Finding Reference Number: 2023-002
Title and Assistance Number of Federal Program: 14.157 Supportive Housing
for the Elderly
Type of Finding: Federal Program Finding (FP)
Finding Resolution Status: IN PROCESS
Information on Universe Population Size: N/A - Not detected as a result of sampling procedures and testing.
Sample Size Information: N/A - Not detected as a result of sampling procedures and testing.
Identification of Repeat Finding and Finding Reference Number: 2022-002
Criteria:
The HUD regulatory agreement requires monthly deposits to the replacement reserve account of $1,351.
Statement of Condition:
Management only made nine (9) of the twelve (12) monthly required reserve deposits, leaving the account underfunded by $4,053 at June 30, 2022; for the year ended June 30, 2023, only $2,702 of the required $16,212 in deposits were made, leaving the account behind schedule by another $13,510, for a total deficiency of $17,563.
Cause:
Management has properly designed controls to ensure all monthly deposits are made; however, the control is not functioning as intended.
Effect or Potential Effect:
The replacement reserve account is underfunded by $17,563.
Auditor Non-Compliance Code: N – Reserve for Replacements Deposits Questioned Costs: $17,563
Details – Questioned Costs by Property
FHA/Contract Number: 127-EE017 S3800-038 Questioned Costs: $17,563
Reporting Views of Responsible Officials:
Senior management has discussed the deficiency with the Project Accountant and Regional Manager. All future deposits to the replacement reserve will be made as required in the regulatory agreement.
Context:
See statement of condition.
Recommendation:
Management should institute a monitoring process to ensure all required monthly deposits to the replacement reserve are made. Such processes could include initiating automatic recurring monthly transfers with the financial institution that maintains the replacement reserve account.
Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations:
Management agrees with the finding, and has taken corrective actions which include communication with the Project Accountant and Regional Manager. All future deposits the replacement reserve will be made as required in the regulatory agreement assuming there is sufficient cash in the operating account to make the deposit.
Response Indicator: Agree (A) Completion Date: March 29,2024
Response:
Management agrees with the finding, and has taken corrective actions which include communication with the Project Accountant and Regional Manager. All future deposits the replacement reserve will be made as required in the regulatory agreement.
Finding Reference Number: 2023-003
Title and Assistance Number of Federal Program: 14.157 Supportive Housing
for the Elderly
Type of Finding: Federal Program Finding (FP)
Finding Resolution Status: IN PROCESS
Information on Universe Population Size: N/A - Not detected as a result of sampling procedures and testing.
Sample Size Information: N/A - Not detected as a result of sampling procedures and testing.
Identification of Repeat Finding and Finding Reference Number: 2022-003
Criteria:
The HUD regulatory agreement requires pre-approval for all withdrawals from the residual receipts account.
Statement of Condition:
Management made an unauthorized withdrawal of $4,400 from the residual receipts account during the fiscal year ended June 30, 2022; the funds have not been returned to the residual receipts account.
Cause:
Management mistakenly withdrew funds from the residual receipts account during the year ended June 30, 2022 but did not make a deposit to replace those funds during the fiscal year ended June 30, 2023.
Effect or Potential Effect:
The residual receipts account remains underfunded by $4,400.
Auditor Non-Compliance Code: C – Unauthorized withdrawals from residual receipts account
Questioned Costs: $4,400
Details – Questioned Costs by Property
FHA/Contract Number: 127-EE017 S3800-038 Questioned Costs: $4,400
Reporting Views of Responsible Officials:
Senior management has discussed the unauthorized transfer with the Project Accountant and will transfer $4,400 from the operating account to the residual receipts reserve.
Context:
Management made an unauthorized withdrawal of $4,400 from the residual receipts account during the fiscal year ended June 30, 2022; the funds have not been returned to the residual receipts account leaving the account underfunded by $4,400.
Recommendation:
Management should deposit $4,400 into the residual receipts account to refund the unapproved withdrawal.
Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations:
Management agrees with the finding, and has taken corrective actions which include communication with the Project Accountant and Regional Manager and will transfer $4,400 from the operating account to the residual receipts account.
Response Indicator: Agree (A) Completion Date: March 29, 2024
Response:
Management agrees with the finding and plans to take corrective actions which include communication with the Project Accountant and Regional Manager about withdrawals, and will transfer $4,400 from the operating account to the residual receipts account.
Finding Reference Number: 2023-004
Title and Assistance Number of Federal Program: 14.157 Supportive Housing
for the Elderly
Type of Finding: Federal Award Finding
Finding Resolution Status: In Process
Information on Universe Population Size: 19 rental units
Sample Size Information: 6 rental units
Identification of Repeat Finding and Finding Reference Number: Not Applicable.
