The Authority's management's internal controls over the Low Rent Public Housing Program's allowable costs/cost principles compliance provision that were in place were not effective. The Executive Director and Board of Directors did not adequately follow the cost principles included in 2 CFR part 200, subpart E; therefore, the Authority incurred and approved costs that were not considered to be necessary or reasonable for the performance of the federal award. Cause: The Board of Commissioners approved for the Executive Director to be paid over budgeted amounts totaling $39,066 for accumulated sick leave in the amount of 640 hours paid at a rate of $61.04/hour. Effect: The Authority incurred costs that were unallowable and that may not have been necessary or reasonable. This resulted in the Executive Director receiving compensation in excess of the budgeted salary for the fiscal year ended June 30, 2021. Due to the nature of this internal control deficiency, given that all parties involved in the review and approval process for disbursements made by the Authority approved costs that were not considered necessary or reasonable for the performance of the Federal Award, it is likely that this deficiency could result in a possibility that errors or irregularities relating to costs exist and not be detected by the Authority?s internal controls. Auditor?s Recommendation: The Authority?s management should ensure that both management and those charged with governance are truly considering whether costs are necessary and reasonable for the performance of the federal award and whether they conform to any exclusions or limitations set in 2 CFR part 200, subpart E. Also, we recommend that the Authority consider improving segregation of duties related to review and approval of disbursements. Grantee Response: At the time of the approval, the consensus was that the transactions were being handled correctly. After reviewing all criteria, it was felt that in the best interest of the Housing Authority that the transactions be reversed. This was brought before the Board and approved with a deposit of $39,066 being made by the Executive Director and all transactions being reversed.