Audit 378543

Criteria: Accurate financial reporting and compliance with the Uniform Guidance require a strong internal control system. This includes proper segregation of duties, consistent application of documented policies and procedures, and routine management oversight. Under 2 CFR 200.303, non-federal entities must establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the awards in compliance with the applicable requirements. Controls should be documented sufficiently to allow management to monitor their effectiveness and to demonstrate compliance to external parties. Criteria: Accurate financial reporting and compliance with the Uniform Guidance require a strong internal control system. This includes proper segregation of duties, consistent application of documented policies and procedures, and routine management oversight. Under 2 CFR 200.303, non-federal entities must establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the awards in compliance with the applicable requirements. Controls should be documented sufficiently to allow management to monitor their effectiveness and to demonstrate compliance to external parties. Condition: During the year, the former Senior Director of Housing & Facilities was responsible for the custody of assets and for authorizing and recording transactions in the Project’s accounting software, with limited routine oversight. Evidence of mitigating controls, such as supervisory review, documented by management approvals or signoffs, was not maintained. Cause: Staffing constraints and employee turnover have contributed to the current control environment’s inadequate segregation of duties and a lack of documented management oversight. Effect: This concentration of incompatible duties in a single individual, without documented oversight, increases the risk that errors or irregularities may occur and remain undetected. When control activities rely on a single individual’s institutional knowledge rather than documented procedures and effective internal controls, continuity and compliance can be difficult to maintain during periods of staff transition. Recommendations: Management should review existing policies and procedures and improve them where necessary to address gaps in the current control structure. Roles and responsibilities should be clearly defined and documented for all key financial reporting and compliance functions. Controls and mitigating controls should be designed, implemented, and documented, with particular attention given to segregation of duties and oversight. Evidence of supervisory review should be maintained routinely through sign-offs, checklists, or review logs. Staff involved in financial reporting and compliance should be familiar with applicable HUD requirements, the Uniform Guidance, and the entity's own policies to ensure ongoing adherence to federal program requirements. Management Comments: We concur with this finding and recognize the need for a more robust control environment. We are actively working to reevaluate staff responsibilities, expand the documentation of oversight procedures, and implement structured, recurring reviews of financial transactions and compliance-related data to ensure compliance with the Uniform Guidance.