FAC Explorer

Audit 5160

FY End
2023-03-31
Total Expended
$8.54M
Findings
2
Programs
3
Organization: Loyal Heights Manor (WA)
Year: 2023 Accepted: 2023-12-04
Auditor: Squires Maddux & Company PLLC

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
3160 2023-002 Material Weakness - E
579602 2023-002 Material Weakness - E

Programs

ALN Program Spent Major Findings
14.155 Mortgage Insurance for the Purchase Or Refinancing of Existing Multifamily Housing Projects $7.72M Yes 0
14.856 Lower Income Housing Assistance Program_section 8 Moderate Rehabilitation $737,073 Yes 1
14.191 Multifamily Housing Service Coordinators $86,038 - 0

Contacts

Name Title Type
PFT5JL1WNMN1 Mikey Clark Auditee
4254948549 John Maddux Auditor
No contacts on file

Notes to SEFA

Title: NOTE A – BASIS OF PRESENTATION Accounting Policies: NOTE A – BASIS OF PRESENTATION The above schedule of expenditures of federal awards includes the federal grant activity of Loyal Heights Manor, HUD Project No. 127-11253 and is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); the financial statements have been prepared and presented based upon accounting principles generally accepted in the United States of America (US GAAP); therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Because the Schedule presents only a selected portion of the operations of Loyal Heights Manor, it is not intended to and does not present the financial position, change in net assets, or cash flows of Loyal Heights Manor. NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Loyal Heights Manor has elected not to use the ten percent (10%) de Minimis indirect cost rate allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The auditee did not use the 10% cost de minimus rate. The above schedule of expenditures of federal awards includes the federal grant activity of Loyal Heights Manor, HUD Project No. 127-11253 and is presented in accordance with the requirementsof Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); the financial statements have been prepared and presented based upon accounting principles generally accepted in the United States of America (US GAAP); therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Because the Schedule presents only a selected portion of the operations of Loyal Heights Manor, it is not intended to and does not present the financial position, change in net assets, or cash flows of Loyal Heights Manor.
Title: NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Policies: NOTE A – BASIS OF PRESENTATION The above schedule of expenditures of federal awards includes the federal grant activity of Loyal Heights Manor, HUD Project No. 127-11253 and is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); the financial statements have been prepared and presented based upon accounting principles generally accepted in the United States of America (US GAAP); therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Because the Schedule presents only a selected portion of the operations of Loyal Heights Manor, it is not intended to and does not present the financial position, change in net assets, or cash flows of Loyal Heights Manor. NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Loyal Heights Manor has elected not to use the ten percent (10%) de Minimis indirect cost rate allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The auditee did not use the 10% cost de minimus rate. Expenditures reported on the Schedule are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Loyal Heights Manor has elected not to use the ten percent (10%) de Minimis indirect cost rate allowed under the Uniform Guidance.
Title: NOTE C – U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT LOAN PROGRAMS Accounting Policies: NOTE A – BASIS OF PRESENTATION The above schedule of expenditures of federal awards includes the federal grant activity of Loyal Heights Manor, HUD Project No. 127-11253 and is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); the financial statements have been prepared and presented based upon accounting principles generally accepted in the United States of America (US GAAP); therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Because the Schedule presents only a selected portion of the operations of Loyal Heights Manor, it is not intended to and does not present the financial position, change in net assets, or cash flows of Loyal Heights Manor. NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Loyal Heights Manor has elected not to use the ten percent (10%) de Minimis indirect cost rate allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The auditee did not use the 10% cost de minimus rate. Loyal Heights Manor has received a U.S. Department of Housing and Urban Development insured loan under Section 207, pursuant to Section 223(f), of the National Housing Act. The loan balance outstanding at the beginning of the year is included in the federal expenditures presented in the Schedule. The balance of the loan outstanding at March 31, 2023 consisted of: 14-155 Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects: $7,575,355.