Criteria:
TheCommittee of Sponsoring Organizations of the Treadway Commission (COSO) framework is a widely recognized framework for designing, implementing, and evaluating internal control systems. The COSO framework defines internal control as a process that is designed to provide reasonable security with respect to achievement of objectives of compliance with applicable laws and regulations. The COSO framework offers useful guiding principles that can be applied in establishing and operating an effective regulatory compliance program with the goal of closing compliance gaps, and ensuring the prevention of material noncompliance. The monitoring component of the COSO framework involves periodic or ongoing evaluations to verify that each of the five components internal control, including the controls that affect the principles within each component, are present and functioning. Monitoring helps ensure that internal controls continue to operate effectively.
Statement of Condition:
Management had developed activity level controls over compliance that included compliance review of all tenant certifications of income used in determining the amount of rent amounts due from eligible PRAC 202 participants (tenants) by the Coast compliance department. However, during our testing, management had no documentation evidencing such reviews had occurred; further, during our interview process of site staff (community managers), staff asserted that no such reviews had occurred, and that no feedback on tenant certifications was provided by the compliance department.
Cause:
Management had properly designed activity level controls over compliance, but those controls were not placed in operation. Proper monitoring of the compliance department was not occurring to detect the lack of proper oversight by the compliance department.
Effect or Potential Effect:
It is reasonably possible that ineligible tenants could improperly be granted tenancy to the property and given rental assistance for which they are not eligible. Such improper payments could be material.
Auditor Non-Compliance Code: S – Internal Control Deficiencies S3800-040 Questioned Costs: $0
FHA Contract Number: 127-HD025 S3800-038: Questioned Costs: $0
Reporting Views of Responsible Officials:
After discussion with the auditor, senior management understands the importance of having a properly functioning monitoring system in place to ensure that controls that are properly designed are in fact placed in operation and functioning as intended. The compliance manager responsible for implementing the controls over compliance has been terminated, and senior management will institute monitoring procedures to ensure that controls over compliance are both properly designed and functioning as intended.
Context:
For the six files tested, no evidence existed in the files to corroborate that tenant certifications were being reviewed and approved by the compliance department.
Recommendation:
Management should have a process to review and approve all tenant certifications being prepared by site staff (community managers). The approval process should include an approval stamp or some other evidence that each file has been reviewed by the compliance department and is approved for processing. Further, senior management should have an ongoing monitoring process to ensure that the compliance department is carrying out the review process.
Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations:
Management agrees with the recommendation of the auditor, and will ensure that evidence of certification review and approval is documented with a approval stamp or some other documentary evidence.
Response Indicator: Agree (A)
Completion Date: March 29, 2024
Response:
Management agrees with the recommendation of the auditor, and will ensure that evidence of certification review and approval is documented with a approval stamp or some other documentary evidence.
Finding Reference Number: 2023-002
Title and Assistance Number of Federal Program: 14.157 Supportive Housing
for the Elderly
Type of Finding: Federal Program Finding (FP)
Finding Resolution Status: IN PROCESS
Information on Universe Population Size: N/A - Not detected as a result of sampling procedures and testing.
Sample Size Information: N/A - Not detected as a result of sampling procedures and testing.
Identification of Repeat Finding and Finding Reference Number: 2022-002
Criteria:
The HUD regulatory agreement requires monthly deposits to the replacement reserve account of $1,351.
Statement of Condition:
Management only made nine (9) of the twelve (12) monthly required reserve deposits, leaving the account underfunded by $4,053 at June 30, 2022; for the year ended June 30, 2023, only $2,702 of the required $16,212 in deposits were made, leaving the account behind schedule by another $13,510, for a total deficiency of $17,563.
Cause:
Management has properly designed controls to ensure all monthly deposits are made; however, the control is not functioning as intended.
Effect or Potential Effect:
The replacement reserve account is underfunded by $17,563.
Auditor Non-Compliance Code: N – Reserve for Replacements Deposits Questioned Costs: $17,563
Details – Questioned Costs by Property
FHA/Contract Number: 127-EE017 S3800-038 Questioned Costs: $17,563
Reporting Views of Responsible Officials:
Senior management has discussed the deficiency with the Project Accountant and Regional Manager. All future deposits to the replacement reserve will be made as required in the regulatory agreement.
Context:
See statement of condition.
Recommendation:
Management should institute a monitoring process to ensure all required monthly deposits to the replacement reserve are made. Such processes could include initiating automatic recurring monthly transfers with the financial institution that maintains the replacement reserve account.
Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations:
Management agrees with the finding, and has taken corrective actions which include communication with the Project Accountant and Regional Manager. All future deposits the replacement reserve will be made as required in the regulatory agreement assuming there is sufficient cash in the operating account to make the deposit.
Response Indicator: Agree (A) Completion Date: March 29,2024
Response:
Management agrees with the finding, and has taken corrective actions which include communication with the Project Accountant and Regional Manager. All future deposits the replacement reserve will be made as required in the regulatory agreement.
Finding Reference Number: 2023-003
Title and Assistance Number of Federal Program: 14.157 Supportive Housing
for the Elderly
Type of Finding: Federal Program Finding (FP)
Finding Resolution Status: IN PROCESS
Information on Universe Population Size: N/A - Not detected as a result of sampling procedures and testing.
