Criteria: Management is responsible for the preparation of the basic financial statements and all accompanying information as well as representations contained therein, and the fair presentation in conformity with U.S. GAAP. This requires management to perform a year-end closing process to accumulate, reconcile and summarize information for inclusion in the annual financial statements. Condition: Monthly review of transactions posted to Yardi and the general ledger system was not implemented properly to detect discrepancies or errors in a timely manner. We identified numerous adjustments, which were posted as part of the audit. Context: The condition was noted during our audit of the entity for the year ended June 30, 2025. Effect: Journal entries were posted, and adjustments made to the financial statements, in order to fairly present the financial statements. Further, the internal control environment is weakened. Cause: The entity’s procedures did not allow for the proper classification or timely reporting of information required for financial reporting. The entity’s process did not allow for evidence to support internal controls in place over the preparation of the financial statements. Recommendation: We recommend staff training at the property level to perform monthly review of accounting records and reconciliations between Yardi and general ledger system to ensure amounts are properly captured, reconciled, classified, and reported in a timely manner. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff.
Criteria: The Uniform Guidance Compliance Supplement requires timely filing of annual financial statements in PIH-REAC system no later than 90 days after year end. Condition: Monthly review of transactions posted to Yardi and the general ledger system was not implemented properly to detect discrepancies or errors in a timely manner, which delayed timely filing of required submission. Context: The condition was noted during our testing over the entity’s accounting records and financial statement reconciliations that required additional time to determine that the books and records were not materially misstated which delayed timely filing of required submission in PIH-REAC system. Effect: Certain financial statement and reporting requirement deadlines were missed creating the potential for lost federal awards. Cause: Lack of knowledge and insufficient skills surrounding financial statement review processes. Recommendation: We recommend staff training at the property level to perform monthly review of accounting records and reconciliations between Yardi and general ledger system. This should improve internal controls over financial reporting sufficient to allow for timely submission of required filings and reduce risk of losing Federal Awards. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff.
Criteria: HAP project funds may be used only for expenses that are reasonable and necessary to the operation of the project as provided for in the HAP contract. Condition: Internal controls over payables were not implemented to detect that vendor invoices of a related party and of the management agent were recorded to the books of the entity. Context: Vendor expenses incurred by a related party and the management agent were posted to the books of the entity. Effect: Certain expenses were overstated by $31,502. Cause: Lack of attention to the customer name on vendor invoices, as well as review of comparative monthly expenses to detect unusual and/or significant increases. Recommendation: We recommend staff training at the property level to perform monthly review of accounting records on a comparative basis to detect and investigate unusual and/or significant variances. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff to perform monthly analysis and investigate unusual and/or significant variances.
Criteria: HAP project funds may be used only for expenses that are reasonable and necessary to the operation of the project as provided for in the HAP contract. Condition: Internal controls over payables were not implemented to detect that duplicate payroll periods were billed by, and paid to, the management agent and were recorded to the books of the entity. Context: Expenses for duplicate payroll periods and van driver payroll expenses were recorded in excess of actual amounts incurred. Effect: Payroll expenses were overstated by $72,034. Cause: Lack of attention to the payroll period on multiple invoices from management agent, as well as no evidence of review of comparative monthly expenses to detect unusual and/or significant increases in payroll and payroll related expenses. Recommendation: We recommend staff training at the property level to perform monthly review of accounting records on a comparative basis to detect and investigate unusual and/or significant variances. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff to perform monthly analysis and investigate unusual and/or significant variances.
Criteria: Guidelines require that any Cash Surplus be deposited within 60 days subsequent to year end. Condition: Cash Surplus was not deposited within 60 days subsequent to year end. Context: Due to significant adjustments made during the audit, the amount of cash surplus was not readily determinable causing the delay in deposit. Effect: The residual receipts account was not funded withing the 60 days subsequent to year end in accordance with guidelines. Cause: Due to significant adjustments made during the audit, the amount of cash surplus was not readily determinable causing the delay in deposit. Recommendation: We recommend higher level review of books and records prior to performance of the audit to determine whether a cash surplus exists and if so, deposit into the residual receipts account in accordance with the guidelines. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff.
Criteria: The Uniform Guidance Compliance Supplement requires only expenditures of the entity be included in project costs. Condition: Internal controls over payables were not implemented to detect the following: Expenses for payroll and payroll taxes were duplicated for 4 payroll periods and triple posted in one instance resulting in an overstatement of payroll expense of $49,679. Expenses for payroll and payroll taxes of van driver were posted in error repeatedly during the year resulting in an overstatement of $22,355. Expenses for payments in lieu of real estate taxes was not recorded or paid, and therefore real estate tax expense was understated by $10,000. Expenses for gas expense billings of a related party were posted to the books and records of Jefferson Apartments. And gas expense billings of Jefferson Apartments were not recorded. This resulted in an understatement of gas expense of $7,857. Expenses for the management agent were posted to the books and records of Jefferson Apartments, and paid from the cash account. This resulted in overstatement of expenses, in various accounts, of $15,645. Expenses for executive director salary historically paid by management agent was posted as an expense of Jefferson Apartments, in addition to management fees charged. This resulted in overstatement of payroll expense of $8,000. Context: The condition was noted during our testing over the entity’s accounting records and financial statement reconciliations. Effect: This resulted in an overall overstatement of expenses of $77,822. Cause: Lack of oversight and necessary internal controls over review and approval process surrounding reasonable and necessary expenses of the project. Recommendation: We recommend staff training at the property level to perform monthly review of accounting records on a comparative basis to detect and investigate unusual and/or significant variances which would have detected duplicate and errors in invoices prior to payments. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff to perform monthly analysis and investigate unusual and/or significant variances.
Criteria: Internal controls over cash management of taxes and insurance escrow account. Condition: Taxes and insurance payments were paid from operating cash account, with no transfer from Escrow account for reimbursement. This resulted in surplus in the tax and insurance account. Context: The condition was noted during our testing over the entity’s accounting records and financial statement reconciliations. Effect: The taxes and insurance escrow account has a surplus, while the operating account reflects a shortage. Cause: Management is not transferring amounts from tax and insurance escrow account to cover costs paid from operating cash account. Recommendation: We recommend management implement policy of transferring funds to operating account from tax and insurance escrow account in a timely manner in keeping with the timing of when tax and insurance expenses are incurred. Views of Responsible Officials and Planned Corrective Actions: Management agrees and will implement policy for timely transfers from tax and insurance escrow account as tax and insurance expenses are incurred and paid from operating account.