Finding No. 2022-003 The Schedule of Expenditures of Federal Awards (SEFA) and the status of prior audit findings and questioned costs were not timely prepared by NWCH staff for the audit. Criteria According to Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) the auditee is responsible for preparation of the SEFA and updating the status of prior audit findings before audit fieldwork begins as stated in the annual audit engagement letter. Condition The SEFA and the status of prior audit findings were provided to the auditor on April 12, 2023, after the HUD audit submission deadline and after the majority of audit procedures were completed. Context The SEFA and the status of prior audit findings were requested in the audit engagement letter and a few additional requests via email and telephone calls during the audit. Cause Lack of familiarity with and understanding of federal single audit requirements and procedures. Effect Late filing of the annual audit with HUD and notification by HUD that this late filing may affect the awarding of future grants and loans to NWCH. Questioned Costs None. Recommendations Rapid growth of NWCH in providing much needed low-income housing on the Oregon coast coupled with difficulty in hiring qualified staff to maintain expanded operations resulted in NWCH being unprepared for the 2022 audit. Seek training on federal single audit requirements, continue to pursue hiring of or contracting with a degreed accountant who can provide oversight of the accounting function, oversee NWCH's audit preparation, and prepare financial statements. Familiarize NWCH staff with federal audit requirements so that adequate preparation of NWCH's accounting system, financial statements, and schedules required for the audit are prepared prior to audit fieldwork including the SEFA and the status of prior audit findings. Continue the search for accounting staff or contracted controller and expand the search to remote workers and professional staffing companies. Views of Responsible Officials and Planned Corrective Actions We agree with this finding and will continue to search for qualified accounting and other personnel necessary to support the continued expansion of NWCH. Training in federal single audit and HUD audit requirements will be obtained. NWCH is currently experiencing growing pains but management is determined to continue expanding, obtaining, and operating additional properties needed for housing low-income, homeless, and other qualifying individuals.
Finding No. 2022-003 The Schedule of Expenditures of Federal Awards (SEFA) and the status of prior audit findings and questioned costs were not timely prepared by NWCH staff for the audit. Criteria According to Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) the auditee is responsible for preparation of the SEFA and updating the status of prior audit findings before audit fieldwork begins as stated in the annual audit engagement letter. Condition The SEFA and the status of prior audit findings were provided to the auditor on April 12, 2023, after the HUD audit submission deadline and after the majority of audit procedures were completed. Context The SEFA and the status of prior audit findings were requested in the audit engagement letter and a few additional requests via email and telephone calls during the audit. Cause Lack of familiarity with and understanding of federal single audit requirements and procedures. Effect Late filing of the annual audit with HUD and notification by HUD that this late filing may affect the awarding of future grants and loans to NWCH. Questioned Costs None. Recommendations Rapid growth of NWCH in providing much needed low-income housing on the Oregon coast coupled with difficulty in hiring qualified staff to maintain expanded operations resulted in NWCH being unprepared for the 2022 audit. Seek training on federal single audit requirements, continue to pursue hiring of or contracting with a degreed accountant who can provide oversight of the accounting function, oversee NWCH's audit preparation, and prepare financial statements. Familiarize NWCH staff with federal audit requirements so that adequate preparation of NWCH's accounting system, financial statements, and schedules required for the audit are prepared prior to audit fieldwork including the SEFA and the status of prior audit findings. Continue the search for accounting staff or contracted controller and expand the search to remote workers and professional staffing companies. Views of Responsible Officials and Planned Corrective Actions We agree with this finding and will continue to search for qualified accounting and other personnel necessary to support the continued expansion of NWCH. Training in federal single audit and HUD audit requirements will be obtained. NWCH is currently experiencing growing pains but management is determined to continue expanding, obtaining, and operating additional properties needed for housing low-income, homeless, and other qualifying individuals.
