Audit 413381

Segregation of Duties Finding resolution status Unresolved Information on universe and population size The universe consisted of all receipts and disbursement transactions during the fiscal year. Sample size information These errors were not discovered as a result of the sampling approach, but through observation of processes and interviews with staff. Identification as a repeat finding This is a repeat finding. Criteria Internal control best practices, including those outlined in the COSO Framework, recommend segregation of duties so that no single individual has control over all phases of a financial transaction. This control is essential to prevent and detect errors or irregularities in a timely manner. Statement of condition During our review of internal control procedures, we noted that key accounting functions over cash receipts and disbursements are not adequately segregated. Cause The Authority has limited staffing resources, resulting in the assignment of incompatible duties to a single employee without sufficient compensating controls. Effect Without adequate segregation of duties, there is an increased risk that errors or fraudulent activity could occur and remain undetected. This could impact the accuracy and integrity of the financial statements. Auditor non-compliance code S – Internal Control Deficiency Section II -- Financial Statement Findings (Continued) Questioned costs None Views of responsible officials Management concurs with the finding. The Board of Commissioners and management have reviewed the current duties of the Authority staff and segregated as much as possible with limited staff. Additionally, the Authority contracts with a 3rd party fee accountant to reconcile the bank statements monthly ( in addition to the Executive Director). The Board of Commissioners receives and reviews the monthly disbursement listing. The Board of Commissioners will continue to monitor rental and cash flow activities reported by accounting personnel monthly. Context This issue was noted in the Authority’s accounting and financial reporting processes, where limited staffing has led to certain employees being responsible for multiple phases of receipt and disbursement transactions. Although management is aware of resource constraints, no formal compensating controls have been implemented to mitigate the risk. Recommendation We recommend that the Authority strengthen segregation of duties by either reallocating responsibilities among existing staff or implementing periodic independent reviews.

Eligibility – Lack of Internal Controls Federal Program: Rural Rental Housing Loans – Assistance Lising #10.415 Federal Agency: U.S. Department of Agriculture - Rural Development Award Period: 2025 Finding resolution status Unresolved Information on universe and population size The universe consisted of tenant files of all tenants living in projects financed with rural rental housing loans (143) during the fiscal year. Sample size information 15 tenant files were reviewed. Identification as a repeat finding This is a repeat finding. Criteria 2 CFR §200.303(c) requires non-Federal entities to establish and maintain effective internal controls over Federal awards that provide reasonable assurance of compliance with applicable laws, regulations, and program requirements. As a fundamental internal control principle, review of key financial and program compliance documents, including tenant certifications, should be performed by an individual independent from the preparer to prevent and detect errors or misstatements. Statement of condition During our testing of compliance for eligibility, we noted that the same employee was responsible for both preparing and reviewing the tenant files. Cause The organization has limited staffing resources, resulting in the assignment of incompatible duties to a single employee without sufficient compensating controls. Effect When the preparer is also the reviewer, the risk of undetected errors or omissions increases. This could result in inaccurate tenant certifications, noncompliance with RD program requirements, and potential misreporting of tenant eligibility or rental assistance amounts. Auditor non-compliance code S – Internal Control Deficiency Questioned costs None Section III – Federal Award Findings and Questioned Costs (Continued) Views of responsible officials Management concurs with the finding and will take steps to resolve the material weakness. Context This issue was observed in the preparation and review process for RD Form 3560-8 and/or HUD Form 50058, where staffing limitations resulted in the same individuals both preparing and reviewing tenant certifications. Recommendation We recommend that the Authority establish procedures to ensure all RD Form 3560-8 and HUD Form 50058 submissions are subject to an independent review prior to submission.