2023–1 Prior Year Audit Entries Not Posted
Condition: Management failed to post prior year audit entries.
Criteria: Agreed upon audit adjustments must be posted to the financial statements each year.
Cause: The cause is undeterminable.
Effect: The financial statement records did not contain all financial transactions of the property.
Recommendation: I recommend management post audit entries to agree financial records to audit report.
2023-2 Real Estate Tax Liability Over Accrued
Condition: Management did not properly record the real estate tax liability in the accounting records.
Criteria: The accrual accounting method ensures transactions are recognized in the accounting period
incurred, rather than paid, which follows the matching principle.
Cause: Management utilized recurring journal entries to post real estate tax expense instead of the actual
invoice.
Effect: The accrued liability account was overstated, as well as real estate tax expense, resulting in a prior
period adjustment.
Recommendation: I recommend management properly post all accruals and make necessary adjusting
entries to properly reflect the financial position of the Project.
2023-3 Utility Accruals Not Properly Posted
Condition: Management did not record utility accruals in the accounting records.
Criteria: The accrual accounting method ensures transactions are recognized in the accounting period
incurred, rather than paid, which follows the matching principle.
Cause: The cause is undeterminable.
Effect: Not recording accruals could have a material impact on both the balance sheet and the income
statements.
Recommendation: I recommend management post all accruals to properly reflect the financial position of
the Project.
2023-4 Reserve for Replacement Deposits Not Made Timely or Not at All
Condition: The Project did not make the required deposit into the bank account on a monthly basis.
Deposits made from January 2023 through May 2023 were underfunded; however, were caught up in
June 2023. Additionally, deposits for the month of September 2023 and November 2023 were not made;
however, were caught up in December 2023.
Criteria: According to the Regulatory Agreement, “mortgagor will establish and maintain a reserve fund
for replacements in a separate account in a bank…Concurrently with the effective commencement of rental
assistance payments under the HAP Contract, the Mortgagor will deposit an amount…per month unless a
different date or amount is approved in writing by HUD”.
Cause: The cause is undeterminable.
Effect: The Project is not in compliance with the Regulatory Agreement. The cash balance was overstated
by $1,073 related to deposits that were never made to this account. The balance was corrected during the
audit.
Recommendation: I recommend the Property make the required monthly deposits at the correct amount
according to the Regulatory Agreement.
2023-3 Late HUD Financial Reporting
Condition: The owner did not meet the HUD financial reporting requirement.
Criteria: According to HUD’s Uniform Financial Reporting Standards rule, annually, an owner is required to submit a financial statement, prepared in accordance with generally accepted accounting principles (GAAP), in the electronic format specified by HUD. The unaudited financial statement is due three months after the owner’s fiscal year end and the audited financial statement is due nine months after its fiscal year-end (24 CFR section 5.801). The financial statement must include the financial activities of this program.
Cause: The cause is undeterminable.
Effect: The Project is not compliant with HUD program requirements.
Recommendation: I recommend the owner meet HUD program requirements.
2023–1 Prior Year Audit Entries Not Posted
Condition: Management failed to post prior year audit entries.
Criteria: Agreed upon audit adjustments must be posted to the financial statements each year.
Cause: The cause is undeterminable.
Effect: The financial statement records did not contain all financial transactions of the property.
Recommendation: I recommend management post audit entries to agree financial records to audit report.
2023-2 Real Estate Tax Liability Over Accrued
Condition: Management did not properly record the real estate tax liability in the accounting records.
Criteria: The accrual accounting method ensures transactions are recognized in the accounting period
incurred, rather than paid, which follows the matching principle.
Cause: Management utilized recurring journal entries to post real estate tax expense instead of the actual
invoice.
Effect: The accrued liability account was overstated, as well as real estate tax expense, resulting in a prior
period adjustment.
Recommendation: I recommend management properly post all accruals and make necessary adjusting
entries to properly reflect the financial position of the Project.
2023-3 Utility Accruals Not Properly Posted
Condition: Management did not record utility accruals in the accounting records.
Criteria: The accrual accounting method ensures transactions are recognized in the accounting period
incurred, rather than paid, which follows the matching principle.
Cause: The cause is undeterminable.
Effect: Not recording accruals could have a material impact on both the balance sheet and the income
statements.
Recommendation: I recommend management post all accruals to properly reflect the financial position of
the Project.
2023-4 Reserve for Replacement Deposits Not Made Timely or Not at All
Condition: The Project did not make the required deposit into the bank account on a monthly basis.
Deposits made from January 2023 through May 2023 were underfunded; however, were caught up in
June 2023. Additionally, deposits for the month of September 2023 and November 2023 were not made;
however, were caught up in December 2023.
Criteria: According to the Regulatory Agreement, “mortgagor will establish and maintain a reserve fund
for replacements in a separate account in a bank…Concurrently with the effective commencement of rental
assistance payments under the HAP Contract, the Mortgagor will deposit an amount…per month unless a
different date or amount is approved in writing by HUD”.
Cause: The cause is undeterminable.
Effect: The Project is not in compliance with the Regulatory Agreement. The cash balance was overstated
by $1,073 related to deposits that were never made to this account. The balance was corrected during the
audit.
Recommendation: I recommend the Property make the required monthly deposits at the correct amount
according to the Regulatory Agreement.
2023-3 Late HUD Financial Reporting
Condition: The owner did not meet the HUD financial reporting requirement.
Criteria: According to HUD’s Uniform Financial Reporting Standards rule, annually, an owner is required to submit a financial statement, prepared in accordance with generally accepted accounting principles (GAAP), in the electronic format specified by HUD. The unaudited financial statement is due three months after the owner’s fiscal year end and the audited financial statement is due nine months after its fiscal year-end (24 CFR section 5.801). The financial statement must include the financial activities of this program.
Cause: The cause is undeterminable.
Effect: The Project is not compliant with HUD program requirements.
Recommendation: I recommend the owner meet HUD program requirements.