Audit 410728

Finding 2025-002 Information on the federal program: Subject: Home Investment Partnerships Program – Internal Controls Federal Agency: Department of Housing and Urban Development Federal Program: Home Investment Partnerships Program Assistance Listing Number: 14.239 Pass-Through Entity: N/A - Direct Grant Compliance Requirement: Special Tests and Provisions – Maximum Per Unit Subsidy Audit Findings: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the tes or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 29 CFR 92.250(b) states in part: The per-unit investment of Home funds may not exceed the Federal Housing Administration (FHA) mortgage limits in Subsection 221(d)(3) of the National Housing Act, including any area-wide high cost exceptions approved by HUD. This information should be available from the grantee or the local HUD field office. In mixed-income or mixed-use projects, the average per-unit investment in HOME-assisted units may not exceed the applicable Subsection 221(d)(3) (i.e., 234) limit. Condition: The Consortium did not have a documented review control in place to ensure the per-unit subsidy calculation was prepared and calculated accurately. There was no documented proof of segregation of duties. Cause: The Consortium's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Consortium at risk of noncompliance with the grant agreement and the per-unit compliance requirements. Questioned Costs: There were no questioned costs identified. Context: In a sample of two, the following instances were noted: • For the first selection, the per-unit subsidy information was entered into the HUD system (IDIS) during the project close out. There is no evidence of segregation of duties over the preparation and review of IDIS inputs. • For the second selection, the calculation was prepared by a former employee in 2025 and did not have sign off by the preparer or reviewer. A secondary review with evidence of sign off was performed subsequent to the audit period in 2026. Identification as a repeat finding: No. Section III – Federal Award Findings and Questioned Costs (Continued) Finding 2025-002 (Continued) Recommendation: We recommend the Consortium implement a formal process to ensure the required per-unit subsidy calculations are prepared, reviewed, and maintained by separate individuals involved in the process. Adequate documentation should be maintained to support the per-unit subsidy calculations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Finding 2025-003 Information on the federal program: Subject: Home Investment Partnerships Program – Internal Controls Federal Agency: Department of Housing and Urban Development Federal Program: Home Investment Partnerships Program Assistance Listing Number: 14.239 Pass-Through Entity: N/A - Direct Grant Compliance Requirement: Special Tests and Provisions - Underwriting Requirements Audit Findings: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 29 CFR 92.250(b) states in part: Participating jurisdictions must underwrite and evaluate projects to ensure that Home funds are not invested in projects with unreasonable costs, that the project is financially viable, and that the level of Home investment is not more than necessary. Additionally, the Uniform Guidance requires entities to maintain adequate documentation to demonstrate compliance with federal program requirements. Condition: The Consortium did not have a documented review control in place to ensure the underwriting calculation was prepared and calculated accurately. There was no documented proof of segregation of duties. Cause: The Consortium's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Consortium at risk of noncompliance with the grant agreement and the underwriting compliance requirements. Questioned Costs: There were no questioned costs identified. Section III – Federal Award Findings and Questioned Costs (Continued) Finding 2025-003 (Continued) Context: In a sample of two, one selection was noted where the underwriting calculation did not have evidence of preparer or reviewer. The selected underwriting calculation was prepared in April 2025. The Consortium implemented a control process in September 2025. The second sample tested had proper review and was completed in September 2025. Identification as a repeat finding: A similar finding appears as finding 2024-002 in the prior report. Recommendation: We recommend the Consortium implement a formal process to ensure the required underwriting calculations are prepared, reviewed, and maintained. Adequate documentation should be maintained to support the underwriting calculations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.