2022-002—ALLOWABLE COSTS AND ACTIVITIES
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Housing Opportunities For Persons With Aids
Assistance Listing Number: 14.241
Federal Award Identification Number and Year: NMH200032-2020 and NMH2001W068- 2020
Award Period: 6/9/2020 – 06/9/2023 for Grant68 and 05/20/2021 – 05/20/2024 for Grant32
Questioned Costs: $453,784.05
Type of Finding
• (D) Material Weakness in Internal Control Over Compliance of Federal Awards
• (F) Instances of Noncompliance related to Federal Awards
Statement of Condition
During our testing of allowable activities and costs, we noted a lack of evidence of internal controls over compliance and lack of evidence of compliance for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068.
Context
Internal Control over Compliance
40 transactions out of 40 tested did not have evidence of approval of review of budget to actual, review of allowable activities and allowable costs. The dollar amount of the exceptions were $469,439.37.
Compliance
21 transactions out of 40 tested did not have evidence of supporting documentation necessary to determine if the transaction was in compliance with grant requirement. The dollar amount of the exceptions were $453,784.05.
Criteria
As set forth in 2 CFR part 200 internal controls should be put in place to ensure costs and activities allowable under a Federal award are made in accordance with the government-wide cost principles in the Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
In addition, § 200.430 Compensation—personal services. (I) Standards for Documentation of Personnel Expenses: charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
Examples of illustrative control activities can be found in OMB Compliance Supplement, part 6—Internal Control, Appendix 2. Some examples of control activities as follows:
• Supervisors review and approve invoices, cost allocations, efforts of personnel, fringe benefits and indirect charges for allowability, adherence to cost principles, accuracy, and completeness.
• Grant supervisor reviews the budget vs. actual report investigating unusual or unexpected variances and documents results of follow-up work performed.
• Journal entries to transfer costs from one project to another are reviewed for appropriateness and approved.
Effect
The organization does not appear to have sufficient internal controls in place and does not appear to be in compliance with grant requirements as set forth in 2 CFR part 200. The lack of compliance has resulted in a disclaimer of opinion for allowable costs for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068. A potential effect of noncompliance of the federal award or future funding decisions could result in disallowance of costs, suspension or termination of the award, or reduction of future allocations.
Cause
Internal controls over compliance do not appear to have been adequately implemented due to lack of training, oversight, or resources.
Recommendation
We recommend the organization prevent recurrence of noncompliance by developing and implementing written policies and procedures, conducting regular reviews and reconciliations, provide training and guidance to staff and monitoring compliance
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022-003—LACK OF INTERNAL CONTROL OVER COMPLIANCE FOR ELIGIBILITY
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Housing Opportunities For Persons With Aids
Assistance Listing Number: 14.241
Federal Award Identification Number and Year: NMH200032-2020 and NMH2001W068- 2020
Award Period: 6/9/2020 – 06/9/2023 for Grant68 and 05/20/2021 – 05/20/2024 for Grant32
Questioned Costs: None
Type of Finding
(E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
Statement of Condition
During our testing of eligibility, we noted a lack of evidence of internal controls over compliance for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068.
Context
5 transactions out of 8 tested did not have evidence of management review of approval of the participant’s eligibility.
Criteria
As set forth in 2 CFR part 200 internal controls:
• The organization should maintain written policies and procedures outlining processes and control activities for determining eligibility of participants and amounts awarded, as applicable.
• Evidence of the review of the eligibility determinations by a knowledgeable supervisor should be documented.
Cause
The auditee did not have adequate policies and procedures to verify and document the eligibility of the recipients.
Effect
The organization does not appear to have sufficient internal controls in place and does not appear to be in compliance with grant requirements as set forth in 2 CFR part 200. A potential effect of noncompliance of the federal award or future funding decisions could result in suspension or termination of the award.
Recommendation
We recommend the organization:
• maintain written policies and procedures outlining processes and control activities for determining eligibility of participants and amounts awarded, as applicable.
• Document evidence of the review of the eligibility determinations by a knowledgeable supervisor.
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022‐001—FINANCIAL TRACKING OF FEDERAL GRANTS AND PREPARATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Federal Agency: All presented in the Schedule of Expenditures of Federal Awards (SEFA).
Federal Program Name: All presented in the SEFA.
