Audit 410021

Significant Deficiency – Internal Controls over Period-End Financial Closing Process of Limited Partnerships Condition During our audits and compilations of the consolidated limited partnerships (the Limited Partnerships), it was noted that the Limited Partnerships did not perform a timely review and reconciliation of the activity reported by the property management company which resulted in misstated accounts, post-closing journal entries, and delays in obtaining supporting documents. These deficiencies contributed to delays in the preparation and finalization of the consolidated financial statements and impacted on the timely submission of the Uniform Guidance reporting package. Criteria: Management and those charged with governance are responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Cause: The deficiencies noted above were attributable to the third-party property management company’s failure to consistently perform and document internal controls over the closing process in a timely manner, as well as delays in providing the required monthly financial reporting package. In addition, the Organization did not have sufficient oversight mechanisms in place to monitor and enforce compliance with closing procedures at the property management company level for the Limited Partnerships. Effect: Certain internal controls were not properly designed or consistently and effectively implemented resulting in numerous adjustments to correct the misstatements. Recommendation: Although the Limited Partnerships have a separate financial reporting process, such controls were not being followed by the property management company. In addition, we noted that the Organization’s finance department was not reviewing the general ledger and financial reports provided by the property management company in a timely manner. We recommend management and finance department perform a timely review of the property management company’s activity for the Limited Partnerships, including a review of key reconciliations, to identify issues early and communicate corrections to the property management company in a timely manner. Views of Responsible Officials and Planned Corrective Actions: ECHC, in its capacity as General Partner, acknowledges the matters identified and notes that while it has established oversight controls over the financial closing and reporting process, the effectiveness of these controls was limited by the prior property management company’s inability to provide complete, accurate, and timely financial information. In response, ECHC has terminated agreements with the prior property management company and has engaged a new property management company, with clear expectations regarding the timely delivery of complete financial reporting packages and supporting documentation. ECHC will continue to execute its established oversight controls and will monitor the new management company’s performance to ensure the effectiveness of the financial closing and reporting process.