Audit 400976

See Finding 2022-003

Criteria: Internal controls over financial reporting should exist to ensure that material misstatements are prevented, or detected and corrected, by management in a timely manner. COSO/Internal Control Framework defines control activities as "policies and procedures that help to ensure management's directives are carried out". Management review controls are defined as, "the activities of a person, different than the preparer, through analyzing and performing oversight activities performed, and is an integral part of any internal control structure". COSO/Internal Control Framework state that control activities must be in place for there to be adequate internal control procedures over financial reporting. Furthermore, these control activities should be performed timely to ensure financial transactions are recorded in the correct reporting period in compliance with generally accepted accounting principles ("GAAP"). Condition: The accounting records for Urban Partnerships Community Development Corporation and Affiliates were missing a material loan receivable and associated loan payable and needed to be revised and corrected. Cause: Management did not have sufficient monitoring procedures in place to ensure the accounting for Urban Partnerships Community Development Corporation and Affiliates was in accordance with generally accepted accounting principles. Effect: This condition may lead to inaccurate financial reporting and potential misstatement of the consolidated financial statements such that they are not in accordance with GAAP. In addition, the 2022 consolidated financial statements had to be restated for misstated items. Recommendation: Management should establish or undertake a review of internal controls over financial reporting and ensure that financial data is properly recorded in the books and records of the Organization to prevent misstatements from occurring in the future. View of Responsible Officials: This issue was brought on this year due to the quick acceleration of the Organization and Affiliates' activities, while management was in the process of implementing internal control policies and procedures, including the transition of third-party bookkeepers engaged by the Organization. Management will implement proper policies and procedures to ensure the Organization and Affiliates' activities are properly recognized. In addition, management will reconcile the activities of the Organization and Affiliates quarterly against the financial system and ensure activities are recognized properly at year-end.

Name of Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Community Development Block Grants Assistance Listing Number: CFDA 14.228 Federal Award Identification Number and Year: Identification number unavailable. Program year 2021. Name of Pass-through Entity: City of Houston, Texas Criteria: In accordance with 2 CFR 200.302 (Financial Management), a grant recipient's financial management system must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. In addition, 2 CFR 200.510 (Financial Statements), states in part that the auditee must prepare a schedule of expenditures of Federal awards ("SEFA") for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with 2CFR 200.502. At a minimum, the Schedule must include: - All individual Federal programs by Federal agency. - For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. - Provide total Federal awards expended for each individual Federal program and the Assistance Listing Number or other identifying number when the Assistance Listing Number is not available. - Include the total amount provided to subrecipients from each Federal program. Condition/Context: The Organization management's review and approval process did not detect the error in a timely manner. The error consisted of the understatement of Federal Assistance Listing Number 14.228 in the amount of $16,244,258. Cause: The Organization's internal controls over the preparation and review of the SEFA were not operating effectively. Effect or Potential Effect: The Schedule as presented in the original issuance of the financial statements was not properly presented in accordance with the Uniform Guidance. Questioned Costs: None Identification as a Repeat Finding: This is not a repeat finding Recommendation: We recommend the Organization strengthen its policies, procedures, and controls for the identification of federal awards to ensure a complete and accurate SEFA is prepared in a timely manner. View of Responsible Officials: Management agrees with the finding and is in the process of revising internal controls to address SEFA preparation.