Assistance Listing Number: All presented in SEFA.
Federal Award Identification Number and Year: All presented in SEFA.
Award Period: N/A
Questioned Costs: None
Type of Finding
• (E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
• (F) Instance of Noncompliance related to Federal Awards
Statement of Condition
During our audit, we were unable to determine if the Schedule of Expenditures of Federal Awards (SEFA) was accurate. While we believe the selection of the NMH200032-2020 and NMH2001W068-2020 grants were accurate as major federal programs per our determination calculation, we did not receive sufficient audit evidence on the accuracy of the expenditures presented in the SEFA. Therefore, we were unable to perform sufficient auditing procedures such as comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements, This has led us to disclaim our opinion related to whether the SEFA is fairly stated, in all material respects, in relation to the financial statements as a whole for the year ended December 31, 2022.
Criteria
2 CFR 200.510 indicates that the auditee must prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with 200.502 Basis for Determining Federal Awards Expended. Per 2 CFR 200.502 the determination of when a Federal award is expended should be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program establish and maintain effective internal controls over Federal awards that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of Federal awards.
Effect
Without an established process governed by effective internal controls, the Housing Trust may not prevent or detect material misstatements on its SEFA in a timely manner. In addition, the errors could result in improper selections of major federal program(s) for the single audit and a substandard single audit. This could affect the auditee’s eligibility for future federal awards or result in audit findings by the federal awarding agencies or pass-through entities.
Cause
the Housing Trust did not have adequate policies and procedures to ensure that the information reported in its SEFA was accurate and complete. Also, the Housing Trust did not have a system to reconcile its SEFA with its general ledger and other supporting documents.
Recommendation
We recommend the Housing Trust improve the financial tracking of its grants, corresponding expenses and other activity related to those federal grants to ensure the information reported in its SEFA is accurate and complete. We also recommend that the auditee establish a system to reconcile its SEFA with its general ledger and other supporting documents, including the name of grantor, the assistance listing #, the pass-through number, if applicable, and review its SEFA for any errors or omissions before submission.
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022-005–INSUFFICIENT AUDIT EVIDENCE
Federal Agency: All presented in the Schedule of Expenditures of Federal Awards (SEFA).
Federal Program Name: All presented in the SEFA.
Assistance Listing Number: All presented in SEFA.
Federal Award Identification Number and Year: All presented in SEFA.
Award Period: N/A
Questioned Costs: None
Estimated Questioned Costs: Unknown
Type of Finding
• (A) Material Weakness in Internal Control Over Financial Reporting
• (D) Material Weakness in Internal Control Over Compliance of Federal Awards
• (F) Instance of Noncompliance related to Federal Awards
Statement of Condition
During our audit, we were unable to obtain sufficient appropriate audit evidence to conclude the financial statements as a whole, are free from material misstatement. The following are key areas in which audit evidence was deemed insufficient:
• Receivables, mortgage loan receivables, development costs, land trust assets, liabilities, donor restricted net assts, revenues and expenditures and the schedule of expenditures of federal awards
Criteria
AU-C Section 705 Modifications to the Opinion in the Independent Auditor’s Report addresses the auditor’s responsibility to issue an appropriate report in circumstances when, in forming an opinion in accordance with section 700, Forming an Opinion and Reporting on Financial Statement.
Cause
the Housing Trust has undergone significant turnover during the year ended December 31, 2022, which has in turn caused the organization to lose institutional knowledge.
Effect
The possible effects of this inability to obtain sufficient appropriate audit evidence are deemed to be both material and pervasive to the financial statements and on compliance for each major federal program and on internal control over compliance required by the uniform guidance. Accordingly, the auditor’s reports both contain disclaimers of opinions.
Recommendation
We recommend Housing Trust maintain accurate and timely information in order to be ready for its annual audit.
View of Responsible Officials and Corrective Action Plan
Agreed. Where feasible, the Housing Trust will aim to improve management of all financial and non-financial data. A thorough review of the current policies and procedures will be conducted to identify new or updated processes that need to be changed. The bank reconciliations, monthly closings of the books, and thorough review of the financial reports will be done monthly. Staff changes have taken place to allow additional time for the Business Operations Manager to conduct these reviews. Consultations with an external accountant will be completed monthly to ensure the processes are correct.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2023-006—LATE DATA COLLECTION FORM
Funding Agency: All
Title: All
AL #: All
Award #: All
Award Period: All periods
Estimated Questioned Costs: None
Type of Finding
• (E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
• (F) Instance of Non-Compliance Related to Federal Awards
Statement of Condition
the Housing Trust Data Collection Form for the year ended December 31, 2022 was submitted after the required due date.
