As a result of our audit, we noted that for the period January 1, 2023, through August 31, 2023, the general ledger (GL) expenses do not include vendor names. This is an internal control deficiency related to documentation and completeness of the audit trail. This deficiency can fall into one of these categories: 1. Documentation Deficiency The GL lacks sufficient detail to identify the source of transactions. Without vendor names, you cannot easily trace expenses, verify legitimacy, or perform reconciliation. 2. Audit Trail Deficiency Auditors expect transactions to be traceable from the financial statements back to the supporting documents. Missing vendor names breaks that trail.
The Project’s books and records are currently maintained on the cash basis of accounting and accrual adjustments are performed at year-end to convert the cash basis of accounting to the accrual basis of accounting. The accrual basis is the method of accounting where revenues are recognized when earned and expenses are recognized when incurred. We understand that maintaining the general ledger on the accrual basis of accounting is more difficult than using the cash basis. However, the accrual basis provides more meaningful financial information to management and complies with generally accepted accounting principles. Failure to maintain the Project’s general ledger on the accrual basis of accounting distorts the interim financial statements and may lead to critical financial decisions being made on erroneous data.
On June 13, 2020, an SBA Economic Injury Disaster Loan was initiated without the knowledge and authorization of those charged with governance. The loan has been identified and recorded in the financial statements; however, HUD did not grant permission to enter into the agreement. We were unable to verify expenditures; however, they were unauthorized.
Project funds were used to provide personal benefits for certain board of directors’ members and other unallowable and unsupported expenditures.
During the year, unauthorized payroll payments were made to an employee. The unapproved payments were disbursed using Project funds.
The Project is covered by a $151,000 fidelity bond and fidelity insurance. The Project fidelity bond coverage for the value of two months of the gross potential income should be $207,366 (monthly gross potential income $103,683 X 2 months). The fidelity bond coverage has a shortage of $56,366.
An Enterprise Income Verification (EIV) was not performed within 90 days of the date of move-in for the following tenants:
Findings were noted during the testing of certification for tenants as follows: A. Rochelle Dyer, Unit# 206, Move-In Date: 2/01/2023: 1. The Model Lease does not state the contract rent of $1,819.00 and Tenant Assistance Payment of $1,584.00. B. Vertrezal Beasley, Unit #501, Date of Recertification 9/18/2023: 1. The Model Lease does not state the contract rent of $1,819.00 and Tenant Assistance Payment of $1,585.00. 2. The Project did not provide the Social Security Annual letter for verification of the annual income of $11,820.00.
During the testing of the move-out of William Payne, Unit# 102, Move-out Date 1/27/2023, the move-out inspection was not performed.
During our testing of cash disbursements, we noted the following: 1. Vendors’ invoices were unavailable for examination purposes. 12 (twelve) exceptions were noted 2. Vendor invoices were not approved by an authorized individual for payment. 31 (thirty-one) exceptions noted. 3. Vendor names could not be traced to the general ledger. 38 (thirty-eight) exceptions noted. 4. Cancelled checks were unavailable for examination purposes. 4 (Four) exceptions were noted.
During our testing of the entity’s compliance with applicable federal laws and regulations, we noted that the entity did not file required Form 1099 NEC information returns for certain non employee compensation payments of $600 or more made during the fiscal year. The Project also did not furnish the required recipient copies by the statutory deadline
During our testing of the Project's accrued payroll & taxes for the year ended December 31, 2023, for the gross payroll of $10,370.46 and payroll taxes of $793.36, we noted that payroll was processed at net pay on 1/4/2024 and that employees were given manual payroll checks. Payroll was not transmitted to ADP, and payroll tax deposits were not made. Therefore, the 1/04/2024 payroll is unreported in the 1st Quarter 2024 filing of required Federal and State Employment/Unemployment tax returns.