Finding Details

Finding 2023-002
Title and CFDA Number of Federal Program: 14.856 Lower Income Housing Assistance Program Section 8 Moderate Rehabilitation Type of Finding: Federal Award Finding Finding Resolution Status: In Process Information on Universe Population Size: 54 rental units Sample Size Information: 11 rental units Identification of Repeat Finding and Finding Reference Number: Not Applicable. Criteria: TheCommittee of Sponsoring Organizations of the Treadway Commission (COSO) framework is a widely recognized framework for designing, implementing, and evaluating internal control systems. The COSO framework defines internal control as a process that is designed to provide reasonable security with respect to achievement of objectives of compliance with applicable laws and regulations. The COSO framework offers useful guiding principles that can be applied in establishing and operating an effective regulatory compliance program with the goal of closing compliance gaps, and ensuring the prevention of material noncompliance. The monitoring component of the COSO framework involves periodic or ongoing evaluations to verify that each of the five components internal control, including the controls that affect the principles within each component, are present and functioning. Monitoring helps ensure that internal controls continue to operate effectively. Statement of Condition: Management had developed activity level controls over compliance that included compliance review of all tenant certifications of income used in determining the amount of rent amounts due from eligible Section 8 participants (tenants) by the Coast compliance department. However, during our testing, management had no documentation evidencing such reviews had occurred; further, during our interview process of site staff (community managers), staff asserted that no such reviews had occurred, and that no feedback on tenant certifications was provided by the compliance department. Cause: Management had properly designed activity level controls over compliance, but those controls were not placed in operation. Proper monitoring of the compliance department was not occurring to detect the lack of proper oversight by the compliance department. Effect or Potential Effect: It is reasonably possible that ineligible tenants could improperly be granted tenancy to the property and given rental assistance for which they are not eligible. Such improper payments could be material. S3800-035 Auditor Non-Compliance Code: S – Internal Control Deficiencies Property(s) and associated questioned costs this finding applies to: FHA/Contract Number – 127-11253 Questioned Costs: $0 Reporting Views of Responsible Officials: After discussion with the auditor, senior management understands the importance of having a properly functioning monitoring system in place to ensure that controls that are properly designed are in fact placed in operation and functioning as intended. The compliance manager responsible for implementing the controls over compliance has been terminated, and senior management will institute monitoring procedures to ensure that controls over compliance are both properly designed and functioning as intended. Context: For the eleven files tested, no evidence existed in the files to corroborate that tenant certifications were being reviewed and approved by the compliance department. Recommendation: Management should have a process to review and approve all tenant certifications being prepared by site staff (community managers). The approval process should include an approval stamp or some other evidence that each file has been reviewed by the compliance department and is approved for processing. Further, senior management should have an ongoing monitoring process to ensure that the compliance department is carrying out the review process. Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: Management agrees with the recommendation of the auditor, and will ensure that evidence of certification review and approval is documented with a approval stamp or some other documentary evidence. Response Indicator: Agree (A) Completion Date: November 22, 2023 Response: Management agrees with the recommendation of the auditor and plans to take corrective actions as noted above.
Finding 2023-002
Title and CFDA Number of Federal Program: 14.856 Lower Income Housing Assistance Program Section 8 Moderate Rehabilitation Type of Finding: Federal Award Finding Finding Resolution Status: In Process Information on Universe Population Size: 54 rental units Sample Size Information: 11 rental units Identification of Repeat Finding and Finding Reference Number: Not Applicable. Criteria: TheCommittee of Sponsoring Organizations of the Treadway Commission (COSO) framework is a widely recognized framework for designing, implementing, and evaluating internal control systems. The COSO framework defines internal control as a process that is designed to provide reasonable security with respect to achievement of objectives of compliance with applicable laws and regulations. The COSO framework offers useful guiding principles that can be applied in establishing and operating an effective regulatory compliance program with the goal of closing compliance gaps, and ensuring the prevention of material noncompliance. The monitoring component of the COSO framework involves periodic or ongoing evaluations to verify that each of the five components internal control, including the controls that affect the principles within each component, are present and functioning. Monitoring helps ensure that internal controls continue to operate effectively. Statement of Condition: Management had developed activity level controls over compliance that included compliance review of all tenant certifications of income used in determining the amount of rent amounts due from eligible Section 8 participants (tenants) by the Coast compliance department. However, during our testing, management had no documentation evidencing such reviews had occurred; further, during our interview process of site staff (community managers), staff asserted that no such reviews had occurred, and that no feedback on tenant certifications was provided by the compliance department. Cause: Management had properly designed activity level controls over compliance, but those controls were not placed in operation. Proper monitoring of the compliance department was not occurring to detect the lack of proper oversight by the compliance department. Effect or Potential Effect: It is reasonably possible that ineligible tenants could improperly be granted tenancy to the property and given rental assistance for which they are not eligible. Such improper payments could be material. S3800-035 Auditor Non-Compliance Code: S – Internal Control Deficiencies Property(s) and associated questioned costs this finding applies to: FHA/Contract Number – 127-11253 Questioned Costs: $0 Reporting Views of Responsible Officials: After discussion with the auditor, senior management understands the importance of having a properly functioning monitoring system in place to ensure that controls that are properly designed are in fact placed in operation and functioning as intended. The compliance manager responsible for implementing the controls over compliance has been terminated, and senior management will institute monitoring procedures to ensure that controls over compliance are both properly designed and functioning as intended. Context: For the eleven files tested, no evidence existed in the files to corroborate that tenant certifications were being reviewed and approved by the compliance department. Recommendation: Management should have a process to review and approve all tenant certifications being prepared by site staff (community managers). The approval process should include an approval stamp or some other evidence that each file has been reviewed by the compliance department and is approved for processing. Further, senior management should have an ongoing monitoring process to ensure that the compliance department is carrying out the review process. Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: Management agrees with the recommendation of the auditor, and will ensure that evidence of certification review and approval is documented with a approval stamp or some other documentary evidence. Response Indicator: Agree (A) Completion Date: November 22, 2023 Response: Management agrees with the recommendation of the auditor and plans to take corrective actions as noted above.