HUD Finding No. 2022-001 S-2700-005 Property Improvement Loan Insurance for Improving All Existing Structures and Building of New Nonresidential Structures - Assistance Listing No. 14.142 Late filing of the HUD audit for 2022 Criteria S-2700-020 HUD requires annual financial statements audits with HUD schedules to be filed within 90 days after the end of the entity's fiscal year. Condition S-2700-010 The 2022 audit for The Ridge was not filed with HUD on or before March 31, 2023. Context S-2700-009 The Ridge's parent nonprofit organization, Northwest Coastal Housing (NWCH) purchased properties, added staff, and set up new entities producing a volume of documentation and transactions for the audit beyond what is typical for this organization. In addition, management researched, obtained HUD approval, and contracted a new property management company for The Ridge to replace the prior property management company that perpetrated financial abuses discovered in the 2021 audit, that have not yet been reimbursed to The Ridge by this company. Cause S-2700-040 Rapid growth of NWCH in providing low-income housing on the Oregon coast coupled with difficulty in hiring qualified staff to maintain expanded operations. The 2022 accounting was submitted to the auditor in several trial balances from the contracted bookkeeper and property management companies resulting in more work for the auditor than expected. In addition, closing entries for properties purchased and sold were not recorded correctly, causing the auditor to calculate corrections to the financial statements for these and other accounting issues. The Schedule of Expenditures of Federal Awards and the status of prior year audit findings and questioned costs were provided to the auditor on April 12, 2023, after the HUD audit submission deadline. NWCH's operations and activities have expanded beyond the entity's current internal infrastructure but are greatly needed in this rural area of Oregon with many homeless and low-income individuals. Effect S-2700-030 Late submission of the 2022 audit and REAC filing to HUD for The Ridge for 2022. Questioned Costs S-2700-065 None. Recommendation S-2700-050 Hire a degreed accountant or engage an accounting firm to oversee the accounting function for NWCH and to properly prepare for the audit with corrections made, and consolidated financial statements prepared prior to the start of the annual audit. Summarize commitments, contingencies, subsequent events, and related party transactions and include these items in the financial statements as part of audit preparation. Expand your search for qualified accounting personnel to remote employees and professional staffing companies since there is definitely a known shortage of qualified accountants in the traditional job markets. Views of Responsible Officials and Planned Corrective Actions S-2700-100 We agree with this finding. NWCH was successful in adding needed staff in 2023, but was unable to hire a degreed accountant or controller, or to contract with an accounting firm for oversight of the accounting function. Bookkeeper training was provided from Shelter Resources Financial Manager in February 2023. NWCH is researching CPA firms in order to contract a qualified controller with expertise in real estate holdings relevant to NWCH. Efforts to hire experienced personnel continues, especially for a qualified, college degreed accountant.
Finding No. 2022-002 Material Weakness - Internal Control - Accounting Corrections Criteria According to Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) a deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected and corrected, on a timely basis. Condition The auditor calculated, and NWCH approved recording several material adjustments to the financial state- ments in order for the audited financial statements to be materially correct. Context NWCH created a partnership entity and sold an apartment complex to the new partnership, however, the transaction was not properly recorded in either entities' accounting system. Nor were the new partnership's assets and liabilities completely removed from NWCH's books. A construction loan for renovation of the apartment complex on a cost reimbursement basis with funds held by the lender was not recorded or disclosed in the financial statements. For NWCH, a material amount of fixed assets were expensed rather than capitalized, and grants awarded but not yet received (over $1 million) were not recorded as receivables and prepaid revenue. The new lease accounting standard was implemented during, rather than prior to the 2022 audit. Accordingly, the audited consolidated financial statements required several adjustments to be materially correct. Cause The transactions discussed above did not go through NWCH's bank accounts and, accordingly, were not recorded by the bookkeeper. Property purchase and sale closing statements were received