Criteria
The audit shall be completed and the data collection form and reporting package shall be electronically transmitted within the earlier of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)).
Cause
The expected deliverables requested to complete the audit were not received by the aforementioned deadline, which resulted in a late submission.
Effect
the Housing Trust is not in compliance with Federal Award data collection form requirements as required under Uniform Guidance regulations.
Recommendation
the Housing Trust should implement controls to ensure that all future data collection forms are completed in a timely manner.
View of Responsible Official
The contractors hired to do the accounting and payroll functions are no longer under contract with the Housing Trust. All financial functions are now being taken care of in-house. The financials are already in the process of being adjusted and all numbers being accounted for with documentation. This will continue through 2023 and in 2024, the chart of accounts will be changed to reflect the current practices for a nonprofit organization. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department has started. Staff changes will also need the Business Operations manager to provide a thorough monthly review. The current administrative assistant will take on the role of accounting technician to handle the day-to-day QuickBooks-related processes. Work has already started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designated Employee Responsible for Corrective Action:
Business Operations Manager
2022-002—ALLOWABLE COSTS AND ACTIVITIES
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Housing Opportunities For Persons With Aids
Assistance Listing Number: 14.241
Federal Award Identification Number and Year: NMH200032-2020 and NMH2001W068- 2020
Award Period: 6/9/2020 – 06/9/2023 for Grant68 and 05/20/2021 – 05/20/2024 for Grant32
Questioned Costs: $453,784.05
Type of Finding
• (D) Material Weakness in Internal Control Over Compliance of Federal Awards
• (F) Instances of Noncompliance related to Federal Awards
Statement of Condition
During our testing of allowable activities and costs, we noted a lack of evidence of internal controls over compliance and lack of evidence of compliance for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068.
Context
Internal Control over Compliance
40 transactions out of 40 tested did not have evidence of approval of review of budget to actual, review of allowable activities and allowable costs. The dollar amount of the exceptions were $469,439.37.
Compliance
21 transactions out of 40 tested did not have evidence of supporting documentation necessary to determine if the transaction was in compliance with grant requirement. The dollar amount of the exceptions were $453,784.05.
Criteria
As set forth in 2 CFR part 200 internal controls should be put in place to ensure costs and activities allowable under a Federal award are made in accordance with the government-wide cost principles in the Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
In addition, § 200.430 Compensation—personal services. (I) Standards for Documentation of Personnel Expenses: charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
Examples of illustrative control activities can be found in OMB Compliance Supplement, part 6—Internal Control, Appendix 2. Some examples of control activities as follows:
• Supervisors review and approve invoices, cost allocations, efforts of personnel, fringe benefits and indirect charges for allowability, adherence to cost principles, accuracy, and completeness.
• Grant supervisor reviews the budget vs. actual report investigating unusual or unexpected variances and documents results of follow-up work performed.
• Journal entries to transfer costs from one project to another are reviewed for appropriateness and approved.
Effect
The organization does not appear to have sufficient internal controls in place and does not appear to be in compliance with grant requirements as set forth in 2 CFR part 200. The lack of compliance has resulted in a disclaimer of opinion for allowable costs for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068. A potential effect of noncompliance of the federal award or future funding decisions could result in disallowance of costs, suspension or termination of the award, or reduction of future allocations.
Cause
Internal controls over compliance do not appear to have been adequately implemented due to lack of training, oversight, or resources.
Recommendation
We recommend the organization prevent recurrence of noncompliance by developing and implementing written policies and procedures, conducting regular reviews and reconciliations, provide training and guidance to staff and monitoring compliance
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022-003—LACK OF INTERNAL CONTROL OVER COMPLIANCE FOR ELIGIBILITY
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Housing Opportunities For Persons With Aids
Assistance Listing Number: 14.241
Federal Award Identification Number and Year: NMH200032-2020 and NMH2001W068- 2020
Award Period: 6/9/2020 – 06/9/2023 for Grant68 and 05/20/2021 – 05/20/2024 for Grant32
Questioned Costs: None
Type of Finding
(E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
Statement of Condition
During our testing of eligibility, we noted a lack of evidence of internal controls over compliance for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068.
