Condition: During the testing of eight out of forty-two tenant files, there were several documentation and calculation errors as documented below. Each situation was noted in one of the eight files: ? No evidence that EIV data was reviewed when performing the annual certification ? Six months of checking account statements were obtained and included in the file but the six month average of these statements did not match the asset information used in form HUD-50059 to determine the tenant?s rent ? Form HUD-50059 did not use the correct social security income amount to determine the tenant?s rent ? Form HUD-9887-A was not signed by management company personnel Criteria: Organizations receiving HUD-assisted rents must calculate the subsidy and tenant portions of rents using accurate and complete information provided by the tenant, the EIV system, and other third party documents, and by following the HUD rent calculation procedures and documentation requirements. Cause: The manager who completed the tenant files failed to run and retain required EIV documents and did not double check asset and income calculations before determining the tenant?s rent. There was no second party reviewing of the tenant files in total or on a sample basis. Effect: Because of the failure to correctly verify and calculate information during tenant certifications tenants could be incorrectly admitted to the property and/or tenant and HUD rent assistance could be incorrectly calculated. The direct result of the eight tenants tested resulted in a $36/month adjustment for one tenant that had been incorrectly charged since November 2021. Correcting this calculation will result in increased rent for the tenant going forward and the property repaying HUD for overclaimed amounts of rental assistance. Recommendation: The Organization should have more qualified personnel performing tenant file compliance. It should also have a second person reviewing files for compliance either on a test basis or for all files. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the issues and lack of control environment. Management has since put in place new individuals at the property at the regional supervisory level to be responsible for the compliance of tenant files. Management plans to review all files and correct all errors. The underpayment by the tenant will be written off and not collected as the error was due to incorrect procedures performed by management company personnel. The tenant was notified in December 2022 of the error and the increased amount of tenant rent due going forward. The amount overclaimed on the HUD vouchers will be refunded in the next HUD voucher, likely February 2023.
Condition: Sufficient funds were not available to make three months of required deposits in the replacement reserve. Criteria: Monthly deposits of $801.31 are required to be deposited in the replacement reserve account according to the HUD regulatory agreement. Cause: Cash flow is not properly managed in order to meeting the immediate and future needs of the organization such as properly escrowing funds in the replacement reserve. Effect: $2,403 in back due deposits are due to the replacement reserve in the coming fiscal year in additional to the required monthly payments. Recommendation: Management personnel should monitor cash flows on a monthly basis in line with budget and correct the large amount of vendor overpayments that continue to occur (see finding 2020-001) in order to appropriately meet the current and future needs of the property. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the lack of cash flow management. The onsite and regional manager plan to work together to perform better monthly review of expenses compared to budget and to work with vendors to obtain refunds for overpaid invoices. Personnel will also come up with a plan for funding the current and back due deposits.
Condition: The Organization did not identify the recording of duplicate invoices prior to vendor payments and did not identify the duplicate expenses during financial statement reviews. This is a repeat finding from the prior year, finding 2020-001. Criteria: The Organization has a responsibility to properly approve all invoices before vendor payments and to review the financial statements on a regular basis to ensure accuracy of the financial data. Cause: The duplicate payments were a result of several failures in the control process including (1) accounts payable entering the same invoice under two similar but different vendors (2) entering incorrect invoice numbers and (3) insufficient review of invoices and financial results at the end of each fiscal period. Effect: The effect was $8,286 of duplicate payments made to vendors. Recommendation: Management continues to redesign the control around this process to identify and correct such items on a timely basis and has hired new personnel to administer the control. We recommend the management company communicate written policies with clearly defined roles to its employees regarding approval of vendor payments and financial statement reviews. Views of Responsible Officials and Planned Corrective Actions: The management company agrees with the auditors' findings. The management company had significant employee turnover in both the accounts payable and regional manager positions during several fiscal years. Additional training and review procedures will be discussed an communicated to the responsible parties. The management company will contact vendors to obtain refunds for duplicate invoice payments. It will also review its current procedures and clearly define rules with its employees to prevent errors from detection in the future.
Condition: The Organization did not make the deposit within 60 days after year-end as required by HUD. This is a repeat of a prior year finding, 2020-002. Recommendation: The Organization should perform its own calculation of surplus cash and remit required deposits to the residual receipts account within 60 days after year-end as required by HUD.Current Status: The deposit identified in the previous year?s audit of $16,284 was made March 9, 2021. However, the deposit that was due for the year ended September 30, 2021, the year under audit, of $28,545 was not made until January 7, 2022.
