ARIZONA HOUSING, INC.Non-Profit

2022-101 ? Allowable Cost/Cost Principles (Material Weakness, Material Noncompliance) Federal program information: Funding agencies: U.S. Department of Treasury Titles: Coronavirus State and Local Fiscal Recovery Funds CFDA numbers: 21.027 Award years: January 1, 2022 through December 31, 2022 Pass-through entities: Maricopa County, Arizona Questioned Costs: $247,841 Criteria: United States Treasury guidelines and the Uniform Guidance require that costs charged to the program are for actual costs incurred and are supported by underlying records. Condition: During 2022 the Organization entered into a contract with Maricopa County for $7,730,022 to purchase and renovate a building to be used for low-income housing. Within this contract an amount of $850,000 was indicated as ?Developer?s Fee.? However, this developer?s fee was not defined in the contract. The Organization billed and collected $247,841 of developer?s fees under the contract through December 31, 2022. However, this amount was not supported by underlying actual expenses incurred by the Organization as required by the Uniform Guidance. Cause and Effect: Under housing related contracts developer fees typically indicate a revenue source to the developer that is unrestricted. During 2022 the Organization believed that these funds were to be received by the County in addition to the direct costs incurred by the Organization and reimbursed. However, the contract did not define developer fees separately from other reimbursable expenses. As a result, it appears that the drawdown of $247,841 relating to developer fees may be unallowable under the Uniform Guidance. Auditor?s Recommendations: Procedures should be implemented to ensure that all costs charged to federal programs are supported by actual costs incurred, unless other types of costs, such as indirect costs using a specified or de minimis rate, are specified in the contract as allowable.