Context
5 transactions out of 8 tested did not have evidence of management review of approval of the participant’s eligibility.
Criteria
As set forth in 2 CFR part 200 internal controls:
• The organization should maintain written policies and procedures outlining processes and control activities for determining eligibility of participants and amounts awarded, as applicable.
• Evidence of the review of the eligibility determinations by a knowledgeable supervisor should be documented.
Cause
The auditee did not have adequate policies and procedures to verify and document the eligibility of the recipients.
Effect
The organization does not appear to have sufficient internal controls in place and does not appear to be in compliance with grant requirements as set forth in 2 CFR part 200. A potential effect of noncompliance of the federal award or future funding decisions could result in suspension or termination of the award.
Recommendation
We recommend the organization:
• maintain written policies and procedures outlining processes and control activities for determining eligibility of participants and amounts awarded, as applicable.
• Document evidence of the review of the eligibility determinations by a knowledgeable supervisor.
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022‐001—FINANCIAL TRACKING OF FEDERAL GRANTS AND PREPARATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Federal Agency: All presented in the Schedule of Expenditures of Federal Awards (SEFA).
Federal Program Name: All presented in the SEFA.
Assistance Listing Number: All presented in SEFA.
Federal Award Identification Number and Year: All presented in SEFA.
Award Period: N/A
Questioned Costs: None
Type of Finding
• (E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
• (F) Instance of Noncompliance related to Federal Awards
Statement of Condition
During our audit, we were unable to determine if the Schedule of Expenditures of Federal Awards (SEFA) was accurate. While we believe the selection of the NMH200032-2020 and NMH2001W068-2020 grants were accurate as major federal programs per our determination calculation, we did not receive sufficient audit evidence on the accuracy of the expenditures presented in the SEFA. Therefore, we were unable to perform sufficient auditing procedures such as comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements, This has led us to disclaim our opinion related to whether the SEFA is fairly stated, in all material respects, in relation to the financial statements as a whole for the year ended December 31, 2022.
Criteria
2 CFR 200.510 indicates that the auditee must prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with 200.502 Basis for Determining Federal Awards Expended. Per 2 CFR 200.502 the determination of when a Federal award is expended should be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program establish and maintain effective internal controls over Federal awards that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of Federal awards.
Effect
Without an established process governed by effective internal controls, the Housing Trust may not prevent or detect material misstatements on its SEFA in a timely manner. In addition, the errors could result in improper selections of major federal program(s) for the single audit and a substandard single audit. This could affect the auditee’s eligibility for future federal awards or result in audit findings by the federal awarding agencies or pass-through entities.
Cause
the Housing Trust did not have adequate policies and procedures to ensure that the information reported in its SEFA was accurate and complete. Also, the Housing Trust did not have a system to reconcile its SEFA with its general ledger and other supporting documents.
Recommendation
We recommend the Housing Trust improve the financial tracking of its grants, corresponding expenses and other activity related to those federal grants to ensure the information reported in its SEFA is accurate and complete. We also recommend that the auditee establish a system to reconcile its SEFA with its general ledger and other supporting documents, including the name of grantor, the assistance listing #, the pass-through number, if applicable, and review its SEFA for any errors or omissions before submission.
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022-005–INSUFFICIENT AUDIT EVIDENCE
Federal Agency: All presented in the Schedule of Expenditures of Federal Awards (SEFA).
Federal Program Name: All presented in the SEFA.
Assistance Listing Number: All presented in SEFA.
Federal Award Identification Number and Year: All presented in SEFA.
