NORTHWEST YOUTH SERVICES

Finding 2024-001 – Special Tests and Provisions – Material Weakness in Internal Control over Compliance and Instance of Material Noncompliance Federal program information: Federal Agency/Pass-through Entity: U.S. Department of Housing and Urban Development/ Office of Community Planning and Development Program Name/Cluster: Continuum of Care Program ALN number: 14.267 Award number: WA0101L0T012215, WA0587L0T012300 WA0500Y0T012201, WA0575Y0T012100 Award period: 11/1/2023 – 11/30/2025 Criteria: Federal regulations and grant and contract conditions specify where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units taking into account relevant features. In addition, the rents may not exceed rents currently being charged by the same owner for comparable unassisted units, and the portion of rents paid with grant funds may not exceed HUD-determined fair market rents. Condition and context: Each of the 8 landlords/property managers who received rental payments from the Organization during the fiscal year ended December 31, 2024, were selected for reasonable rental rate testing. No documentation supporting compliance with federal reasonable rental rates was provided. Cause: Policies and procedures have not been implemented properly to ensure compliance with federal reasonable rental rates compliance requirements. The Organization did not have an effective control system in place to ensure that documentation was retained to support the reasonableness of the rents being paid to landlords/property managers to house the Organization’s clients. Repeat Finding: Yes Effect: The Organization may be out of compliance with special tests and provisions requirements. Questioned costs: Known questioned costs were $163,808 of rent paid to landlords/property managers that it was unknown whether rent was over or under charged. Likely questioned costs are believed to be above the questioned cost threshold and program materiality for this program. Recommendation: The Organization should improve the controls over the reasonable rental rates compliance requirements, which includes the documentation, review, and approval of reasonableness of all rental rates charged by landlords to house the Organization’s clients. Views of Responsible Officials and Planned Corrective Actions: Management concurs with this finding. See the corrective action plan.

Finding 2023-001 – Special Tests and Provisions – Material Weakness and Material Instances of Noncompliance Federal program information: Federal Agency/Pass-through Entity: U.S. Department of Housing and Urban Development/ Office of Community Planning and Development Program Name/Cluster: Continuum of Care Program ALN number: 14.267 Award number: WA0101L0T012115, WA0500Y0T012100, WA0575Y0T012100 Award period: 11/1/2022 – 11/30/2025 Criteria: Federal regulations and grant and contract conditions specify where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units taking into account relevant features. In addition, the rents may not exceed rents currently being charged by the same owner for comparable unassisted units, and the portion of rents paid with grant funds may not exceed HUD-determined fair market rents. Condition and context: Each of the 9 landlords/property managers who received rental payments from the Organization during the fiscal year ended December 31, 2023 were selected for reasonable rental rate testing. For 5 landlords/property managers, a signed certification letter from the landlord/property manager was provided stating the locations and each month’s rent payments received from the Organization were residential units with rent comparable to other units operated by the landlords/property managers and the Organization was not asked to pay more in rent than other tenants in comparable units. For 4 landlords/property managers, no documentation supporting compliance with federal reasonable rental rates was provided. Questioned costs: Known questioned costs were $43,236 of rent paid to landlords/property managers that it was unknown whether rent was over or under charged. Likely questioned costs are believed to be above the questioned cost threshold and program materiality for this program. Cause: Policies and procedures have not been implemented properly to ensure compliance with federal reasonable rental rates compliance requirements. The Organization did not have an effective control system in place to ensure that documentation was retained to support the reasonableness of the rents being paid to landlords/property managers to house the Organization’s clients. Repeat finding: This is a repeat finding from the prior year. See prior year finding 2022-001. Effect: The Organization may be out of compliance with special tests and provisions requirements. Recommendation: The Organization should improve the controls over the reasonable rental rates compliance requirements, which includes the documentation, review, and approval of reasonableness of all rental rates charged by landlords to house the Organization’s clients. Management’s Response: Management concurs with this finding. See the corrective action plan.

