Audit 309124

Segregation of Duties Criteria: Professional standards require the communication, in writing, to management and those charged with governance, of significant deficiencies and material weaknesses identified in an audit. Condition: The Authority does not have appropriate segregation of duties. Cause: The Authority does not have appropriate segregation of duties due to the limited number of personnel. Effect or potential effect: The material weakness is a deficiency that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Authority’s internal control. Recommendation: The Milford Housing Authority’s management and Board of Commissioners must rely on its review and oversight authority to mitigate this inherent weakness in its internal control system. Views of responsible officials and Planned Corrective Actions: Milford Housing Authority’s management and Board of Commissioners will rely on its review and oversight authority to mitigate this inherent weakness in its internal control system.

Preparation of the Financial Statements Identification data: U.S. Department of Agriculture – Rural Rental Housing Loan, Assistance Listing No. 10.415. Criteria: Professional Standards require the communication, in writing, to management and those charged with governance, of significant deficiencies and material weaknesses identified in an audit. Condition: The Authority does not have an internal control system designed to provide for the preparation of the financial statements being audited. Cause: The Authority’s accounting personnel do not have the expertise to prepare financial statements, including note disclosures, in accordance with generally accepted accounting principles. This is not an unusual deficiency for an entity of this size. Effect or potential effect: The material weakness is a deficiency that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Authority’s internal control. Recommendation: The Milford Housing Authority’s management and Board of Commissioners must rely on its review and oversight authority to mitigate this inherent weakness in its internal control system. Views of responsible officials and Planned Corrective Actions: The Milford Housing Authority's management and Board of Commissioners will rely on its review and oversight authority to mitigate this inherent weakness in its internal control system.

Material Audit Adjustments Identification data: U.S. Department of Agriculture – Rural Rental Housing Loan, Assistance Listing No. 10.415. Criteria: Professional Standards require the communication, in writing, to management and those charged with governance, of significant deficiencies and material weaknesses identified in an audit. Condition: Audit adjustments were proposed that were not identified by the Authority’s internal control system. Cause: Management did not identify adjustments necessary to present the financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Material audit adjustments were proposed to correct account balances. Effect or potential effect: The material weakness is a deficiency that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Milford Housing Authority’s internal control. Recommendation: The Milford Housing Authority will continue to improve communication of accounting transactions to both accounting personnel and those charged with oversight in order to decrease future proposed material audit adjustments. Views of responsible officials and Planned Corrective Actions: The Milford Housing Authority will continue to improve communication of accounting transactions to both accounting personnel and those charged with oversight in order to decrease future proposed material audit adjustments.

Noncompliance and Internal Controls over Compliance for Special Tests and Provisions Identification data: U.S. Department of Agriculture – Rural Rental Housing Loan, Assistance Listing No. 10.415. Criteria: The Authority’s agreements with the U.S. Department of Agriculture – Rural Rental Housing Loan program require the Authority to deposit $24,223 to the reserve account annually until the total reaches $288,000. Condition: The Authority made deposits to the reserve account totaling $21,050 during the year and the reserve balance was under the $288,000. The deposits did not meet the total required by the agreement. Cause: A breakdown in the Authority’s internal controls over special tests and provisions did not allow the Authority to meet the reporting requirements under the award agreements. Effect or potential effect: The control deficiency is a significant deficiency that prevented the Authority from complying with the special tests and provisions requirements of the award agreements. Identification as a repeat finding: This is a repeat finding from the immediate previous audit, 2022-005. Recommendation: The Milford Housing Authority should review its system of internal control over special tests and provisions to determine improvements that can be made to ensure the Authority actively tracks and adheres to reserve requirements outlined in its award agreements. Views of responsible officials and Planned Corrective Actions: The Milford Housing Authority will evaluate its system of internal control over special tests and provisions to determine how the Authority can better monitor and comply with reserve requirements of its award agreement.

Segregation of Duties Criteria: Professional standards require the communication, in writing, to management and those charged with governance, of significant deficiencies and material weaknesses identified in an audit. Condition: The Authority does not have appropriate segregation of duties. Cause: The Authority does not have appropriate segregation of duties due to the limited number of personnel. Effect or potential effect: The material weakness is a deficiency that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Authority’s internal control. Recommendation: The Milford Housing Authority’s management and Board of Commissioners must rely on its review and oversight authority to mitigate this inherent weakness in its internal control system. Views of responsible officials and Planned Corrective Actions: Milford Housing Authority’s management and Board of Commissioners will rely on its review and oversight authority to mitigate this inherent weakness in its internal control system.

Preparation of the Financial Statements Identification data: U.S. Department of Agriculture – Rural Rental Housing Loan, Assistance Listing No. 10.415. Criteria: Professional Standards require the communication, in writing, to management and those charged with governance, of significant deficiencies and material weaknesses identified in an audit. Condition: The Authority does not have an internal control system designed to provide for the preparation of the financial statements being audited. Cause: The Authority’s accounting personnel do not have the expertise to prepare financial statements, including note disclosures, in accordance with generally accepted accounting principles. This is not an unusual deficiency for an entity of this size. Effect or potential effect: The material weakness is a deficiency that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Authority’s internal control. Recommendation: The Milford Housing Authority’s management and Board of Commissioners must rely on its review and oversight authority to mitigate this inherent weakness in its internal control system. Views of responsible officials and Planned Corrective Actions: The Milford Housing Authority's management and Board of Commissioners will rely on its review and oversight authority to mitigate this inherent weakness in its internal control system.

Material Audit Adjustments Identification data: U.S. Department of Agriculture – Rural Rental Housing Loan, Assistance Listing No. 10.415. Criteria: Professional Standards require the communication, in writing, to management and those charged with governance, of significant deficiencies and material weaknesses identified in an audit. Condition: Audit adjustments were proposed that were not identified by the Authority’s internal control system. Cause: Management did not identify adjustments necessary to present the financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Material audit adjustments were proposed to correct account balances. Effect or potential effect: The material weakness is a deficiency that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Milford Housing Authority’s internal control. Recommendation: The Milford Housing Authority will continue to improve communication of accounting transactions to both accounting personnel and those charged with oversight in order to decrease future proposed material audit adjustments. Views of responsible officials and Planned Corrective Actions: The Milford Housing Authority will continue to improve communication of accounting transactions to both accounting personnel and those charged with oversight in order to decrease future proposed material audit adjustments.

Noncompliance and Internal Controls over Compliance for Special Tests and Provisions Identification data: U.S. Department of Agriculture – Rural Rental Housing Loan, Assistance Listing No. 10.415. Criteria: The Authority’s agreements with the U.S. Department of Agriculture – Rural Rental Housing Loan program require the Authority to deposit $24,223 to the reserve account annually until the total reaches $288,000. Condition: The Authority made deposits to the reserve account totaling $21,050 during the year and the reserve balance was under the $288,000. The deposits did not meet the total required by the agreement. Cause: A breakdown in the Authority’s internal controls over special tests and provisions did not allow the Authority to meet the reporting requirements under the award agreements. Effect or potential effect: The control deficiency is a significant deficiency that prevented the Authority from complying with the special tests and provisions requirements of the award agreements. Identification as a repeat finding: This is a repeat finding from the immediate previous audit, 2022-005. Recommendation: The Milford Housing Authority should review its system of internal control over special tests and provisions to determine improvements that can be made to ensure the Authority actively tracks and adheres to reserve requirements outlined in its award agreements. Views of responsible officials and Planned Corrective Actions: The Milford Housing Authority will evaluate its system of internal control over special tests and provisions to determine how the Authority can better monitor and comply with reserve requirements of its award agreement.