Award Period: N/A
Questioned Costs: None
Estimated Questioned Costs: Unknown
Type of Finding
• (A) Material Weakness in Internal Control Over Financial Reporting
• (D) Material Weakness in Internal Control Over Compliance of Federal Awards
• (F) Instance of Noncompliance related to Federal Awards
Statement of Condition
During our audit, we were unable to obtain sufficient appropriate audit evidence to conclude the financial statements as a whole, are free from material misstatement. The following are key areas in which audit evidence was deemed insufficient:
• Receivables, mortgage loan receivables, development costs, land trust assets, liabilities, donor restricted net assts, revenues and expenditures and the schedule of expenditures of federal awards
Criteria
AU-C Section 705 Modifications to the Opinion in the Independent Auditor’s Report addresses the auditor’s responsibility to issue an appropriate report in circumstances when, in forming an opinion in accordance with section 700, Forming an Opinion and Reporting on Financial Statement.
Cause
the Housing Trust has undergone significant turnover during the year ended December 31, 2022, which has in turn caused the organization to lose institutional knowledge.
Effect
The possible effects of this inability to obtain sufficient appropriate audit evidence are deemed to be both material and pervasive to the financial statements and on compliance for each major federal program and on internal control over compliance required by the uniform guidance. Accordingly, the auditor’s reports both contain disclaimers of opinions.
Recommendation
We recommend Housing Trust maintain accurate and timely information in order to be ready for its annual audit.
View of Responsible Officials and Corrective Action Plan
Agreed. Where feasible, the Housing Trust will aim to improve management of all financial and non-financial data. A thorough review of the current policies and procedures will be conducted to identify new or updated processes that need to be changed. The bank reconciliations, monthly closings of the books, and thorough review of the financial reports will be done monthly. Staff changes have taken place to allow additional time for the Business Operations Manager to conduct these reviews. Consultations with an external accountant will be completed monthly to ensure the processes are correct.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2023-006—LATE DATA COLLECTION FORM
Funding Agency: All
Title: All
AL #: All
Award #: All
Award Period: All periods
Estimated Questioned Costs: None
Type of Finding
• (E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
• (F) Instance of Non-Compliance Related to Federal Awards
Statement of Condition
the Housing Trust Data Collection Form for the year ended December 31, 2022 was submitted after the required due date.
Criteria
The audit shall be completed and the data collection form and reporting package shall be electronically transmitted within the earlier of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)).
Cause
The expected deliverables requested to complete the audit were not received by the aforementioned deadline, which resulted in a late submission.
Effect
the Housing Trust is not in compliance with Federal Award data collection form requirements as required under Uniform Guidance regulations.
Recommendation
the Housing Trust should implement controls to ensure that all future data collection forms are completed in a timely manner.
View of Responsible Official
The contractors hired to do the accounting and payroll functions are no longer under contract with the Housing Trust. All financial functions are now being taken care of in-house. The financials are already in the process of being adjusted and all numbers being accounted for with documentation. This will continue through 2023 and in 2024, the chart of accounts will be changed to reflect the current practices for a nonprofit organization. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department has started. Staff changes will also need the Business Operations manager to provide a thorough monthly review. The current administrative assistant will take on the role of accounting technician to handle the day-to-day QuickBooks-related processes. Work has already started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designated Employee Responsible for Corrective Action:
Business Operations Manager
2022-002—ALLOWABLE COSTS AND ACTIVITIES
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Housing Opportunities For Persons With Aids
Assistance Listing Number: 14.241
Federal Award Identification Number and Year: NMH200032-2020 and NMH2001W068- 2020
Award Period: 6/9/2020 – 06/9/2023 for Grant68 and 05/20/2021 – 05/20/2024 for Grant32
Questioned Costs: $453,784.05
Type of Finding
• (D) Material Weakness in Internal Control Over Compliance of Federal Awards
• (F) Instances of Noncompliance related to Federal Awards
Statement of Condition
During our testing of allowable activities and costs, we noted a lack of evidence of internal controls over compliance and lack of evidence of compliance for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068.
Context
Internal Control over Compliance
40 transactions out of 40 tested did not have evidence of approval of review of budget to actual, review of allowable activities and allowable costs. The dollar amount of the exceptions were $469,439.37.
Compliance
21 transactions out of 40 tested did not have evidence of supporting documentation necessary to determine if the transaction was in compliance with grant requirement. The dollar amount of the exceptions were $453,784.05.