Finding 2023-001 – Special Tests and Provisions – Material Weakness and Material Instances of Noncompliance Federal program information: Federal Agency/Pass-through Entity: U.S. Department of Housing and Urban Development/ Office of Community Planning and Development Program Name/Cluster: Continuum of Care Program ALN number: 14.267 Award number: WA0101L0T012115, WA0500Y0T012100, WA0575Y0T012100 Award period: 11/1/2022 – 11/30/2025 Criteria: Federal regulations and grant and contract conditions specify where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units taking into account relevant features. In addition, the rents may not exceed rents currently being charged by the same owner for comparable unassisted units, and the portion of rents paid with grant funds may not exceed HUD-determined fair market rents. Condition and context: Each of the 9 landlords/property managers who received rental payments from the Organization during the fiscal year ended December 31, 2023 were selected for reasonable rental rate testing. For 5 landlords/property managers, a signed certification letter from the landlord/property manager was provided stating the locations and each month’s rent payments received from the Organization were residential units with rent comparable to other units operated by the landlords/property managers and the Organization was not asked to pay more in rent than other tenants in comparable units. For 4 landlords/property managers, no documentation supporting compliance with federal reasonable rental rates was provided. Questioned costs: Known questioned costs were $43,236 of rent paid to landlords/property managers that it was unknown whether rent was over or under charged. Likely questioned costs are believed to be above the questioned cost threshold and program materiality for this program. Cause: Policies and procedures have not been implemented properly to ensure compliance with federal reasonable rental rates compliance requirements. The Organization did not have an effective control system in place to ensure that documentation was retained to support the reasonableness of the rents being paid to landlords/property managers to house the Organization’s clients. Repeat finding: This is a repeat finding from the prior year. See prior year finding 2022-001. Effect: The Organization may be out of compliance with special tests and provisions requirements. Recommendation: The Organization should improve the controls over the reasonable rental rates compliance requirements, which includes the documentation, review, and approval of reasonableness of all rental rates charged by landlords to house the Organization’s clients. Management’s Response: Management concurs with this finding. See the corrective action plan.

Criteria: Federal regulations and grant and contract conditions specify where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units taking into account relevant features. In addition, the rents may not exceed rents currently being charged by the same owner for comparable unassisted units, and the portion of rents paid with grant funds may not exceed HUD-determined fair market rents. Condition and context: A total of 8 landlords/property managers who received rental payments from the Organization during the fiscal year ended December 31, 2022 were randomly selected for reasonable rental rate testing. For 4 landlords/property managers, a signed certification letter from the landlord/property manager was provided stating the locations and each month?s rent payments received from the Organization were residential units with rent comparable to other units operated by the management and the Organization was not asked to pay more in rent than other tenants in comparable units. For 4 landlords/property managers, no documentation supporting compliance with federal reasonable rental rates was provided. Questioned costs: Known questioned costs were $106,329 of rent paid to landlords/property managers that it was unknown whether rent was over or under charged. Likely questioned costs are believed to be above the questioned cost threshold and program materiality for this program. Cause: Policies and procedures have not been implemented properly to ensure compliance with federal reasonable rental rates compliance requirements. The Organization did not have an effective control system in place to ensure that documentation was retained to support the reasonableness of the rents being paid to landlords/property managers to house the Organization?s clients. Repeat finding: This was not previously reported as a finding. Effect: The Organization may be out of compliance with special tests and provisions requirements. Recommendation: The Organization should improve the controls over the reasonable rental rates compliance requirements, which includes the documentation, review, and approval of reasonableness of all rental rates charged by landlords to house the Organization?s clients. Management?s Response: Management concurs with this finding. See the corrective action plan.

CFDA No. 93.243, Substance Abuse and Mental Health Services Projects of Regional and National Significance ? Department of Health and Human Services Substance Abuse and Mental Health Services Administration Finding 2020-002: Performance Objectives Criteria ? In accordance with the grant terms and conditions, the Organization is required to meet certain performance objectives. Condition & Context ? The Organization did not meet 3 of the 4 performance objectives included in the grant agreement: 1. 50% of the 200 youth served annually, or 600 served throughout the lifetime of the project, will enroll in the Project (by completing a GPRA) 2. 75% of youth will have permanent stable housing in the community 3. 80% of youth will have secured income through entitlements and/or employment Questioned Costs ? No questioned costs were noted with this finding. Cause ? The Organization has had significant turnover in key roles for this program and has had difficulty obtaining the staffing levels necessary to operate the program at full capacity. Repeat Finding ? This finding is repeated from the prior year and was reported as finding 2019-005 in prior year?s schedule of findings and questioned costs. Recommendation ? The Organization should ensure an individual with knowledge of program objectives is consistently responsible for ensuring compliance with federal grant requirements.