but were not recorded in the books of accounts until after the audit began. Recording of fixed assets purchases did not follow NWCH's capitalization policy. The bookkeeper does not have the accounting experience and back- ground, or a full understanding of U.S. GAAP to properly record transactions as they occur without further training and oversight. The new lease accounting standard is not understood by NWCH staff, and was not implemented, nor were the related entities consolidated into one set of financial statements. Effect Initial accounting records provided for the audit from NWCH and the new partnership understated assets by $855,551 and $8,498,772, understated liabilities by $644,791 and $7,756,414, and incorrectly reported the change in net assets by $148,269 and ($35,291), respectively. Questioned Costs None. Recommendation The two property management companies managing NWCH apartment complexes produce accurate accounting and tenant records. A college degreed accountant, CPA, or CPA firm is needed to oversee the NORTHWEST COASTAL HOUSING Spyglass Ridge Limited Partnership, HUD Project No. 126-11130 Schedule of Findings and Questioned Costs For the Year Ended December 31, 2022 63 Section II - Financial Statement Findings (continued) Finding No. 2022-002 (continued) Material Weakness - Internal Control - Accounting Corrections Recommendation (continued) accounting function for NWCH to properly prepare the consolidated financial statements in accordance with U.S. GAAP. Views of Responsible Officials and Planned Corrective Actions We agree with this finding. NWCH was successful in adding needed staff in 2023, but was unable to hire a degreed accountant or controller, or to contract with an accounting firm for oversight of the accounting function. Bookkeeper training was provided from Shelter Resources Financial Manager in February 2023. NWCH is researching CPA firms in order to contract a qualified controller with expertise in real estate holdings relevant to NWCH. NWCH has been actively searching for a qualified CPA to hire or contract with since 2021, however, due to capacity constraints and overwhelmed CPA firms, NWCH has been unsuccessful. Efforts to hire experienced accounting personnel continues. NORTHWEST COASTAL HOUSING Spyglass Ridge Limited Partnership, HUD Project No. 126-11130 Schedule of Findings and Questioned Costs For the Year Ended December 31, 2022 64
Finding No. 2022-003 The Schedule of Expenditures of Federal Awards (SEFA) and the status of prior audit findings and questioned costs were not timely prepared by NWCH staff for the audit. Criteria According to Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) the auditee is responsible for preparation of the SEFA and updating the status of prior audit findings before audit fieldwork begins as stated in the annual audit engagement letter. Condition The SEFA and the status of prior audit findings were provided to the auditor on April 12, 2023, after the HUD audit submission deadline and after the majority of audit procedures were completed. Context The SEFA and the status of prior audit findings were requested in the audit engagement letter and a few additional requests via email and telephone calls during the audit. Cause Lack of familiarity with and understanding of federal single audit requirements and procedures. Effect Late filing of the annual audit with HUD and notification by HUD that this late filing may affect the awarding of future grants and loans to NWCH. Questioned Costs None. Recommendations Rapid growth of NWCH in providing much needed low-income housing on the Oregon coast coupled with difficulty in hiring qualified staff to maintain expanded operations resulted in NWCH being unprepared for the 2022 audit. Seek training on federal single audit requirements, continue to pursue hiring of or contracting with a degreed accountant who can provide oversight of the accounting function, oversee NWCH's audit preparation, and prepare financial statements. Familiarize NWCH staff with federal audit requirements so that adequate preparation of NWCH's accounting system, financial statements, and schedules required for the audit are prepared prior to audit fieldwork including the SEFA and the status of prior audit findings. Continue the search for accounting staff or contracted controller and expand the search to remote workers and professional staffing companies. Views of Responsible Officials and Planned Corrective Actions We agree with this finding and will continue to search for qualified accounting and other personnel necessary to support the continued expansion of NWCH. Training in federal single audit and HUD audit requirements will be obtained. NWCH is currently experiencing growing pains but management is determined to continue expanding, obtaining, and operating additional properties needed for housing low-income, homeless, and other qualifying individuals.
