Community Youth Services

Finding related to the Financial Statement Audit

Findings Relating to the Financial Statement Audit as Required to be Reported in Accordance with Generally Accepted Government Auditing StandardsA. Material Weakness in Internal Control over Major ProgramFinding 2022-001 (reference Finding 2021-003Findings related to major federal awards required to be reported in accordance with Section 2 CDR-20.516(b):Department of the TreasuryAgency Rental Assistance ? CFDA 21.023B. Material Weakness in Internal ControlFinding related to the Financial Statement AuditFinding 2022-002 Internal Control over Cash Receipts and DisbursementsCondition:During audit procedures, we reviewed twelve months of bank statements and related reconciliations for the audit period. We noted the bank reconciliation supervisory approval process had not been performed for eleven months out of twelve months.Cause: The Organization did not have adequate supervisory review of month-end procedures to detect the bank reconciliations had not been performed in a timely manner. In addition, the prior year audit was issued in September 2022, limiting the time for compliance for the months of January through September 2022. October 2022 was reviewed timely, the months of November and December were not reviewed during the audit period.Criteria:Uniform Guidance Part 6 ? Internal ControlThe 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.Government Auditing Standards Chapter 5 Internal Control, Requirement: System of Quality Control5.04 An audit organization should document its quality control policies and procedures and communicate those policies and procedures to its personnel. The audit organization shoulddocument compliance with its quality control policies and procedures and maintain such documentation for a period of time sufficient to enable those performing monitoring.II Findings Relating to the Financial Statement Audit as Required to be Reported in Accordance with Generally Accepted Government Auditing Standards (continued)procedures and peer reviews to evaluate the extent to which the audit organization complies with its quality control policies and procedures.Effect: Bank reconciliations are an essential internal control and are necessary in preventing and detecting fraud. They identify accounting and bank errors and provide explanations of the differences between accounting and bank balance cash balances. Due to the small number of, and often remotely located, accounting personnel, this lack of oversite could be discovered by employees in performing their normal duties.Recommendation: Bank reconciliations should be prepared within 30 days of the receipt of the statement. Banks may not correct any errors (or fraud) that is not detected and reported within that time frame. The bank statement and bank reconciliation should be reviewed by a person other than the preparer and that person should initial and date as reviewed (or electronic procedure of comparable nature).The bank reconciliation balance should agree with the general ledger balance(s). In addition, both statements should be initialed and dated as approved by supervisory personnel.

Questioned costs: $31,726

·                     Consult with the third-party US Department of the Treasury regarding whether the known questioned cost identified should be repaid.

Findings and Questioned Costs for Federal AwardsC. Compliance FindingsCompliance findings relating to the major federal awards as required to be reported in accordance with Section 2 CFR-20.516(a) are:Department of the TreasuryAgency Rental Assistance ? CFDA 21.023See Finding 2021-001Questioned costs: $31,726Finding 2021-003 The Organization did not ensure that rental assistance payments were made to applicants with adequate third-party documentation of eligibility. No secondary review of the files was performed by supervisory personnel for the required compliance criteria and the checks issued were not reviewed in conjunction with the review of the application packet.Federal Awarding agency: US Department of the TreasuryPass-Through Entity: WA Department of Commerce2021-ComTRAP-CYS-RAApplicable Compliance Component: Eligibility and Internal ControlKnown Questioned Cost Amount: Application incorrect $ 9,169Incorrect number of months paid $22,557Total questioned costs $31,726Condition:We found the Organization had inadequate internal controls to ensure material compliance with the eligibility requirements. The program requires forms that must be completed and contemporaneously signed and dated. Case managers may take verbal information and are held to the same standard of contemporaneously signing and dating of the applicable documentation. From a random sample of 25 files from the 210 applicants, four files out of 25 (16%) did not contain adequate third-party supporting documentation to support eligibility. From that same sample, eight out of 25 files (32%) paid the incorrect amount of rent. There was no secondary review of files performed by supervisory personnel, so incomplete files were not corrected prior to the issuance of rental assistance payments. The check request for rental assistance payments was approved by the same person preparing the applicant file. Check signing supervisory personnel also did not review the applicant file.The prior year audit report was issued September 2022, the program ended June 2022. Therefore, the Organization did not have adequate time to implement any changes to the program.Cause: The Organization developed program guidelines, but did not incorporate adequate internal controls to ensure the compliance criteria that third-party evidence of existence was complete.Criteria:WA Department of Commerce Guidelines for the Treasury Rent Assistance Program (T-RAP), Version 4 August 2022:4.3.1 RentHouseholds can receive assistance with only future rent if the households do not have rental arrears and/or the provider has already assisted the household with rental arrears.An additional three months of future rent assistance can be provided if the household reapplies and is still experiencing housing instability, and has not already received the maximum amount of assistance.5.1 Documenting Household StatusHouseholds must demonstrate a risk of experiencing homelessness or housing instability. This MUST (auditor emphasis) be documented and may include:?Self-declaration signed and dated by the applicant. . .5.2 Documenting Income?. Adult household members that have no income can complete a self-declaration signed and dated by the applicant. A verbal verification of no income is allowable and MUST (auditor emphasis) be signed and dated by the case manager making the call.6.2 Payment Agreement FormThe Commence T-RAP Payment agreement Form MUST (auditor emphasis) be completed for households seeking financial assistance.Effect: From the sample audited, forty-four percent (44%) of the applicant files lacked adequate document to determine eligibility. Those files resulted in $85,414 in questioned costs in rental payment disbursements. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs in a Singe Audit exceed $25,000.We question costs when we find an organization has not complied with grant regulations or when it does not have adequate documented to support expenditures.Recommendation:We recommend the Organization:? Establish internal controls to obtain adequate third-party evidence to support eligibility. This documentation is to be signed by the applicant and the landlord, the one exception is the case manager may sign, but must accept responsibility that the information is complete.? Supervisory personnel should perform a secondary review of files and provide contemporaneous documentation of such review.? Supervisory personnel in accounting should perform a secondary review of payment requests to supporting documentation.? Consult with the third-party US Department of the Treasury regarding whether the known questioned cost identified should be repaid.

