FAC Explorer

Audit 10874

FY End
2022-06-30
Total Expended
$5.74M
Findings
4
Programs
2
Organization: Hip Housing Development Corporation (CA)
Year: 2022 Accepted: 2024-01-10
Auditor: Snd Partners LLP

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
8244 2022-001 Material Weakness - N
8245 2022-002 Material Weakness - N
584686 2022-001 Material Weakness - N
584687 2022-002 Material Weakness - N

Programs

ALN Program Spent Major Findings
14.239 Home Investment Partnerships Program $4.89M Yes 2
14.218 Community Development Block Grants/entitlement Grants $848,085 - 0

Contacts

Name Title Type
YDL1DJEPLHG6 Ghion Dessie Auditee
6503486660 Courtney Sharp Auditor
No contacts on file

Notes to SEFA

Title: NOTE C – PRIOR YEARS’ EXPENDITURES Accounting Policies: NOTE A - BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the federal grant and loan activities of HIP Housing Development Corporation and Subsidiaries, and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic consolidated financial statements. The purpose of the Schedule is to present a summary of those activities of HIP Housing Development Corporation and Subsidiaries for the year ended June 30, 2022, which have been financed by the U.S. Government. For purposes of the Schedule, federal awards include all federal assistance entered into directly and indirectly between HIP Housing Development Corporation and Subsidiaries and the federal government. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported in the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Uniform Guidance, where certain types of expenditures are not allowable or are limited as to reimbursement. Assistance Listing numbers (“AL No.”) are provided when available. De Minimis Rate Used: N Rate Explanation: HIP Housing Development Corporation and Subsidiaries did not elect to use the 10% de minimis indirect cost rate as allowed under the Uniform Guidance. The accompanying Schedule includes expenditures from prior years for which continuing compliance is required.
Title: NOTE D – U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT LOAN PROGRAM Accounting Policies: NOTE A - BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the federal grant and loan activities of HIP Housing Development Corporation and Subsidiaries, and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic consolidated financial statements. The purpose of the Schedule is to present a summary of those activities of HIP Housing Development Corporation and Subsidiaries for the year ended June 30, 2022, which have been financed by the U.S. Government. For purposes of the Schedule, federal awards include all federal assistance entered into directly and indirectly between HIP Housing Development Corporation and Subsidiaries and the federal government. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported in the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Uniform Guidance, where certain types of expenditures are not allowable or are limited as to reimbursement. Assistance Listing numbers (“AL No.”) are provided when available. De Minimis Rate Used: N Rate Explanation: HIP Housing Development Corporation and Subsidiaries did not elect to use the 10% de minimis indirect cost rate as allowed under the Uniform Guidance. HIP Housing Development Corporation and Subsidiaries has received U.S. Department of Housing and Urban Development pass-through loans. The loan balances outstanding at the end of the year are as follows: HOME Investment Partnership Program Loans City of Redwood City $ 384,797 City of San Mateo $ 2,574,150 City of Daly City $ 754,500 County of San Mateo $ 1,140,129 Community Development Block Grant Program Loans City of Redwood City $ 289,750 County of San Mateo $ 501,929 City of Daly City $ 56,406