HUD Finding No. 2022-001 S-2700-005 Property Improvement Loan Insurance for Improving All Existing Structures and Building of New Nonresidential Structures - Assistance Listing No. 14.142 Late filing of the HUD audit for 2022 Criteria S-2700-020 HUD requires annual financial statements audits with HUD schedules to be filed within 90 days after the end of the entity's fiscal year. Condition S-2700-010 The 2022 audit for The Ridge was not filed with HUD on or before March 31, 2023. Context S-2700-009 The Ridge's parent nonprofit organization, Northwest Coastal Housing (NWCH) purchased properties, added staff, and set up new entities producing a volume of documentation and transactions for the audit beyond what is typical for this organization. In addition, management researched, obtained HUD approval, and contracted a new property management company for The Ridge to replace the prior property management company that perpetrated financial abuses discovered in the 2021 audit, that have not yet been reimbursed to The Ridge by this company. Cause S-2700-040 Rapid growth of NWCH in providing low-income housing on the Oregon coast coupled with difficulty in hiring qualified staff to maintain expanded operations. The 2022 accounting was submitted to the auditor in several trial balances from the contracted bookkeeper and property management companies resulting in more work for the auditor than expected. In addition, closing entries for properties purchased and sold were not recorded correctly, causing the auditor to calculate corrections to the financial statements for these and other accounting issues. The Schedule of Expenditures of Federal Awards and the status of prior year audit findings and questioned costs were provided to the auditor on April 12, 2023, after the HUD audit submission deadline. NWCH's operations and activities have expanded beyond the entity's current internal infrastructure but are greatly needed in this rural area of Oregon with many homeless and low-income individuals. Effect S-2700-030 Late submission of the 2022 audit and REAC filing to HUD for The Ridge for 2022. Questioned Costs S-2700-065 None. Recommendation S-2700-050 Hire a degreed accountant or engage an accounting firm to oversee the accounting function for NWCH and to properly prepare for the audit with corrections made, and consolidated financial statements prepared prior to the start of the annual audit. Summarize commitments, contingencies, subsequent events, and related party transactions and include these items in the financial statements as part of audit preparation. Expand your search for qualified accounting personnel to remote employees and professional staffing companies since there is definitely a known shortage of qualified accountants in the traditional job markets. Views of Responsible Officials and Planned Corrective Actions S-2700-100 We agree with this finding. NWCH was successful in adding needed staff in 2023, but was unable to hire a degreed accountant or controller, or to contract with an accounting firm for oversight of the accounting function. Bookkeeper training was provided from Shelter Resources Financial Manager in February 2023. NWCH is researching CPA firms in order to contract a qualified controller with expertise in real estate holdings relevant to NWCH. Efforts to hire experienced personnel continues, especially for a qualified, college degreed accountant.
Finding No. 2022-003 The Schedule of Expenditures of Federal Awards (SEFA) and the status of prior audit findings and questioned costs were not timely prepared by NWCH staff for the audit. Criteria According to Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) the auditee is responsible for preparation of the SEFA and updating the status of prior audit findings before audit fieldwork begins as stated in the annual audit engagement letter. Condition The SEFA and the status of prior audit findings were provided to the auditor on April 12, 2023, after the HUD audit submission deadline and after the majority of audit procedures were completed. Context The SEFA and the status of prior audit findings were requested in the audit engagement letter and a few additional requests via email and telephone calls during the audit. Cause Lack of familiarity with and understanding of federal single audit requirements and procedures. Effect Late filing of the annual audit with HUD and notification by HUD that this late filing may affect the awarding of future grants and loans to NWCH. Questioned Costs None. Recommendations Rapid growth of NWCH in providing much needed low-income housing on the Oregon coast coupled with difficulty in hiring qualified staff to maintain expanded operations resulted in NWCH being unprepared for the 2022 audit. Seek training on federal single audit requirements, continue to pursue hiring of or contracting with a degreed accountant who can provide oversight of the accounting function, oversee NWCH's audit preparation, and prepare financial statements. Familiarize NWCH staff with federal audit requirements so that adequate preparation of NWCH's accounting system, financial statements, and schedules required for the audit are prepared prior to audit fieldwork including the SEFA and the status of prior audit findings. Continue the search for accounting staff or contracted controller and expand the search to remote workers and professional staffing companies. Views of Responsible Officials and Planned Corrective Actions We agree with this finding and will continue to search for qualified accounting and other personnel necessary to support the continued expansion of NWCH. Training in federal single audit and HUD audit requirements will be obtained. NWCH is currently experiencing growing pains but management is determined to continue expanding, obtaining, and operating additional properties needed for housing low-income, homeless, and other qualifying individuals.