A. Material Weakness in Internal Control over Major Program Finding 2021-001 (reference Finding 2021-003 Findings related to major federal awards required to be reported in accordance with Section 2 CDR-20.516(b): Department of the Treasury Agency Rental Assistance ? CFDA 21.023

III Findings and Questioned Costs for Federal Awards C. Compliance Findings Compliance findings relating to the major federal awards as required to be reported in accordance with Section 2 CFR-20.516(a) are: Department of the Treasury Agency Rental Assistance ? CFDA 21.023 See Finding 2021-001 Questioned costs: $85,414 Finding 2021-003 The Organization did not ensure that rental assistance payments were made to applicants with adequate third-party documentation of eligibility. No secondary review of the files was performed by supervisory personnel for the required compliance criteria and the checks issued were not reviewed in conjunction with the review of the application packet. Federal Awarding agency: US Department of the Treasury Pass-Through Entity: WA Department of Commerce 2021-ComTRAP-CYS-RA Applicable Compliance Component: Eligibility and Internal Control Known Questioned Cost Amount: $85,414 Condition: We found the Organization had inadequate internal controls to ensure material compliance with the eligibility requirements. The program requires forms that must be completed and contemporaneously signed and dated. Case managers may take verbal information and are held to the same standard of contemporaneously signing and dating of the applicable documentation. From a random sample of 25 from the 105 applicants, eleven files out of 25 (44%) did not contain adequate third-party supporting documentation to support eligibility. There was no secondary review of files performed by supervisory personnel, so incomplete files were not corrected prior to the issuance of rental assistance payments. The check request for rental assistance payments was approved by the same person preparing the applicant file. Check signing supervisory personnel also did not review the applicant file. Cause: The Organization developed program guidelines, but did not incorporate adequate internal controls to ensure the compliance criteria that third-party evidence of existence was complete. Criteria: WA Department of Commerce Guidelines for the Treasury Rent Assistance Program (T-RAP), Version 1 February 2021: 5.1 Documenting Household Status Households must demonstrate a risk of experiencing homelessness or housing instability. This MUST (auditor emphasis) be documented and may include: ?Self-declaration signed and dated by the applicant. . . 5.2 Documenting Income ?. Adult household members that have no income can complete a self-declaration signed and dated by the applicant. A verbal verification of no income is allowable and MUST (auditor emphasis) be signed and dated by the case manager making the call. 6.2 Payment Agreement Form The Commence T-RAP Payment agreement Form MUST (auditor emphasis) be completed for households seeking financial assistance. Effect: From the sample audited, forty-four percent (44%) of the applicant files lacked adequate document to determine eligibility. Those files resulted in $85,414 in questioned costs in rental payment disbursements. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs in a Singe Audit exceed $25,000. We question costs when we find an organization has not complied with grant regulations or when it does not have adequate documented to support expenditures. Recommendation: We recommend the Organization: ? Establish internal controls to obtain adequate third-party evidence to support eligibility. This documentation is to be signed by the applicant and the landlord, the one exception is the case manager may sign, but must accept responsibility that the information is complete. ? Supervisory personnel should perform a secondary review of files and provide contemporaneous documentation of such review. ? Supervisory personnel in accounting should perform a secondary review of payment requests to supporting documentation. ? Consult with the third-party US Department of the Treasury regarding whether the known questioned cost identified should be repaid. Management?s response: Finding: 2021-003 CFDA: 21.023 Department of the Treasury, Agency Rental Assistance Pass-Through Entity: WA Department of Commerce 2021-ComTRAP-CYS-RA Agency: Community Youth Services Name of contact person and title: Derek Harris, CEO Anticipated completion date: 09/30/2022 Agency?s response: Concur The organization agrees with this finding and will implement the following: We will be developing program guidelines in addition to the guidelines provided by the Pass-Through Entity in order to ensure internal controls are in place to mitigate fraud and/or misuse of rental assistance funds. The program personnel are in the process of developing a file checklist to ensure all compliance components included in the file documentation meet the criteria required for the program. When possible the forms will be sent to all parties for digital signature. When digital signatures cannot be obtained, verbal verification of agreement by the applicant will be documented by the program staff to include date, time, method of communication. A supervisor (Program Director, Deputy Director, or CEO) will review the files to ensure compliance with the program guidelines, ensure third party evidence exists and that all applicable documentation is in the file to support the rental assistance request. The files will also be reviewed by the Finance Coordinator prior to submitting the payment request to the Accounting Associate to ensure eligibility is adequately documented and that third party evidence exists before funds are released to the landlord.