Sample Size Information: N/A - Not detected as a result of sampling procedures and testing.
Identification of Repeat Finding and Finding Reference Number: 2022-003
Criteria:
The HUD regulatory agreement requires pre-approval for all withdrawals from the residual receipts account.
Statement of Condition:
Management made an unauthorized withdrawal of $4,400 from the residual receipts account during the fiscal year ended June 30, 2022; the funds have not been returned to the residual receipts account.
Cause:
Management mistakenly withdrew funds from the residual receipts account during the year ended June 30, 2022 but did not make a deposit to replace those funds during the fiscal year ended June 30, 2023.
Effect or Potential Effect:
The residual receipts account remains underfunded by $4,400.
Auditor Non-Compliance Code: C – Unauthorized withdrawals from residual receipts account
Questioned Costs: $4,400
Details – Questioned Costs by Property
FHA/Contract Number: 127-EE017 S3800-038 Questioned Costs: $4,400
Reporting Views of Responsible Officials:
Senior management has discussed the unauthorized transfer with the Project Accountant and will transfer $4,400 from the operating account to the residual receipts reserve.
Context:
Management made an unauthorized withdrawal of $4,400 from the residual receipts account during the fiscal year ended June 30, 2022; the funds have not been returned to the residual receipts account leaving the account underfunded by $4,400.
Recommendation:
Management should deposit $4,400 into the residual receipts account to refund the unapproved withdrawal.
Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations:
Management agrees with the finding, and has taken corrective actions which include communication with the Project Accountant and Regional Manager and will transfer $4,400 from the operating account to the residual receipts account.
Response Indicator: Agree (A) Completion Date: March 29, 2024
Response:
Management agrees with the finding and plans to take corrective actions which include communication with the Project Accountant and Regional Manager about withdrawals, and will transfer $4,400 from the operating account to the residual receipts account.
Finding Reference Number: 2023-004
Title and Assistance Number of Federal Program: 14.157 Supportive Housing
for the Elderly
Type of Finding: Federal Award Finding
Finding Resolution Status: In Process
Information on Universe Population Size: 19 rental units
Sample Size Information: 6 rental units
Identification of Repeat Finding and Finding Reference Number: Not Applicable.
Criteria:
TheCommittee of Sponsoring Organizations of the Treadway Commission (COSO) framework is a widely recognized framework for designing, implementing, and evaluating internal control systems. The COSO framework defines internal control as a process that is designed to provide reasonable security with respect to achievement of objectives of compliance with applicable laws and regulations. The COSO framework offers useful guiding principles that can be applied in establishing and operating an effective regulatory compliance program with the goal of closing compliance gaps, and ensuring the prevention of material noncompliance. The monitoring component of the COSO framework involves periodic or ongoing evaluations to verify that each of the five components internal control, including the controls that affect the principles within each component, are present and functioning. Monitoring helps ensure that internal controls continue to operate effectively.
Statement of Condition:
Management had developed activity level controls over compliance that included compliance review of all tenant certifications of income used in determining the amount of rent amounts due from eligible PRAC 202 participants (tenants) by the Coast compliance department. However, during our testing, management had no documentation evidencing such reviews had occurred; further, during our interview process of site staff (community managers), staff asserted that no such reviews had occurred, and that no feedback on tenant certifications was provided by the compliance department.
Cause:
Management had properly designed activity level controls over compliance, but those controls were not placed in operation. Proper monitoring of the compliance department was not occurring to detect the lack of proper oversight by the compliance department.
Effect or Potential Effect:
It is reasonably possible that ineligible tenants could improperly be granted tenancy to the property and given rental assistance for which they are not eligible. Such improper payments could be material.
Auditor Non-Compliance Code: S – Internal Control Deficiencies S3800-040 Questioned Costs: $0
FHA Contract Number: 127-HD025 S3800-038: Questioned Costs: $0
Reporting Views of Responsible Officials:
After discussion with the auditor, senior management understands the importance of having a properly functioning monitoring system in place to ensure that controls that are properly designed are in fact placed in operation and functioning as intended. The compliance manager responsible for implementing the controls over compliance has been terminated, and senior management will institute monitoring procedures to ensure that controls over compliance are both properly designed and functioning as intended.
Context:
For the six files tested, no evidence existed in the files to corroborate that tenant certifications were being reviewed and approved by the compliance department.
Recommendation:
Management should have a process to review and approve all tenant certifications being prepared by site staff (community managers). The approval process should include an approval stamp or some other evidence that each file has been reviewed by the compliance department and is approved for processing. Further, senior management should have an ongoing monitoring process to ensure that the compliance department is carrying out the review process.
Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations:
Management agrees with the recommendation of the auditor, and will ensure that evidence of certification review and approval is documented with a approval stamp or some other documentary evidence.
Response Indicator: Agree (A)
Completion Date: March 29, 2024
Response:
Management agrees with the recommendation of the auditor, and will ensure that evidence of certification review and approval is documented with a approval stamp or some other documentary evidence.