Finding No. 2022-003 The Schedule of Expenditures of Federal Awards (SEFA) and the status of prior audit findings and questioned costs were not timely prepared by NWCH staff for the audit. Criteria According to Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) the auditee is responsible for preparation of the SEFA and updating the status of prior audit findings before audit fieldwork begins as stated in the annual audit engagement letter. Condition The SEFA and the status of prior audit findings were provided to the auditor on April 12, 2023, after the HUD audit submission deadline and after the majority of audit procedures were completed. Context The SEFA and the status of prior audit findings were requested in the audit engagement letter and a few additional requests via email and telephone calls during the audit. Cause Lack of familiarity with and understanding of federal single audit requirements and procedures. Effect Late filing of the annual audit with HUD and notification by HUD that this late filing may affect the awarding of future grants and loans to NWCH. Questioned Costs None. Recommendations Rapid growth of NWCH in providing much needed low-income housing on the Oregon coast coupled with difficulty in hiring qualified staff to maintain expanded operations resulted in NWCH being unprepared for the 2022 audit. Seek training on federal single audit requirements, continue to pursue hiring of or contracting with a degreed accountant who can provide oversight of the accounting function, oversee NWCH's audit preparation, and prepare financial statements. Familiarize NWCH staff with federal audit requirements so that adequate preparation of NWCH's accounting system, financial statements, and schedules required for the audit are prepared prior to audit fieldwork including the SEFA and the status of prior audit findings. Continue the search for accounting staff or contracted controller and expand the search to remote workers and professional staffing companies. Views of Responsible Officials and Planned Corrective Actions We agree with this finding and will continue to search for qualified accounting and other personnel necessary to support the continued expansion of NWCH. Training in federal single audit and HUD audit requirements will be obtained. NWCH is currently experiencing growing pains but management is determined to continue expanding, obtaining, and operating additional properties needed for housing low-income, homeless, and other qualifying individuals.
HUD Finding No. 2022-001 S-2700-005 Property Improvement Loan Insurance for Improving All Existing Structures and Building of New Nonresidential Structures - Assistance Listing No. 14.142 Late filing of the HUD audit for 2022 Criteria S-2700-020 HUD requires annual financial statements audits with HUD schedules to be filed within 90 days after the end of the entity's fiscal year. Condition S-2700-010 The 2022 audit for The Ridge was not filed with HUD on or before March 31, 2023. Context S-2700-009 The Ridge's parent nonprofit organization, Northwest Coastal Housing (NWCH) purchased properties, added staff, and set up new entities producing a volume of documentation and transactions for the audit beyond what is typical for this organization. In addition, management researched, obtained HUD approval, and contracted a new property management company for The Ridge to replace the prior property management company that perpetrated financial abuses discovered in the 2021 audit, that have not yet been reimbursed to The Ridge by this company. Cause S-2700-040 Rapid growth of NWCH in providing low-income housing on the Oregon coast coupled with difficulty in hiring qualified staff to maintain expanded operations. The 2022 accounting was submitted to the auditor in several trial balances from the contracted bookkeeper and property management companies resulting in more work for the auditor than expected. In addition, closing entries for properties purchased and sold were not recorded correctly, causing the auditor to calculate corrections to the financial statements for these and other accounting issues. The Schedule of Expenditures of Federal Awards and the status of prior year audit findings and questioned costs were provided to the auditor on April 12, 2023, after the HUD audit submission deadline. NWCH's operations and activities have expanded beyond the entity's current internal infrastructure but are greatly needed in this rural area of Oregon with many homeless and low-income individuals. Effect S-2700-030 Late submission of the 2022 audit and REAC filing to HUD for The Ridge for 2022. Questioned Costs S-2700-065 None. Recommendation S-2700-050 Hire a degreed accountant or engage an accounting firm to oversee the accounting function for NWCH and to properly prepare for the audit with corrections made, and consolidated financial statements prepared prior to the start of the annual audit. Summarize commitments, contingencies, subsequent events, and related party transactions and include these items in the financial statements as part of audit preparation. Expand your search for qualified accounting personnel to remote employees and professional staffing companies since there is definitely a known shortage of qualified accountants in the traditional job markets. Views of Responsible Officials and Planned Corrective Actions S-2700-100 We agree with this finding. NWCH was successful in adding needed staff in 2023, but was unable to hire a degreed accountant or controller, or to contract with an accounting firm for oversight of the accounting function. Bookkeeper training was provided from Shelter Resources Financial Manager in February 2023. NWCH is researching CPA firms in order to contract a qualified controller with expertise in real estate holdings relevant to NWCH. Efforts to hire experienced personnel continues, especially for a qualified, college degreed accountant.
