State & Local Reports

The Department of Internal Auditing (DIA) has conducted an audit of the Housing and CommunityDevelopment (HCD) and the Emergency Rental Assistance Program (ERA) for the period January1, 2023 – December 31, 2023. Our main objectives were to assess progress on any action plansdeveloped in response to findings and recommendations by federal and state audits and assessthe effectiveness and adequacy of policy, procedures, and controls in mitigating the risk of fraud,waste, and abuse for the ERA Program. To accomplish the first objective, we identified relevant audit reports by consulting with HCD andsearching federal and state agency websites. Additionally, we conducted substantive testing byreviewing the action plans and requesting support documentation to verify that the audit findingswere addressed adequately through timely corrective action. For the second objective, weresearched ERA program requirements, federal Uniform Guidance, and grant management bestpractices. DIA also conducted interviews, requested documentation, and performed sufficienttesting to assess the adequacy of HCD’s policies, procedures, and controls relative to mitigatingfraud, waste, and abuse. Additionally, DIA determined it necessary to expand the scope of theaudit to include additional, but limited, testing of provider payments to ensure rates paidcomplied with terms of applicable contracts. This additional testing included payments made bydepartments such as Department of Development (DOD), Juvenile Court, and Department ofPublic Safety & Justice Services. Our audit procedures disclosed internal control weaknesses related to corrective action on auditfindings, departmental policies and procedures including subrecipient monitoring and reportingaccuracy, advanced funds monitoring and reconciliations, and compliance with billing terms incontracts. This report provides the details of our findings. We are confident corrective action hasbeen or will be taken to mitigate the risks identified in this audit report. DIA provided HCD management with recommendations for improvinginternal controls. Additionally, DIA provided recommendations to theDoD, County Department of Purchasing (DoP), and County Fiscal Office.Based on management responses, we believe corrective action will betaken to mitigate the risks identified. Management responses follow eachrecommendation in the report. DIA recommended implementing thefollowing to HCD:  Implement a robust subrecipient monitoring program that will ensureERA program compliance and effectively mitigate the risks of fraud, waste,and abuse.  Establish a control that ensures the accuracy of invoices, adherence tocontract terms and billable rates, and detects overpayments. HCD andDoD should obtain refunds or credits as appropriate for theoverpayments totaling $173,139 and $10,400, respectively, caused byinconsistencies in billable rates.  Ensure that material changes to contracts, such as rate changes andretroactive application, are supported for their reasonableness andadequately disclosed to the approving authority (Council/Board ofControl).  Implement controls to ensure that subaward reconciliations of advancedfunds are performed timely using standardized forms, reviewed by asupervisor, and accompanied by supporting documentation to facilitatereviews and audits.  Establish controls to ensure ERA reporting compliance: o Ensure the accuracy of reporting and eligible expenditures in ERAreports through a review process that identifies and correctsdiscrepancies. o Submit quarterly ERA reports to the U.S. Treasury by themandated deadlines. o Submit quarterly ERA reports to the County’s Fiscal Office forsecondary review.

An audit was conducted to assess the adequacy, completeness, and accuracy of the Fiscal bank reconciliation process. The bank reconciliation process had been an area of higher risk due to the historic issues associated with the bank reconciliation, including bank reconciliations not being performed timely and having an unreconciled difference between bank and book of approximately $2.2 million.The Department of Internal Audit conducted interviews with management regarding procedures that the Fiscal Office utilizes for bank reconciliations. Internal Audit reviewed the adequacy of procedures relating to the performance and review of bank reconciliations. Internal Audit also assessed the adequacy of spreadsheet controls utilized on the bank reconciliation. A test of transactions was performed to assess the completeness and accuracy of the bank reconciliation. Our audit procedures disclosed internal control weaknesses and/or areas of potential process improvement related to management of accounts payable and payroll checks outstanding for over one year and documented review of consolidated bank reconciliation.

Our investigation showed that the City’s former Finance Director, Robert Mays, and the former Finance Director who succeeded him, Pennie Zuercher, failed to sufficiently scrutinize Lanier’s invoices from April 1, 2019, through June 30, 2022, the period of our review. Neither finance director ensured that Lanier’s reports of revenue it collected on behalf of the City, which totaled $2,942,099.83, were accurate whencompared to Lanier’s deposits into the City’s parking bank account, which totaled $3,056,220.00. In addition, we calculated that the City paid at least $108,093.11 in questionable expenditures when the two former finance directors approved reimbursements to Lanier of $77,589.36 for inadequately documented employee wages and another $30,503.75 for unauthorized expenses.