AIDS FOUNDATION HOUSTON, INC.

2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness)

U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding

Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award.

Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end.

Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance.

Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing.

Questioned Costs: $33,439

Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager.

Repeat Finding: No

Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests.

Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.

2023-003 Internal Controls and Compliance over Allowable Costs (Significant Deficiency)

U.S. Department of Health and Human Services 93.939 HIV Prevention Activities - Non-Governmental Organization Based 2022-2023 and 2023-2024 Funding

Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, grantees are required to have a detailed breakout of these costs along with any supporting documents for those expenses for auditing and oversight. Title 2 CFR 200.302 requires the financial management system of each non-Federal entity provide records that identify adequately the source and application of funds for federally-funded activities.

Condition: We noted instances of the allocation rates being used to calculate amount of payroll costs to charge to grants did not agree to the hours incurred per approved timesheets.

SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued)

Cause: The personnel costs charged to the grant were not reconciled to timesheets correctly by the accounting personnel.

Effect: AIH requested in error reimbursement for unallowable payroll costs.

Questioned Costs: $42

Perspective: Allocation errors were noted for 2 employees in 3 payroll periods tested.

Repeat Finding: No

Auditor’s Recommendation: Review process should be reevaluated and employees retrained to ensure that only actual hours worked from timesheets are charged to grant.

Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.