Finding No. 2022-002 Material Weakness - Internal Control - Accounting Corrections Criteria According to Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) a deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected and corrected, on a timely basis. Condition The auditor calculated, and NWCH approved recording several material adjustments to the financial state- ments in order for the audited financial statements to be materially correct. Context NWCH created a partnership entity and sold an apartment complex to the new partnership, however, the transaction was not properly recorded in either entities' accounting system. Nor were the new partnership's assets and liabilities completely removed from NWCH's books. A construction loan for renovation of the apartment complex on a cost reimbursement basis with funds held by the lender was not recorded or disclosed in the financial statements. For NWCH, a material amount of fixed assets were expensed rather than capitalized, and grants awarded but not yet received (over $1 million) were not recorded as receivables and prepaid revenue. The new lease accounting standard was implemented during, rather than prior to the 2022 audit. Accordingly, the audited consolidated financial statements required several adjustments to be materially correct. Cause The transactions discussed above did not go through NWCH's bank accounts and, accordingly, were not recorded by the bookkeeper. Property purchase and sale closing statements were received but were not recorded in the books of accounts until after the audit began. Recording of fixed assets purchases did not follow NWCH's capitalization policy. The bookkeeper does not have the accounting experience and back- ground, or a full understanding of U.S. GAAP to properly record transactions as they occur without further training and oversight. The new lease accounting standard is not understood by NWCH staff, and was not implemented, nor were the related entities consolidated into one set of financial statements. Effect Initial accounting records provided for the audit from NWCH and the new partnership understated assets by $855,551 and $8,498,772, understated liabilities by $644,791 and $7,756,414, and incorrectly reported the change in net assets by $148,269 and ($35,291), respectively. Questioned Costs None. Recommendation The two property management companies managing NWCH apartment complexes produce accurate accounting and tenant records. A college degreed accountant, CPA, or CPA firm is needed to oversee the NORTHWEST COASTAL HOUSING Spyglass Ridge Limited Partnership, HUD Project No. 126-11130 Schedule of Findings and Questioned Costs For the Year Ended December 31, 2022 63 Section II - Financial Statement Findings (continued) Finding No. 2022-002 (continued) Material Weakness - Internal Control - Accounting Corrections Recommendation (continued) accounting function for NWCH to properly prepare the consolidated financial statements in accordance with U.S. GAAP. Views of Responsible Officials and Planned Corrective Actions We agree with this finding. NWCH was successful in adding needed staff in 2023, but was unable to hire a degreed accountant or controller, or to contract with an accounting firm for oversight of the accounting function. Bookkeeper training was provided from Shelter Resources Financial Manager in February 2023. NWCH is researching CPA firms in order to contract a qualified controller with expertise in real estate holdings relevant to NWCH. NWCH has been actively searching for a qualified CPA to hire or contract with since 2021, however, due to capacity constraints and overwhelmed CPA firms, NWCH has been unsuccessful. Efforts to hire experienced accounting personnel continues. NORTHWEST COASTAL HOUSING Spyglass Ridge Limited Partnership, HUD Project No. 126-11130 Schedule of Findings and Questioned Costs For the Year Ended December 31, 2022 64
Finding No. 2022-003 The Schedule of Expenditures of Federal Awards (SEFA) and the status of prior audit findings and questioned costs were not timely prepared by NWCH staff for the audit. Criteria According to Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) the auditee is responsible for preparation of the SEFA and updating the status of prior audit findings before audit fieldwork begins as stated in the annual audit engagement letter. Condition The SEFA and the status of prior audit findings were provided to the auditor on April 12, 2023, after the HUD audit submission deadline and after the majority of audit procedures were completed. Context The SEFA and the status of prior audit findings were requested in the audit engagement letter and a few additional requests via email and telephone calls during the audit. Cause Lack of familiarity with and understanding of federal single audit requirements and procedures. Effect Late filing of the annual audit with HUD and notification by HUD that