COMMUNITY HOMELESS SOLUTIONSNon-Profit

Finding 2021-008 – Compliance and Internal Control Over Allowable Costs - Payroll Processing (Material Weakness) Federal Program 14.231 Emergency Solutions Grant Condition: We noted that the Agency did not have a formal process to ensure that payroll costs charged to federal programs are based on actual time worked. Payroll charges were allocated using estimates or predetermined percentages, without periodic certifications or time and effort documentation to support the allocations. Criteria: Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and must support the distribution of the employee’s activity among federal awards and other activities. Documentation should include after-the-fact records and reasonable assurance that charges are accurate, allowable, and properly allocated. Cause: The Agency had not implemented adequate internal controls or documentation procedures to ensure compliance with federal payroll allocation requirements. This may have been due to lack of training, oversight, or formal written policies. Effect: Inaccurate or unsupported payroll allocations may result in unallowable costs being charged to federal programs. This increases the risk of questioned costs and noncompliance with federal grant requirements. Questioned Costs: $2,819 Recommendation: We recommend that the Agency implement a formal payroll allocation process that includes time and effort reporting or certifications for employees working on federal programs. Management should ensure payroll charges are supported by documentation that accurately reflects actual work performed and periodically review allocations for accuracy. Management’s Response: See Corrective Action Plan.

Finding 2021-009 – Internal Control Over Approvals – Allowable Costs (Material Weakness) Federal Program 14.231 Emergency Solutions Grant Condition: The Agency lacked a formal, consistent process for obtaining and documenting approvals for expenditures related to federal awards. Several instances were identified where federal funds were used without proper pre-approval, or approvals were not consistently documented. Criteria: Recipients of federal awards must establish and maintain effective internal controls, including proper authorization and documentation of expenditures. Specifically, prior approval for costs related to federal awards must be obtained from the relevant parties, and expenditure documentation must be retained to demonstrate compliance with federal regulations. Cause: The Agency did not implement a structured approval process for federal awards expenditures, resulting in ad-hoc approvals or the lack of documented evidence of such approvals. Effect: Without proper internal controls over approvals, there is an increased risk of noncompliance with federal regulations, potential misuse of federal funds, and inaccurate financial reporting. This could result in disallowed costs or findings during future audits. Recommendation: We recommend the Agency implement a formal approval process for all expenditures related to federal awards, ensuring that appropriate pre-approvals are obtained, documented, and retained for all applicable costs. Consider training staff on the Uniform Guidance requirements and establish regular reviews of the approval process to ensure compliance. Management’s Response: See Corrective Action Plan.

Finding 2021-010 – Compliance and Internal Control Over Supporting Documentation – Allowable Costs (Material Weakness) Federal Program 14.231 Emergency Solutions Grant Condition: The Agency did not maintain adequate documentation to support several direct costs charged to federal awards. In particular, invoices, receipts, or other required supporting documentation were missing or incomplete, resulting in an inability to substantiate the direct costs claimed for reimbursement. Criteria: Direct costs charged to federal awards must be supported by proper documentation, such as invoices, purchase orders, payroll records, and timesheets. These expenses must be allowable, allocable, and reasonable in accordance with the terms of the federal award and the Agency’s established policies. Cause: The Agency lacked a consistent process for tracking and retaining documentation for direct costs related to federal awards, leading to missing or incomplete supporting records for certain expenses. Effect: The absence of adequate supporting documentation for direct costs exposes the Agency to the risk of noncompliance with federal regulations, which could result in disallowed costs. Additionally, this could impact the Agency’s ability to accurately report expenses and potentially jeopardize future funding. Questioned Costs: $5,317 Recommendation: We recommend the Agency implement procedures to ensure that all direct costs charged to federal awards are supported by proper documentation and retained in accordance with Uniform Guidance. This includes regularly reviewing and reconciling supporting records to ensure compliance with federal regulations and organizational policies. Management’s Response: See Corrective Action Plan.

Finding 2021-011 – Compliance and Internal Control Over Procurement (Material Weakness) Federal Program 14.231 Emergency Solutions Grant Condition: The Agency’s documented procurement policy did not incorporate the federal procurement requirements as required under Uniform Guidance. During our audit, we identified procurement transactions that did not follow federally mandated procedures, including lack of competition, missing cost/price analysis, or inadequate documentation, etc. Criteria: Non-Federal entities must use their own documented procurement procedures which reflect applicable state and local laws and regulations, provided that the procurements also conform to applicable federal law and the standards identified in the Uniform Guidance. Cause: The Agency did not update its procurement policy to align with the procurement standards under the Uniform Guidance. Additionally, the existing policy was not operating effectively, as staff did not consistently follow established procedures or ensure compliance with federal procurement requirements. Effect: Failure to follow federally compliant procurement procedures increases the risk of unallowable costs being charged to the federal program and may result in questioned costs or disallowed expenditures. Recommendation: We recommend that the Agency revise its procurement policy to fully incorporate applicable federal requirements. In addition, the Agency should evaluate and strengthen internal controls to ensure the policy is effectively implemented. This includes providing staff training on federal procurement standards and establishing oversight procedures to ensure consistent compliance. Management’s Response: See Corrective Action Plan.