Audit 3947

FY End

2022-12-31

Total Expended

$1.94M

Findings

2

Programs

1

Organization: Lowertown Lofts Cooperative (MN)

Year: 2022 Accepted: 2023-11-21

Auditor: Mahoney

Organization Exclusion Status:

Checking exclusion status...

ID	Ref	Severity	Repeat	Requirement
2308	2022-001	Material Weakness	-	N
578750	2022-001	Material Weakness	-	N

ALN	Program	Spent	Major	Findings
14.126	Mortgage Insurance_cooperative Projects	$1.94M	Yes	1

Contacts

Name	Title	Type
KNJPW64BKSJ1	Wendy Fernstrum	Auditee
6123339164	Darren Fetzer	Auditor
No contacts on file

Notes to SEFA

Title: Insured Mortgage Loan Accounting Policies: Basis of Presentation - The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of the Cooperative under programs of the federal government for the year ended December 31, 2022. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Adminnistrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance). Becasue the Schedule presents only a selected portion of the operations of the Cooperative, it is not intended to and does not present the financial position, results of operations, or cash flows of the Cooperative. De Minimis Rate Used: N Rate Explanation: Indirect Cost Rate - The Cooperative's federal award is not based on eligible costs incurred. Accordingly, the Cooperative has not made an election related to use of the 10% de minimis cost rate described in the Uniform Guidance. Federal expenditures for the mortgage insurance program represent the principal balance of the insured loan as of December 31, 2021. The loan is outstanding from a previous year. The federal government imposes countinuing compliance requirements on this loan. The loan balance at December 31, 2022 was 1,905,837.

Finding Details

Finding 2022-001

SECTION II – FINDINGS – FINANCIAL STATEMENTS AUDIT 2022-001 –Material Weakness – Financial Reporting Process Criteria – Effective internal control over the financial reporting process is necessary to prevent misstatements. Condition – The property management agent and the Cooperative have not prepared year end accrual entries in accordance with generally accepted accounting principles. Cause – The property management agent and Cooperative have made a conscious decision to not prepare year end accrual entries in accordance with generally accepted accounting principles. Effect – A misstatement of the financial statements could occur and not be prevented or detected by the property management agent or Cooperative. Recommendation – In designing internal controls, management should weigh many factors, including cost, benefits, and the degree of risk to be accepted. Management should periodically evaluate its decision to outsource the drafting of financial statements and preparation of year end accounting adjustments. Auditee’s comment – The financial statements and year end accounting adjustments will continue to be prepared by an outside CPA firm at this time. We will continue to monitor the outsourced services, making all related decisions, evaluating the adequacy and results of the services, and accepting responsibility for them. Status – Resolved. The property management agent and Cooperative will implement a process to record the audited journal entries and prepare year end accrual entries in accordance with generally accepted accounting principles. Auditor’s non-compliance code – S – Internal Control Deficiencies

Finding 2022-001

SECTION II – FINDINGS – FINANCIAL STATEMENTS AUDIT 2022-001 –Material Weakness – Financial Reporting Process Criteria – Effective internal control over the financial reporting process is necessary to prevent misstatements. Condition – The property management agent and the Cooperative have not prepared year end accrual entries in accordance with generally accepted accounting principles. Cause – The property management agent and Cooperative have made a conscious decision to not prepare year end accrual entries in accordance with generally accepted accounting principles. Effect – A misstatement of the financial statements could occur and not be prevented or detected by the property management agent or Cooperative. Recommendation – In designing internal controls, management should weigh many factors, including cost, benefits, and the degree of risk to be accepted. Management should periodically evaluate its decision to outsource the drafting of financial statements and preparation of year end accounting adjustments. Auditee’s comment – The financial statements and year end accounting adjustments will continue to be prepared by an outside CPA firm at this time. We will continue to monitor the outsourced services, making all related decisions, evaluating the adequacy and results of the services, and accepting responsibility for them. Status – Resolved. The property management agent and Cooperative will implement a process to record the audited journal entries and prepare year end accrual entries in accordance with generally accepted accounting principles. Auditor’s non-compliance code – S – Internal Control Deficiencies