Audit 3870

Condition: The Organization has not established proper segregation of duties with one employee performing substantially all accounting functions without any independent review or oversight. This results in lack of internal controls over financial reporting. Identification as a Repeat Finding: Finding 2021-001 was reported in the immediate prior year. Criteria: The Organization is responsible for the design, implementation, and maintenance of effective internal control over financial reporting, including proper segregation of duties and sufficient oversight over accounting function to ensure the accuracy of the financial reporting. Cause: Failure to establish proper oversight over financial reporting and proper segregation of duties is the result of the turnover in property management company personnel during the period and due to limited number of employees in the Organization. Effect or Potential Effect: The lack of proper oversight over financial reporting could result in general ledger and interim financial statements being materially misstated. A lack of segregation of duties could result in erroneous postings, inaccurate financial reporting as well as create opportunities for fraudulent activities. Recommendation: We recommend that the accounting function prepares detail reconciliations of all material accounts and then perform a review of the final trial balance to ensure that all significant journal entries are posted. We also recommend that the segregation of duties be reviewed and adjusted where possible to strengthen the system of internal control. The Organization may consider engaging an outside CFO or another individual within the Organization possessing sufficient expertise to provide an oversight and review of the financial reporting performed by the bookkeeper as well as to assume responsibility for performance of certain accounting functions to enhance the segregation of duties. Views of Responsible Officials: The Organization personnel will prepare detail reconciliations of all material accounts and then perform a review of the final trial balance to ensure that all significant journal entries are posted. The Organization will develop procedures to allow for greater segregation of duties over financial reporting or establish mitigating controls concerned with review and oversight.

Condition: During 2022, there was a shortfall of $10,935 in required deposits into the reserve for replacements. Identification as a Repeat Finding: Finding 2021-002 was reported in the immediate prior year. Criteria: As required by the Section 811 Capital Advance Program ("Program") Regulatory Agreement ("Agreement") with the United States Department of Housing and Urban Development ("HUD"), the Organization is required to establish and maintain a reserve for replacements in a separate bank account in the name of the Organization. The Organization is required to make payments of $536 per month through March 31, 2022, at which time payments increased to $1,036 through February 28, 2024, until a different date or amount is approved in writing by HUD. During 2022, the Organization did not make any monthly deposits into the reserve resulting in a cumulative shortfall of $12,007. Cause: Failure to make all required payments into the replacement reserve during the period under audit as result of the Organization not having the cash to make the deposits. Effect or Potential Effect: Noncompliance with the terms and requirements of the Agreement as well as the compliance requirements of the Program in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Recommendations: We recommend that the Organization make up the shortfall of deposits in the subsequent period and on a going forward basis, make the monthly required reserve for replacement deposits. Views of Responsible Officials: Management will make the necessary required deposits to bring the balance of the reserve for replacement in alignment with requirements of the Agreement and going forward will make the required monthly deposits. As of the report date, the Organization has not fulfilled its obligation relating to the required deposits per the terms of the Agreement.

Condition: The Organization has not established proper segregation of duties with one employee performing substantially all accounting functions without any independent review or oversight. This results in lack of internal controls over financial reporting. Identification as a Repeat Finding: Finding 2021-001 was reported in the immediate prior year. Criteria: The Organization is responsible for the design, implementation, and maintenance of effective internal control over financial reporting, including proper segregation of duties and sufficient oversight over accounting function to ensure the accuracy of the financial reporting. Cause: Failure to establish proper oversight over financial reporting and proper segregation of duties is the result of the turnover in property management company personnel during the period and due to limited number of employees in the Organization. Effect or Potential Effect: The lack of proper oversight over financial reporting could result in general ledger and interim financial statements being materially misstated. A lack of segregation of duties could result in erroneous postings, inaccurate financial reporting as well as create opportunities for fraudulent activities. Recommendation: We recommend that the accounting function prepares detail reconciliations of all material accounts and then perform a review of the final trial balance to ensure that all significant journal entries are posted. We also recommend that the segregation of duties be reviewed and adjusted where possible to strengthen the system of internal control. The Organization may consider engaging an outside CFO or another individual within the Organization possessing sufficient expertise to provide an oversight and review of the financial reporting performed by the bookkeeper as well as to assume responsibility for performance of certain accounting functions to enhance the segregation of duties. Views of Responsible Officials: The Organization personnel will prepare detail reconciliations of all material accounts and then perform a review of the final trial balance to ensure that all significant journal entries are posted. The Organization will develop procedures to allow for greater segregation of duties over financial reporting or establish mitigating controls concerned with review and oversight.

Condition: During 2022, there was a shortfall of $10,935 in required deposits into the reserve for replacements. Identification as a Repeat Finding: Finding 2021-002 was reported in the immediate prior year. Criteria: As required by the Section 811 Capital Advance Program ("Program") Regulatory Agreement ("Agreement") with the United States Department of Housing and Urban Development ("HUD"), the Organization is required to establish and maintain a reserve for replacements in a separate bank account in the name of the Organization. The Organization is required to make payments of $536 per month through March 31, 2022, at which time payments increased to $1,036 through February 28, 2024, until a different date or amount is approved in writing by HUD. During 2022, the Organization did not make any monthly deposits into the reserve resulting in a cumulative shortfall of $12,007. Cause: Failure to make all required payments into the replacement reserve during the period under audit as result of the Organization not having the cash to make the deposits. Effect or Potential Effect: Noncompliance with the terms and requirements of the Agreement as well as the compliance requirements of the Program in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Recommendations: We recommend that the Organization make up the shortfall of deposits in the subsequent period and on a going forward basis, make the monthly required reserve for replacement deposits. Views of Responsible Officials: Management will make the necessary required deposits to bring the balance of the reserve for replacement in alignment with requirements of the Agreement and going forward will make the required monthly deposits. As of the report date, the Organization has not fulfilled its obligation relating to the required deposits per the terms of the Agreement.