FAC Explorer

Audit 325250

FY End
2024-06-30
Total Expended
$2.74M
Findings
2
Programs
2
Organization: South Pointe Phase Ii, Inc. (LA)
Year: 2024 Accepted: 2024-10-20
Auditor: Little and Associates LLC

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
503180 2024-001 Significant Deficiency - N
1079622 2024-001 Significant Deficiency - N

Programs

ALN Program Spent Major Findings
14.157 Supportive Housing for the Elderly $2.62M Yes 1
14.195 Section 8 Housing Assistance Payments Program $121,536 - 0

Contacts

Name Title Type
LFL3NNMBL3D5 Cheryl Farmer Auditee
3183881500 Carol Brasher Auditor
No contacts on file

Notes to SEFA

Title: NOTE 3 – RELATIONSHIP TO BASIC FINANCIAL STATEMENTS Accounting Policies: NOTE 1 – BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal award activity of South Pointe Phase II, Inc., HUD Project No. 064-EE137-WAH-NP-L8, 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 the 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 financial statements. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Corporation has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. Federal award revenues earned under the Project Rental Assistance Contract are reported in the Corporation’s Statement of Activities. The mortgage payable of $2,615,100 is reported in the Corporation’s Statement of Financial Position in long-term liabilities.
Title: NOTE 4 – RELATIONSHIP TO FEDERAL FINANCIAL REPORTS Accounting Policies: NOTE 1 – BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal award activity of South Pointe Phase II, Inc., HUD Project No. 064-EE137-WAH-NP-L8, 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 the 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 financial statements. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Corporation has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. Amounts reported above agree with the amounts reported in the related federal financial reports except for changes made to reflect amounts in accordance with accounting principles generally accepted in the United States of America.
Title: NOTE 5 – EXPENDITURES OF FEDERAL AWARDS TO SUBRECIPIENTS Accounting Policies: NOTE 1 – BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal award activity of South Pointe Phase II, Inc., HUD Project No. 064-EE137-WAH-NP-L8, 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 the 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 financial statements. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Corporation has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. The Corporation did not have expenditures of federal awards to subrecipients.

