Finding No. 2024-001: Financial Reporting (Material Weakness)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Community Development Block Grants/Entitlement Grants
Federal Assistance Listing Number: 14.218
Compliance Requirement: Reporting
Statement of condition
The lack of appropriate policies, procedures, and internal processes led to untimely year end close and recording procedures, late filing of required reporting, and incomplete submissions of required data collection forms.
Certain information technology controls and procedures were not documented, properly designed, or followed appropriately, including, but not limited to: segregation of administrative user roles from the accounting function, user access review, removal of terminated users, complementary user entity controls assessment, backup restoration testing, penetration testing, and cybersecurity awareness training.
Criteria
The Organization is required to have internal controls and procedures in place in order to timely and accurately report the results of its operations, close its books, and timely file its reports with the applicable federal agencies. These procedures include documenting levels of review, reconciling accounting records at month-end and year-end close and maintaining a well-documented, designed, and applied information technology environment.
Cause
Management did not have sufficient internal controls in place to accurately and timely report the results of the Organization's operations and maintain the information technology environment.
Effect
Insufficient controls, late closing and reconciliation of accounting records, and insufficiently maintained information technology environment could result in accounting errors and theft. A lack of controls over financial reporting can result in untimely filing of required reports or incomplete filings with the regulatory and oversight entities.
Recommendation
We recommend that management re-evaluate its internal controls, policies and procedures to ensure an appropriate member of management is in place to review the year-end and month-end close processes, as well as journal entries, reconciliations, and other accounting records. Management should appoint an individual to be responsible for the Organization's financial statements and reporting obligations. Management evaluate its controls and procedures over the information technology environment to ensure they are properly documented, designed, and followed, including but not limited to: ensuring segregation of administrative user roles from the accounting function, performing a regular review of user access, ensuring terminated users are removed from all systems and software, performing an assessment of complementary user entity controls for relevant software vendors, performing backup restoration tests and penetration tests, and providing cybersecurity awareness training.
Identification of repeat finding
The finding is a repeat of Finding No. 2023-002.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
In process
Finding No. 2024-002: Cash Disbursements Classification (Material Weakness)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Community Development Block Grants/Entitlement Grants
Federal Assistance Listing Number: 14.218
Compliance Requirement: Allowable costs, Activities allowed or unallowed
Statement of condition
During the year ended June 30, 2024, the Organization did not properly classify certain expenditures between expense accounts.
Criteria
Management should review expenditures for accurate expense account classification to ensure proper financial and HUD reporting.
Cause
Review procedures were not sufficient to ensure expenditures were recorded in accurate expense accounts.
Effect
Inaccurate expenses classification could result in improper financial and HUD reporting.
Recommendation
Management should revisit and enhance its internal controls and procedures over period-end review to ensure proper classification of charges.
Identification of repeat finding
The finding is a repeat of Finding No. 2023-003.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
In process
Finding No. 2024-003: Tenant File Maintenance (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Community Development Block Grants/Entitlement Grants
Federal Assistance Listing Number: 14.218
Compliance Requirement: Program Income
Statement of condition
In connection with the procedures applied to a sample of three tenant lease files, the Organization did not maintain the required lead-based paint disclosure in all selected lease files.
Criteria
Tenant lease files are required to be maintained and tenant eligibility determined in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs.
Cause
Management’s policies with respect to the determination of tenant eligibility and the maintenance of tenant lease files in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs, were not consistently followed.
Effect
The procedures for determining tenant eligibility and maintaining tenant lease files were not consistently applied in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. This noncompliance could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD.
Recommendation
Management should review and enhance procedures and monitor compliance with those procedures to ensure that tenant eligibility is correctly determined and that tenant lease files are properly maintained in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs.
Identification of repeat finding
The finding is a repeat of Finding No. 2023-004.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
In process
Finding No. 2024-004: Timely Work Order Completion (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Community Development Block Grants/Entitlement Grants
Federal Assistance Listing Number: 14.218
Compliance Requirement: Activities allowed or unallowed
Statement of condition
During the year ended June 30, 2024, management was unable to provide supporting documentation regarding timely completion of 27 of 59 work orders selected.
Criteria
HUD projects are required to complete work orders timely.
Cause
The Organization did not have sufficient controls in place to ensure the timely completion of work orders as required by HUD.
Effect
Significant repairs could be delayed and repairs could be falsified or duplicated.
Recommendation
Management should continue to review and enhance its internal controls and procedures over work orders to ensure they are completed on a timely basis.
