Audit 36057

Finding 2022-002: Allowable Costs Section 202 Capital Advance, 14.157 Material Weakness Criteria: The Project?s Capital Advance Program Regulatory Agreement with HUD requires an annual operating budget. Further, the budget is an essential internal control tool to ensure funds will be available when needed and also provides an ongoing check for reasonableness through comparing actual revenues and expenses against the budget. The budget is an essential part in assuring all costs incurred by the Project are allowable. Condition: During our audit, we noted neither entity that provided management services during the year was able to provide an operating budget for the fiscal year ended June 30, 2022. We did note the Project did have other controls to ensure all costs incurred were allowable with multiple levels of review but the budget to actual comparison was not done to determine total expense levels were appropriate. Cause: Management did not prepare a budget for the year ended June 30, 2022. Effect or Potential Effect: The Project did not have adequate internal controls over allowable costs. Recommendation: The Project should establish procedures to annually adopt a budget. It should be noted the Project had adopted a budget for the fiscal year ending June 30, 2023. View of the Responsible Officials of the Auditee: The auditee?s management agrees with the finding.

Finding 2022-002: Allowable Costs Section 202 Capital Advance, 14.157 Material Weakness Criteria: The Project?s Capital Advance Program Regulatory Agreement with HUD requires an annual operating budget. Further, the budget is an essential internal control tool to ensure funds will be available when needed and also provides an ongoing check for reasonableness through comparing actual revenues and expenses against the budget. The budget is an essential part in assuring all costs incurred by the Project are allowable. Condition: During our audit, we noted neither entity that provided management services during the year was able to provide an operating budget for the fiscal year ended June 30, 2022. We did note the Project did have other controls to ensure all costs incurred were allowable with multiple levels of review but the budget to actual comparison was not done to determine total expense levels were appropriate. Cause: Management did not prepare a budget for the year ended June 30, 2022. Effect or Potential Effect: The Project did not have adequate internal controls over allowable costs. Recommendation: The Project should establish procedures to annually adopt a budget. It should be noted the Project had adopted a budget for the fiscal year ending June 30, 2023. View of the Responsible Officials of the Auditee: The auditee?s management agrees with the finding.