this late filing may affect the awarding of future grants and loans to NWCH. Questioned Costs None. Recommendations Rapid growth of NWCH in providing much needed low-income housing on the Oregon coast coupled with difficulty in hiring qualified staff to maintain expanded operations resulted in NWCH being unprepared for the 2022 audit. Seek training on federal single audit requirements, continue to pursue hiring of or contracting with a degreed accountant who can provide oversight of the accounting function, oversee NWCH's audit preparation, and prepare financial statements. Familiarize NWCH staff with federal audit requirements so that adequate preparation of NWCH's accounting system, financial statements, and schedules required for the audit are prepared prior to audit fieldwork including the SEFA and the status of prior audit findings. Continue the search for accounting staff or contracted controller and expand the search to remote workers and professional staffing companies. Views of Responsible Officials and Planned Corrective Actions We agree with this finding and will continue to search for qualified accounting and other personnel necessary to support the continued expansion of NWCH. Training in federal single audit and HUD audit requirements will be obtained. NWCH is currently experiencing growing pains but management is determined to continue expanding, obtaining, and operating additional properties needed for housing low-income, homeless, and other qualifying individuals.
HUD Finding No. 2022-001 S-2700-005 Property Improvement Loan Insurance for Improving All Existing Structures and Building of New Nonresidential Structures - Assistance Listing No. 14.142 Late filing of the HUD audit for 2022 Criteria S-2700-020 HUD requires annual financial statements audits with HUD schedules to be filed within 90 days after the end of the entity's fiscal year. Condition S-2700-010 The 2022 audit for The Ridge was not filed with HUD on or before March 31, 2023. Context S-2700-009 The Ridge's parent nonprofit organization, Northwest Coastal Housing (NWCH) purchased properties, added staff, and set up new entities producing a volume of documentation and transactions for the audit beyond what is typical for this organization. In addition, management researched, obtained HUD approval, and contracted a new property management company for The Ridge to replace the prior property management company that perpetrated financial abuses discovered in the 2021 audit, that have not yet been reimbursed to The Ridge by this company. Cause S-2700-040 Rapid growth of NWCH in providing low-income housing on the Oregon coast coupled with difficulty in hiring qualified staff to maintain expanded operations. The 2022 accounting was submitted to the auditor in several trial balances from the contracted bookkeeper and property management companies resulting in more work for the auditor than expected. In addition, closing entries for properties purchased and sold were not recorded correctly, causing the auditor to calculate corrections to the financial statements for these and other accounting issues. The Schedule of Expenditures of Federal Awards and the status of prior year audit findings and questioned costs were provided to the auditor on April 12, 2023, after the HUD audit submission deadline. NWCH's operations and activities have expanded beyond the entity's current internal infrastructure but are greatly needed in this rural area of Oregon with many homeless and low-income individuals. Effect S-2700-030 Late submission of the 2022 audit and REAC filing to HUD for The Ridge for 2022. Questioned Costs S-2700-065 None. Recommendation S-2700-050 Hire a degreed accountant or engage an accounting firm to oversee the accounting function for NWCH and to properly prepare for the audit with corrections made, and consolidated financial statements prepared prior to the start of the annual audit. Summarize commitments, contingencies, subsequent events, and related party transactions and include these items in the financial statements as part of audit preparation. Expand your search for qualified accounting personnel to remote employees and professional staffing companies since there is definitely a known shortage of qualified accountants in the traditional job markets. Views of Responsible Officials and Planned Corrective Actions S-2700-100 We agree with this finding. NWCH was successful in adding needed staff in 2023, but was unable to hire a degreed accountant or controller, or to contract with an accounting firm for oversight of the accounting function. Bookkeeper training was provided from Shelter Resources Financial Manager in February 2023. NWCH is researching CPA firms in order to contract a qualified controller with expertise in real estate holdings relevant to NWCH. Efforts to hire experienced personnel continues, especially for a qualified, college degreed accountant.