Identification of repeat finding
The finding is a repeat of Finding No. 2023-005.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
In process
Finding No. 2024-001: Financial Reporting (Material Weakness)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Community Development Block Grants/Entitlement Grants
Federal Assistance Listing Number: 14.218
Compliance Requirement: Reporting
Statement of condition
The lack of appropriate policies, procedures, and internal processes led to untimely year end close and recording procedures, late filing of required reporting, and incomplete submissions of required data collection forms.
Certain information technology controls and procedures were not documented, properly designed, or followed appropriately, including, but not limited to: segregation of administrative user roles from the accounting function, user access review, removal of terminated users, complementary user entity controls assessment, backup restoration testing, penetration testing, and cybersecurity awareness training.
Criteria
The Organization is required to have internal controls and procedures in place in order to timely and accurately report the results of its operations, close its books, and timely file its reports with the applicable federal agencies. These procedures include documenting levels of review, reconciling accounting records at month-end and year-end close and maintaining a well-documented, designed, and applied information technology environment.
Cause
Management did not have sufficient internal controls in place to accurately and timely report the results of the Organization's operations and maintain the information technology environment.
Effect
Insufficient controls, late closing and reconciliation of accounting records, and insufficiently maintained information technology environment could result in accounting errors and theft. A lack of controls over financial reporting can result in untimely filing of required reports or incomplete filings with the regulatory and oversight entities.
Recommendation
We recommend that management re-evaluate its internal controls, policies and procedures to ensure an appropriate member of management is in place to review the year-end and month-end close processes, as well as journal entries, reconciliations, and other accounting records. Management should appoint an individual to be responsible for the Organization's financial statements and reporting obligations. Management evaluate its controls and procedures over the information technology environment to ensure they are properly documented, designed, and followed, including but not limited to: ensuring segregation of administrative user roles from the accounting function, performing a regular review of user access, ensuring terminated users are removed from all systems and software, performing an assessment of complementary user entity controls for relevant software vendors, performing backup restoration tests and penetration tests, and providing cybersecurity awareness training.
Identification of repeat finding
The finding is a repeat of Finding No. 2023-002.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
In process
Finding No. 2024-002: Cash Disbursements Classification (Material Weakness)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Community Development Block Grants/Entitlement Grants
Federal Assistance Listing Number: 14.218
Compliance Requirement: Allowable costs, Activities allowed or unallowed
Statement of condition
During the year ended June 30, 2024, the Organization did not properly classify certain expenditures between expense accounts.
Criteria
Management should review expenditures for accurate expense account classification to ensure proper financial and HUD reporting.
Cause
Review procedures were not sufficient to ensure expenditures were recorded in accurate expense accounts.
Effect
Inaccurate expenses classification could result in improper financial and HUD reporting.
Recommendation
Management should revisit and enhance its internal controls and procedures over period-end review to ensure proper classification of charges.
Identification of repeat finding
The finding is a repeat of Finding No. 2023-003.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
In process
Finding No. 2024-003: Tenant File Maintenance (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Community Development Block Grants/Entitlement Grants
Federal Assistance Listing Number: 14.218
Compliance Requirement: Program Income
Statement of condition
In connection with the procedures applied to a sample of three tenant lease files, the Organization did not maintain the required lead-based paint disclosure in all selected lease files.
Criteria
Tenant lease files are required to be maintained and tenant eligibility determined in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs.
Cause
Management’s policies with respect to the determination of tenant eligibility and the maintenance of tenant lease files in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs, were not consistently followed.
Effect
The procedures for determining tenant eligibility and maintaining tenant lease files were not consistently applied in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. This noncompliance could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD.
Recommendation
Management should review and enhance procedures and monitor compliance with those procedures to ensure that tenant eligibility is correctly determined and that tenant lease files are properly maintained in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs.
Identification of repeat finding
The finding is a repeat of Finding No. 2023-004.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
In process
Finding No. 2024-004: Timely Work Order Completion (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Community Development Block Grants/Entitlement Grants
Federal Assistance Listing Number: 14.218
Compliance Requirement: Activities allowed or unallowed
Statement of condition
During the year ended June 30, 2024, management was unable to provide supporting documentation regarding timely completion of 27 of 59 work orders selected.
Criteria
HUD projects are required to complete work orders timely.
Cause
The Organization did not have sufficient controls in place to ensure the timely completion of work orders as required by HUD.
Effect
Significant repairs could be delayed and repairs could be falsified or duplicated.
Recommendation
Management should continue to review and enhance its internal controls and procedures over work orders to ensure they are completed on a timely basis.
Identification of repeat finding
The finding is a repeat of Finding No. 2023-005.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
In process