Audit 626

FY End

2023-06-30

Total Expended

$1.40M

Findings

2

Programs

1

Organization: Mary Lee Flagship (TX)

Year: 2023 Accepted: 2023-10-12

Auditor: Brown Graham & Company PC

Organization Exclusion Status:

Checking exclusion status...

ID	Ref	Severity	Repeat	Requirement
323	2023-001	Significant Deficiency	Yes	E
576765	2023-001	Significant Deficiency	Yes	E

ALN	Program	Spent	Major	Findings
14.157	Supportive Housing for the Elderly	$1.40M	Yes	1

Contacts

Name	Title	Type
VF3DXK3UCVS1	Fran Rodda	Auditee
5124435777	Shannon Andre	Auditor
No contacts on file

Notes to SEFA

Title: Basis of presentation Accounting Policies: Basis of presentation: The accompanying schedule of expenditures of federal awards includes the federal loan activity of Mary Lee Flagship (the Organization) for the year ended June 30, 2023. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the presentation of the financial statements. Summary of significant accounting policies: Expenditures related to tenant rental assistance activity are reported on the accrual basis of accounting. Federal loan expenditures represent the full outstanding balance of the Section 202 mortgage note payable as required by the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The Organization did not make an election to use the ten percent de minimis cost rate as allowed in the Uniform Guidance. The accompanying schedule of expenditures of federal awards includes the federal loan activity of Mary Lee Flagship (the Organization) for the year ended June 30, 2023. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the presentation of the financial statements.

Title: Summary of significant accounting policies Accounting Policies: Basis of presentation: The accompanying schedule of expenditures of federal awards includes the federal loan activity of Mary Lee Flagship (the Organization) for the year ended June 30, 2023. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the presentation of the financial statements. Summary of significant accounting policies: Expenditures related to tenant rental assistance activity are reported on the accrual basis of accounting. Federal loan expenditures represent the full outstanding balance of the Section 202 mortgage note payable as required by the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The Organization did not make an election to use the ten percent de minimis cost rate as allowed in the Uniform Guidance. Expenditures related to tenant rental assistance activity are reported on the accrual basis of accounting. Federal loan expenditures represent the full outstanding balance of the Section 202 mortgage note payable as required by the Uniform Guidance.

Title: Summary of significant accounting policies Accounting Policies: Basis of presentation: The accompanying schedule of expenditures of federal awards includes the federal loan activity of Mary Lee Flagship (the Organization) for the year ended June 30, 2023. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the presentation of the financial statements. Summary of significant accounting policies: Expenditures related to tenant rental assistance activity are reported on the accrual basis of accounting. Federal loan expenditures represent the full outstanding balance of the Section 202 mortgage note payable as required by the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The Organization did not make an election to use the ten percent de minimis cost rate as allowed in the Uniform Guidance. The Organization did not make an election to use the ten percent de minimis cost rate as allowed in the Uniform Guidance.

Finding Details

Finding 2023-001

Finding 2023-01: Condition: Mary Lee Flagship (the Organization) did not consistently use the Enterprise Income Verification (EIV) system, as required by HUD. We noted two tenants file did not contain a timely run EIV report. Client had obtained and used third-party documentation of income and assets for the initial certification/recertifications. Criteria: Per 24 CFR 5.233 Mandated Use of HUD’s Enterprise Income Verification (EIV) System, entities administering assistance under Section 202 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 8013) must use HUD’s EIV system in its entirety as a third-party source to verify tenant employment and income information during mandatory reexaminations or recertifications of family composition and income. Cause: Inconsistent monitoring of internal controls in place over use of EIV reports in recertifications and inadequate internal monitoring of tenant files noted during the current year. Effect: Failure to use the EIV system in its entirety may result in the imposition of sanctions and/or the assessment of disallowed costs associated with any resulting incorrect subsidy or tenant rent calculations, or both. Questioned costs: $-0- Context: We examined three tenant files of which one file contained relevant EIV report and two files did not contain a timely run EIV report. Repeat Finding: Yes Recommendation: We recommend that the Organization require any personnel performing initial certifications or recertifications to undergo HUD 202 training regarding the intake process prior to performing any initial certifications or recertifications. Additionally, we recommend a second person in the housing office review the tenant file to ensure completeness and compliance with HUD 202 documentation requirements prior to signing the new/amended lease agreement. Reporting Views of Responsible Officials: Management agrees with the finding and will begin an independent review of each tenant file to include examination of EIV reports to determine if there are any discrepancies and take corrective measures. Leasing office staff will undergo additional HUD 202 training regarding the initial and recertification process. Additionally, management is staffing the property with a dedicated property manager that will be responsible for reviewing tenant files for compliance with HUD procedures including uses of EIV reports and ensure supporting documentation is maintained in each tenant’s file prior to signing new or amended leases.

Finding 2023-001

Finding 2023-01: Condition: Mary Lee Flagship (the Organization) did not consistently use the Enterprise Income Verification (EIV) system, as required by HUD. We noted two tenants file did not contain a timely run EIV report. Client had obtained and used third-party documentation of income and assets for the initial certification/recertifications. Criteria: Per 24 CFR 5.233 Mandated Use of HUD’s Enterprise Income Verification (EIV) System, entities administering assistance under Section 202 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 8013) must use HUD’s EIV system in its entirety as a third-party source to verify tenant employment and income information during mandatory reexaminations or recertifications of family composition and income. Cause: Inconsistent monitoring of internal controls in place over use of EIV reports in recertifications and inadequate internal monitoring of tenant files noted during the current year. Effect: Failure to use the EIV system in its entirety may result in the imposition of sanctions and/or the assessment of disallowed costs associated with any resulting incorrect subsidy or tenant rent calculations, or both. Questioned costs: $-0- Context: We examined three tenant files of which one file contained relevant EIV report and two files did not contain a timely run EIV report. Repeat Finding: Yes Recommendation: We recommend that the Organization require any personnel performing initial certifications or recertifications to undergo HUD 202 training regarding the intake process prior to performing any initial certifications or recertifications. Additionally, we recommend a second person in the housing office review the tenant file to ensure completeness and compliance with HUD 202 documentation requirements prior to signing the new/amended lease agreement. Reporting Views of Responsible Officials: Management agrees with the finding and will begin an independent review of each tenant file to include examination of EIV reports to determine if there are any discrepancies and take corrective measures. Leasing office staff will undergo additional HUD 202 training regarding the initial and recertification process. Additionally, management is staffing the property with a dedicated property manager that will be responsible for reviewing tenant files for compliance with HUD procedures including uses of EIV reports and ensure supporting documentation is maintained in each tenant’s file prior to signing new or amended leases.