Finding Details

Finding 2022-001
Questioned Costs: N/A Condition: Complete and reconciled financials were not available within a reasonable period after the fiscal year end. Criteria: A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of HIP Housing Development Corporation and Subsidiaries’ financial statements will not be prevented, or detected and corrected on a timely basis. Cause: Management's accounting and review process does not have sufficient controls to ensure accurate and timely reporting. Effect: Management's was unable to produce accurate and timely financial statements to meet the reporting requirements of the entity. Recommendation: We recommend that Management review their processes and procedures for identifying and reconciling the financials for the entity. Reporting Views of Responsible Officials: HIP Housing had a system conversion from QuickBooks to Yardi in July 2021. Our go live date was July 1, 2021 which makes fiscal year 21-22 our first year of audit in our new system for HHAV, HIP Housing, and HHDC. Due to difficulties and complications related to our conversion, mapping of conversion data, validating beginning balances, and closing out the year took us much longer that we expected. That significantly delayed our year end closing process. Such a delay is common when organizations are going through system conversions. Now that we will have audited beginning balances in Yardi, such delays should be reduced. We have already started taking measures to ensure that financials are completed and reconciled in a reasonable period for future audits. Some of these measures include monthly A/R and A/P tie outs of the A/R and A/P sub-ledgers to the general ledger and also a monthly reconciliation of intercompany reconciliations. We have also started using import files to record most of the intercompany transactions which will simplify/improve our intercompany reconciliation.
Finding 2022-002
Questioned Costs: N/A Condition: A significant number of account balances required adjustments resulting in a significant amount of audit adjusting journal entries. Criteria: Identification by the auditor of a material weakness in internal control over financial reporting such that a misstatement would not have been detected by the Entity's internal control should be regarded as a material weakness in internal controls. Cause: Management's review process does not have sufficient controls to detect misstatements to the financial statements. Effect: The unadjusted financial statements were materially misstated. Recommendation: We recommend that Management review their processes and procedures for identifying, capturing, and recording transactions accurately. Reporting Views of Responsible Officials: A big part of our systems conversion was the creating of a uniform chart of accounts throughout our portfolio. This was necessary to optimize our new system, to simplify financial analysis and reporting, and to streamline account reconciliations. However, changing the organization’s chart of accounts involved the consolidating, splitting-up, adding and removing of some general ledger line items. This created a number of issues when it comes to validating the beginning balances data in Yardi with the audited ending balances in QuickBooks. Furthermore, in the first few months after the system conversion, most of the finance team staff members were getting used to a new system and a new chart of accounts. This resulted in several data entry errors and inconsistencies. As a result of these some balance sheet account balances needed adjustment. HIP Housing’s team has provided the most of the adjusting entries necessary to rectify the account balances. We have also provided our team with ample training of the new system and have implemented several process improvements to streamline data entry. We are confident that a combination of these measures we have taken have already come to fruition and future audits will have far less account balances that need adjustments.
Finding 2022-001
Questioned Costs: N/A Condition: Complete and reconciled financials were not available within a reasonable period after the fiscal year end. Criteria: A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of HIP Housing Development Corporation and Subsidiaries’ financial statements will not be prevented, or detected and corrected on a timely basis. Cause: Management's accounting and review process does not have sufficient controls to ensure accurate and timely reporting. Effect: Management's was unable to produce accurate and timely financial statements to meet the reporting requirements of the entity. Recommendation: We recommend that Management review their processes and procedures for identifying and reconciling the financials for the entity. Reporting Views of Responsible Officials: HIP Housing had a system conversion from QuickBooks to Yardi in July 2021. Our go live date was July 1, 2021 which makes fiscal year 21-22 our first year of audit in our new system for HHAV, HIP Housing, and HHDC. Due to difficulties and complications related to our conversion, mapping of conversion data, validating beginning balances, and closing out the year took us much longer that we expected. That significantly delayed our year end closing process. Such a delay is common when organizations are going through system conversions. Now that we will have audited beginning balances in Yardi, such delays should be reduced. We have already started taking measures to ensure that financials are completed and reconciled in a reasonable period for future audits. Some of these measures include monthly A/R and A/P tie outs of the A/R and A/P sub-ledgers to the general ledger and also a monthly reconciliation of intercompany reconciliations. We have also started using import files to record most of the intercompany transactions which will simplify/improve our intercompany reconciliation.
Finding 2022-002
Questioned Costs: N/A Condition: A significant number of account balances required adjustments resulting in a significant amount of audit adjusting journal entries. Criteria: Identification by the auditor of a material weakness in internal control over financial reporting such that a misstatement would not have been detected by the Entity's internal control should be regarded as a material weakness in internal controls. Cause: Management's review process does not have sufficient controls to detect misstatements to the financial statements. Effect: The unadjusted financial statements were materially misstated. Recommendation: We recommend that Management review their processes and procedures for identifying, capturing, and recording transactions accurately. Reporting Views of Responsible Officials: A big part of our systems conversion was the creating of a uniform chart of accounts throughout our portfolio. This was necessary to optimize our new system, to simplify financial analysis and reporting, and to streamline account reconciliations. However, changing the organization’s chart of accounts involved the consolidating, splitting-up, adding and removing of some general ledger line items. This created a number of issues when it comes to validating the beginning balances data in Yardi with the audited ending balances in QuickBooks. Furthermore, in the first few months after the system conversion, most of the finance team staff members were getting used to a new system and a new chart of accounts. This resulted in several data entry errors and inconsistencies. As a result of these some balance sheet account balances needed adjustment. HIP Housing’s team has provided the most of the adjusting entries necessary to rectify the account balances. We have also provided our team with ample training of the new system and have implemented several process improvements to streamline data entry. We are confident that a combination of these measures we have taken have already come to fruition and future audits will have far less account balances that need adjustments.