Condition and Criteria: Through review of new lease agreements, identified in-kind rent components that were not properly recognized, discounted and disclosed as required by U.S. GAAP. Questioned Costs: An audit adjustment of $430,800 was required. Cause: Management?s lack of adequate experience and understanding of the rules for accounting for longterm leases with an unconditional promise to give component. Effect: Resulted in an adjustment to in-kind revenue, receivables, lease expense and the discount on longterm receivables totaling $430,800. Recommendation: The Organization should review lease agreements for any in-kind portion at the time the lease agreement is signed, in order to properly recognize the income and expenses associated with the inkind component.

Condition and Criteria: During our planning procedures, identified written policies and procedures over the following compliance requirements did not exist: procurement, suspension and debarment, eligibility, equipment management, and subrecipient monitoring. In accordance with the above-referenced contracts and the 2019 OMB Compliance Supplement, the Organization is required to have formal, written procedures over these compliance areas. Questioned Costs: No questioned costs were noted with this finding. Cause: The Organization relied on the grant agreements as written guidelines for compliance requirements and did not deem formal written policies to be necessary due to changing grant requirements each year. Effect: Lack of formal written policies and procedures over compliance may result in noncompliance with the grant agreements. Recommendation: The Organization should adopt written policies and procedures over procurement, suspension and debarment, eligibility, equipment management, and subrecipient monitoring to ensure compliance with federal requirements. The Organization should designate the controls in place and individuals responsible for ensuring compliance with federal grant requirements

Condition and Criteria: Currently, the Organization does not have a formal process to determine if vendors from covered transactions are suspended or debarred, nor is documentation maintained supporting competitive price quotes or rationale for purchases subject to procurement. Questioned Costs: Total population of covered transactions (with two vendors) totaling approximately $118,000 were not evaluated for suspension and debarment or for competitive pricing. Auditor determined the vendors were not suspended and debarred through testing. Of the two other purchases above the micropurchase threshold, one purchase from a vendor totaling $7,946 did not have support for competitive pricing and exceeded the corresponding line item on the grant budget by approximately $4k. While competitive pricing was evaluated and the grantor consulted regarding the deviation from budget, no documentation was maintained supporting these procedures. Cause: The Organization does not have a process in place to identify transactions subject to procurement or suspension and debarment and ensure compliance in these areas. Effect: Noncompliance with procurement and suspension and debarment for applicable transactions could result in loss of grant funding. Recommendation: The Organization should adopt procedures and individuals responsible surrounding procurement and suspension and debarment in order to ensure compliance with federal grant requirements.

Condition and Criteria: The Organization received a restricted status on their grant award (grant number 5H79SM063332-03) for the period 9/30/2019 ? 9/29/2020 due to noncompliance with reporting requirements for the period 9/30/2017 ? 9/29/2018. The Organization did not submit the Federal Financial Report (FFR-SF425) by the required due date. Questioned Costs: No questioned costs were noted with this finding. Cause: The Organization has not consistently maintained a responsible individual over reporting requirements for federal grants. Effect: Noncompliance with reporting requirements resulted in a restricted status on their most recent grant agreement and could result in loss of grant funding. Recommendation: The Organization should ensure an individual with knowledge of grant reporting requirements is consistently responsible for ensuring compliance with federal grant requirements

Condition and Criteria: The Organization did not meet 3 of the 4 performance objectives included in the grant agreement: 1. 50% of the 200 youth served annually, or 600 served throughout the lifetime of the project, will enroll in the Project (by completing a GPRA) 2. 75% of youth will have permanent stable housing in the community 3. 80% of youth will have secured income through entitlements and/or employment Questioned Costs: No questioned costs were noted with this finding. Cause: The Organization has had significant turnover in key roles for this program and has had difficulty obtaining the staffing levels necessary to operate the program at full capacity. Effect: Noncompliance with performance objectives could result in loss of grant funding. Recommendation: The Organization should ensure an individual with knowledge of program objectives is consistently responsible for ensuring compliance with federal grant requirements.

Condition and Criteria: The Organization does not have a process or individual responsible for ensuring proper subrecipient monitoring occurs. The grant narrative specifies the Organization as responsible for performing annual audits of subrecipients to ensure compliance standards have been met. However, no such audits or site visits have been performed. There was also no risk assessment performed over subrecipients or documented as required in the 2019 OMB Compliance Supplement. Questioned Costs: No questioned costs were noted with this finding. Cause: The Organization has not designated an individual monitoring and planned to perform the site visit at the end of the project. Effect: Noncompliance by subrecipients could result in loss of grant funding. Recommendation: The Organization should ensure an individual with knowledge of grant compliance requirements is responsible for monitoring subrecipients and ensuring compliance with federal grant requirements.

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