I--- . UNITE~STATESGENERALACCOUNT~NG OFmE REGIONAL OFFICE 502 U S CUSTOMHOUSE, SECOND AND CHESTNUT STREETS PHILADELPHIA, PENNSYLVANIA 19106 Mr. Warren P. Phelan Regional Administrator Department of HOUSI ng and Urban Development Region iii 900 Curtis Bullding 6th Q Walnut Streets , Philadelphia, Pennsylvanta 19106 Dear Mr. Phelan: We have made a review for the settlement of the accounts of the certifying officer of Region III, Department of Housing and Urban Deve 1eprnent ) Phlladelphla, Pennsylvania, through fiscal year 1969, The revlew consisted of an evaluation of selected administrative procedures and internal controls relative to receipts and disburse- ments and included such tests of financial transactions and records ’ as we considered appropriate. Examinations into selective program activities were made to determine the adequacy of the financial management system as It pertained to transactions for which the certifying officer was responsible, We also reviewed the audit reports issued by the HUD Office of Audit as they related to the act IVI t yes we exams ned into. We found the administrative procedures and internal controls to be generally satisfactory and the tested financial transactions to be processed tn a satisfactory manner. Further, our review of selected program activltles showed that the frnanclal management system was generally adequate to assure that disbursement and collection transactions were valld, appropriate, and legal. We did note, however, certain rndicatrons of weaknesses in the Imple- mentatron-of the system, which are described below. These were discussed with the Acting Assistant Regional Admlnlstrator for Administration, who informed us that corrective actions had been taken or were planned. 1. We found that an Inspection and audit fee of $750 was not deducted from the initial grant payment made to a public body particlpatlng in the urban beautification and Improvement program. The grant contract provided that the Government be compensated at a fixed fee for its inspections and audits ot the proJeCt, that this <fee be payable when the first requlsltlon for a grant payment was approved, and that it be pard by deducting the ent 1 re amount from the f 1 rst grant payment made to the pub1 tc body. We found, however, that the inspection and audit fee was not deducted from the lnltral payment made to the public body, on March 10, 1969. After we brought this matter to the attentton of the officer who had certified the disbursement voucher, an invotce Yor repayment of the $750 was marled to the public body, thrs amount was subsequently remitted to the Government. J 2. Our audit of the Imprest fund showed the following weak- nesses in internal controls a. The cashier had made one of the purchases as shown by a receipt In the fund. HUD Handbook 1911.1, dated August 1969, provides that for sound internal control the person designated as a cashier should not make or approve purchases. b. No alternate cashier had been designated for the 1mprest fund. We were Informed that, In the absence of the Imprest fund cashier, one of the certlfytng officers acts as the fund cashier. This sltuatlon IS contrary to sound internal control procedures and HUD InstructIons, which require that the performance of both certlfylng and disbursing functions by one I nd~v~dual be avow ded. Thrs pornt will take on added sig- nlflcance rf the Regronal Office implements Its plan to 1 ncrease the amount of the fund from $75 to $500 I n order to handle travel advances on a cash basis. 3. We found that employees who kept time and attendance records also engaged in the drstributlon of employees’ salary checks. The General Accounting Off ice Pol rcy and Procedures Manual for Gul dance of Federal Agencies, title 6, section 15.7 provides that persons who keep time and attendance records should not deliver salary checks. This Internal control weakness was also reported on June 2, 1967, at the completton of our prior settlement review. 4. Our review showed a need for improvement in the procedures for posting hours used and leave taken to the time and attendance reports. In three of the four secttons reviewed, we noted that the ttme- keepers were prepostlng 80 hours at the beginning of each pay period and posting all absences in total at the end of the period. The total absences were posted from da1 ly entries made on the t I mekeepers’ desk calendars or from the employees’ leave records. This practice IS In vlolatlon of HUD instructions which require dally postings to the ttme and attend- ance report s. -2- 5. Our review of the Elderly and Handicapped Housing Loan Program drsclosed the following weaknesses In the admtnlstration of the program: a. HUD procedures require that the field engineer approve certain designated proJect costs prior to the payment of costs from the applicant’s construct I on account. Our detailed revfew of one project showed that the fteld engineer did not approve the project costs designated for his approval even though the costs had been paid by HUD. We were advl sed by cognl zant HUD offlcrals that this same srtuatlon existed with respect to other proJects wlthrn the program and this was primarily due to the failure of the borrowers to provide sufficient documentation support I ng the project expendrtures. When docu- mentat Ion was provided, it was not understandable and did not contain sufficient data upon which to base an approval. We were also advised that HUD program personnel dtd not take positive action to assure that prolect adml nistrators provided the requ I red support I ng data. We recommend that responsible HUD personnel be Informed of the importance of having adequate documentat ton to support project expend1 tures prror to approval and payment of such costs. The above situation was also brought to your attention by the HUD Office of Audit in a report dated May 19, 1969. b. Our review of one prOJeCt disclosed three in- stances In which funds requisitioned and rece I ved by the borrower exceeded the HUD- approved line item costs by a total of about $809. Our review of the proJeCt showed no rndicatlon as to the reason for the excess payments. Program personnel suggested that the overpayment was most 1 I kely the resu 1t of an oversight, c. Our review of this prOJeCt also disclosed that the borrower was btlled for SIX Interest payments during the period May 29, 1969 to August 30, 1970, in accordance wrth the requlre- ments of HUD Regional Circular Number 882 but patd HUD for only one blllrng. As of September 30, 1970, outstanding interest on thrs prOJeLt amounted to $63,948.54. During the -3- period when interest was outstandlng, the borrower sub- mltted a requlsttlon for constructton funds, however, when providing them, HUD did not make an offset for the outstand1 ng I nterest. We believe that most of the out- standing Interest charges should have been obtalned In th 1s manner* In discussing this matter wrth us, the Chief of the Elderly Hous I ng Programs Branch agreed that I nterest should be collected on a timely basis. Further 9 he said he IS lnvestrgatang the feaslbtllty of deducting the Interest charge from proJect requksttlons rather than bill Ing the borrower. We wish to acknowledge the cooperatton extended to our repre- sentat Ives durl ng ther r review. We would appreciate recervlng your comments as to acttons taken or planned with respect to the matters descr t bed above. In accordance wI th t ltle 8, chapter 3, of the General Accountrng Office Policy and Procedures Manual for Guidance of Federal Agenctes, the records of financial transactions through June 30, 1969, may be transferred to the Federal Records Center for storage. A copy of this report is being furnished to the Secretary of Houslng and Urban Development, to the AssIstant Secretary for Admlnis- tratlon, and to the Director of the Office of Audit. S 1 ncere ly yours, -4-
Review of Settlement of Account of Certifying Officer of Region III, HUD, Philadelphia, Pennsylvania
Published by the Government Accountability Office on 1971-01-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)