Audit 405074

Finding 2025-002: Compliance finding and material weakness over compliance and financial reporting Information on universe: Payroll control testing Sample Size: Five employees selected for internal control testing. Identification of repeat finding: No Condition: Errors in coding during payroll processing which resulted in two employee’s time to be erroneously charged to the project. Criteria: Payroll should be properly allocated to projects. Effect: Ineligible wages being charged to the project. Context: Auditor selected timesheets for payroll control testing. Cause: Lack of management oversight. Recommendation: A procedure be implemented to ensure that wages charged to the project are adequately reviewed and allowable.

Finding 2025-004: Compliance finding Information on universe: It was noted during testing that the management agent did not deposit the 2024 surplus cash into the residual receipts account within the 90 day timeframe required by HUD. Sample Size: Monthly reserve activity is tested for compliance. Identification of repeat finding: No Condition: Deposit did not occur until September 2025. Criteria: Surplus cash is to be deposited into the residual receipts account within 90 days of the Organization’s year end. Effect: Surplus cash was not deposited within the required timeframe resulting in operating cash being overstated. Context: Auditor reviewed source documents noting the surplus cash was not deposited within 90 days of year end. An owner certified REAC was filed and management did not deposit the required surplus cash into the residual receipts account. This is required whether you file an audited REAC or owner certified REAC. Cause: An owner certified REAC was filed extending the due date for the audited REAC. Management did not estimate and deposit surplus cash into the residual receipts account. Recommendation: Management should calculate the surplus cash at the end of the fiscal year to properly ensure that the deposit is made timely whether they file an owner certified REAC or an audited REAC.

Finding 2025-003: Compliance finding and significant deficiency over compliance and financial reporting Information on universe: Payroll control testing Sample Size: Five employees selected for internal control testing. Identification of repeat finding: Yes, 2024-006 Condition: Lack of adequate reviews and approvals on time allocated and charged to the property due to calculation errors, using old allocation sheets and not receiving information timely. Criteria: Allocation sheets should be reviewed and approved for accuracy and completeness prior to payroll being run. Effect: The property could be charged the wrong amounts for payroll. Context: Auditor selected timesheets for payroll control testing. Cause: Lack of review and approvals. Recommendation: Allocation sheets and formulas should be reviewed in detail and approved prior to payroll being run.

Finding 2025-005: Material weakness and compliance Information on universe/sample size: It was noted during testing that the management agent was not able to perform management duties in a timely manner. Identification of repeat finding: Yes, 2024-004 and 2024-007 Condition: All management agent duties should be performed timely. Criteria: Tenant units should be filled in a timely manner and existing tenants must be recertified annually. Effect: There were unresolved corrections, open items, and tenants’ subsidies that had expired and, tenants that had not been recertified, as well as vacant units for extended periods of time. Context: All tenants should be recertified annually, verifying all income and expenses, and calculating the correct portions of HUD and tenant rent. Additionally, all vacant units should be filled in a timely manner. Cause: Turnover at the management agent. Recommendation: The management agent should hire a consultant to assist with performing the necessary management agent duties when they are not adequately staffed.