Finding Details

Finding 2024-001
SECTION II - FINANCIAL STATEMENT FINDINGS Finding 2024-1 Insufficient Internal Controls Over Monthly Replacement Reserve Funding Finding Resolution Status: Resolved Information on Universal Population Size: One Instance Sample Size: 12 Identification of Repeat Finding and Finding Reference Number: Not Applicable Questioned Costs: $0 Criteria: Monthly deposits to the Replacement Reserve account must be made monthly in accordance with HUD required amounts and all withdrawals must be approved by HUD. Condition: In accordance with the HUD requirements, the Project was required to make monthly deposits to the Replacement Reserve account in the amount of $1,200 for the year ended June 30, 2024. In July 2023, a deposit in the amount of $1,200 was made to the Replacement Reserve and immediately withdrawn without HUD approval. The internal controls in place for the Replacement Reserve account were not sufficient enough to prevent the funds from being deposited and subsequently withdrawn due to insufficient funds. Cause: Unknown Effect: The Project is not in compliance with HUD’s regulations. If a significant replacement need were to arise, there may not be adequate funds in Replacement Reserve to cover the cost. Auditors’ Recommendation: Management should implement internal controls suitable to detect and prevent withdrawals without HUD approval and to ensure that the Management makes all required monthly deposits to the Replacement Reserve account. Management should also verify that sufficient funds exist prior to transferring deposits to the Replacement Reserve account. In addition, Management should establish internal control procedures to reconcile, on a monthly basis, the Replacement Reserve account balance and the Replacement Reserve general ledger to the total amount of the Replacement Reserve required by HUD. Auditor Non-Compliance Code: N – Reserve for Replacement Requirements FHA/Contract Number: 064-EE137 Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: We have noted that the appearance of an unapproved withdrawal was due to insufficient funds and the monthly deposit was unable to be completed. We have also noted that the deposit was made in a subsequent month. Reporting Views of Responsible Officials: Deposits to the replacement reserve accounts are set up to automatically debit the operating account and credit the replacement reserve account. In July, 2023, this transfer was completed in the amount of $1,200.00. However, due to a system glitch, South Pointe II did not receive their July HAP payment from HUD. This resulted in funds not being sufficient for the replacement reserve transfer and the bank reversed the transfer making it appear that we withdrew money. We did not authorize a withdrawal of funds from the replacement reserve account. Response Indicator: Agree Completion Date: 06/01/2024 Response: Deposits to the replacement reserve accounts are set up to automatically debit the operating account and credit the replacement reserve account. In July, 2023, this transfer was completed in the amount of $1,200.00. However, due to a system glitch, South Pointe II did not receive their July HAP payment from HUD. This resulted in funds not being sufficient for the replacement reserve transfer and the bank reversed the transfer making it appear that we withdrew money. We did not authorize a withdrawal of funds from the replacement reserve account. Contact Person: Janet Sanderford SECTION III - FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Supportive Housing for the Elderly – Section 202 Assistance Listing Number 14.157 See Finding 2024-1 under Section II – Financial Statement Findings.
Finding 2024-001
SECTION II - FINANCIAL STATEMENT FINDINGS Finding 2024-1 Insufficient Internal Controls Over Monthly Replacement Reserve Funding Finding Resolution Status: Resolved Information on Universal Population Size: One Instance Sample Size: 12 Identification of Repeat Finding and Finding Reference Number: Not Applicable Questioned Costs: $0 Criteria: Monthly deposits to the Replacement Reserve account must be made monthly in accordance with HUD required amounts and all withdrawals must be approved by HUD. Condition: In accordance with the HUD requirements, the Project was required to make monthly deposits to the Replacement Reserve account in the amount of $1,200 for the year ended June 30, 2024. In July 2023, a deposit in the amount of $1,200 was made to the Replacement Reserve and immediately withdrawn without HUD approval. The internal controls in place for the Replacement Reserve account were not sufficient enough to prevent the funds from being deposited and subsequently withdrawn due to insufficient funds. Cause: Unknown Effect: The Project is not in compliance with HUD’s regulations. If a significant replacement need were to arise, there may not be adequate funds in Replacement Reserve to cover the cost. Auditors’ Recommendation: Management should implement internal controls suitable to detect and prevent withdrawals without HUD approval and to ensure that the Management makes all required monthly deposits to the Replacement Reserve account. Management should also verify that sufficient funds exist prior to transferring deposits to the Replacement Reserve account. In addition, Management should establish internal control procedures to reconcile, on a monthly basis, the Replacement Reserve account balance and the Replacement Reserve general ledger to the total amount of the Replacement Reserve required by HUD. Auditor Non-Compliance Code: N – Reserve for Replacement Requirements FHA/Contract Number: 064-EE137 Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: We have noted that the appearance of an unapproved withdrawal was due to insufficient funds and the monthly deposit was unable to be completed. We have also noted that the deposit was made in a subsequent month. Reporting Views of Responsible Officials: Deposits to the replacement reserve accounts are set up to automatically debit the operating account and credit the replacement reserve account. In July, 2023, this transfer was completed in the amount of $1,200.00. However, due to a system glitch, South Pointe II did not receive their July HAP payment from HUD. This resulted in funds not being sufficient for the replacement reserve transfer and the bank reversed the transfer making it appear that we withdrew money. We did not authorize a withdrawal of funds from the replacement reserve account. Response Indicator: Agree Completion Date: 06/01/2024 Response: Deposits to the replacement reserve accounts are set up to automatically debit the operating account and credit the replacement reserve account. In July, 2023, this transfer was completed in the amount of $1,200.00. However, due to a system glitch, South Pointe II did not receive their July HAP payment from HUD. This resulted in funds not being sufficient for the replacement reserve transfer and the bank reversed the transfer making it appear that we withdrew money. We did not authorize a withdrawal of funds from the replacement reserve account. Contact Person: Janet Sanderford SECTION III - FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Supportive Housing for the Elderly – Section 202 Assistance Listing Number 14.157 See Finding 2024-1 under Section II – Financial Statement Findings.