Condition: During the testing of eight out of forty-two tenant files, there were several documentation and calculation errors as documented below. Each situation was noted in one of the eight files: ? No evidence that EIV data was reviewed when performing the annual certification ? Six months of checking account statements were obtained and included in the file but the six month average of these statements did not match the asset information used in form HUD-50059 to determine the tenant?s rent ? Form HUD-50059 did not use the correct social security income amount to determine the tenant?s rent ? Form HUD-9887-A was not signed by management company personnel Criteria: Organizations receiving HUD-assisted rents must calculate the subsidy and tenant portions of rents using accurate and complete information provided by the tenant, the EIV system, and other third party documents, and by following the HUD rent calculation procedures and documentation requirements. Cause: The manager who completed the tenant files failed to run and retain required EIV documents and did not double check asset and income calculations before determining the tenant?s rent. There was no second party reviewing of the tenant files in total or on a sample basis. Effect: Because of the failure to correctly verify and calculate information during tenant certifications tenants could be incorrectly admitted to the property and/or tenant and HUD rent assistance could be incorrectly calculated. The direct result of the eight tenants tested resulted in a $36/month adjustment for one tenant that had been incorrectly charged since November 2021. Correcting this calculation will result in increased rent for the tenant going forward and the property repaying HUD for overclaimed amounts of rental assistance. Recommendation: The Organization should have more qualified personnel performing tenant file compliance. It should also have a second person reviewing files for compliance either on a test basis or for all files. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the issues and lack of control environment. Management has since put in place new individuals at the property at the regional supervisory level to be responsible for the compliance of tenant files. Management plans to review all files and correct all errors. The underpayment by the tenant will be written off and not collected as the error was due to incorrect procedures performed by management company personnel. The tenant was notified in December 2022 of the error and the increased amount of tenant rent due going forward. The amount overclaimed on the HUD vouchers will be refunded in the next HUD voucher, likely February 2023.
Condition: Sufficient funds were not available to make three months of required deposits in the replacement reserve. Criteria: Monthly deposits of $801.31 are required to be deposited in the replacement reserve account according to the HUD regulatory agreement. Cause: Cash flow is not properly managed in order to meeting the immediate and future needs of the organization such as properly escrowing funds in the replacement reserve. Effect: $2,403 in back due deposits are due to the replacement reserve in the coming fiscal year in additional to the required monthly payments. Recommendation: Management personnel should monitor cash flows on a monthly basis in line with budget and correct the large amount of vendor overpayments that continue to occur (see finding 2020-001) in order to appropriately meet the current and future needs of the property. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the lack of cash flow management. The onsite and regional manager plan to work together to perform better monthly review of expenses compared to budget and to work with vendors to obtain refunds for overpaid invoices. Personnel will also come up with a plan for funding the current and back due deposits.
Condition: The Organization did not identify the recording of duplicate invoices prior to vendor payments and did not identify the duplicate expenses during financial statement reviews. This is a repeat finding from the prior year, finding 2020-001. Criteria: The Organization has a responsibility to properly approve all invoices before vendor payments and to review the financial statements on a regular basis to ensure accuracy of the financial data. Cause: The duplicate payments were a result of several failures in the control process including (1) accounts payable entering the same invoice under two similar but different vendors (2) entering incorrect invoice numbers and (3) insufficient review of invoices and financial results at the end of each fiscal period. Effect: The effect was $8,286 of duplicate payments made to vendors. Recommendation: Management continues to redesign the control around this process to identify and correct such items on a timely basis and has hired new personnel to administer the control. We recommend the management company communicate written policies with clearly defined roles to its employees regarding approval of vendor payments and financial statement reviews. Views of Responsible Officials and Planned Corrective Actions: The management company agrees with the auditors' findings. The management company had significant employee turnover in both the accounts payable and regional manager positions during several fiscal years. Additional training and review procedures will be discussed an communicated to the responsible parties. The management company will contact vendors to obtain refunds for duplicate invoice payments. It will also review its current procedures and clearly define rules with its employees to prevent errors from detection in the future.
Condition: The Organization did not make the deposit within 60 days after year-end as required by HUD. This is a repeat of a prior year finding, 2020-002. Recommendation: The Organization should perform its own calculation of surplus cash and remit required deposits to the residual receipts account within 60 days after year-end as required by HUD.Current Status: The deposit identified in the previous year?s audit of $16,284 was made March 9, 2021. However, the deposit that was due for the year ended September 30, 2021, the year under audit, of $28,545 was not made until January 7, 2022.