Criteria
As set forth in 2 CFR part 200 internal controls should be put in place to ensure costs and activities allowable under a Federal award are made in accordance with the government-wide cost principles in the Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
In addition, § 200.430 Compensation—personal services. (I) Standards for Documentation of Personnel Expenses: charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
Examples of illustrative control activities can be found in OMB Compliance Supplement, part 6—Internal Control, Appendix 2. Some examples of control activities as follows:
• Supervisors review and approve invoices, cost allocations, efforts of personnel, fringe benefits and indirect charges for allowability, adherence to cost principles, accuracy, and completeness.
• Grant supervisor reviews the budget vs. actual report investigating unusual or unexpected variances and documents results of follow-up work performed.
• Journal entries to transfer costs from one project to another are reviewed for appropriateness and approved.
Effect
The organization does not appear to have sufficient internal controls in place and does not appear to be in compliance with grant requirements as set forth in 2 CFR part 200. The lack of compliance has resulted in a disclaimer of opinion for allowable costs for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068. A potential effect of noncompliance of the federal award or future funding decisions could result in disallowance of costs, suspension or termination of the award, or reduction of future allocations.
Cause
Internal controls over compliance do not appear to have been adequately implemented due to lack of training, oversight, or resources.
Recommendation
We recommend the organization prevent recurrence of noncompliance by developing and implementing written policies and procedures, conducting regular reviews and reconciliations, provide training and guidance to staff and monitoring compliance
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022-003—LACK OF INTERNAL CONTROL OVER COMPLIANCE FOR ELIGIBILITY
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Housing Opportunities For Persons With Aids
Assistance Listing Number: 14.241
Federal Award Identification Number and Year: NMH200032-2020 and NMH2001W068- 2020
Award Period: 6/9/2020 – 06/9/2023 for Grant68 and 05/20/2021 – 05/20/2024 for Grant32
Questioned Costs: None
Type of Finding
(E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
Statement of Condition
During our testing of eligibility, we noted a lack of evidence of internal controls over compliance for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068.
Context
5 transactions out of 8 tested did not have evidence of management review of approval of the participant’s eligibility.
Criteria
As set forth in 2 CFR part 200 internal controls:
• The organization should maintain written policies and procedures outlining processes and control activities for determining eligibility of participants and amounts awarded, as applicable.
• Evidence of the review of the eligibility determinations by a knowledgeable supervisor should be documented.
Cause
The auditee did not have adequate policies and procedures to verify and document the eligibility of the recipients.
Effect
The organization does not appear to have sufficient internal controls in place and does not appear to be in compliance with grant requirements as set forth in 2 CFR part 200. A potential effect of noncompliance of the federal award or future funding decisions could result in suspension or termination of the award.
Recommendation
We recommend the organization:
• maintain written policies and procedures outlining processes and control activities for determining eligibility of participants and amounts awarded, as applicable.
• Document evidence of the review of the eligibility determinations by a knowledgeable supervisor.
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022‐001—FINANCIAL TRACKING OF FEDERAL GRANTS AND PREPARATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Federal Agency: All presented in the Schedule of Expenditures of Federal Awards (SEFA).
Federal Program Name: All presented in the SEFA.
Assistance Listing Number: All presented in SEFA.
Federal Award Identification Number and Year: All presented in SEFA.
Award Period: N/A
Questioned Costs: None
Type of Finding
• (E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
• (F) Instance of Noncompliance related to Federal Awards
Statement of Condition
During our audit, we were unable to determine if the Schedule of Expenditures of Federal Awards (SEFA) was accurate. While we believe the selection of the NMH200032-2020 and NMH2001W068-2020 grants were accurate as major federal programs per our determination calculation, we did not receive sufficient audit evidence on the accuracy of the expenditures presented in the SEFA. Therefore, we were unable to perform sufficient auditing procedures such as comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements, This has led us to disclaim our opinion related to whether the SEFA is fairly stated, in all material respects, in relation to the financial statements as a whole for the year ended December 31, 2022.
Criteria
2 CFR 200.510 indicates that the auditee must prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with 200.502 Basis for Determining Federal Awards Expended. Per 2 CFR 200.502 the determination of when a Federal award is expended should be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program establish and maintain effective internal controls over Federal awards that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of Federal awards.
Effect
Without an established process governed by effective internal controls, the Housing Trust may not prevent or detect material misstatements on its SEFA in a timely manner. In addition, the errors could result in improper selections of major federal program(s) for the single audit and a substandard single audit. This could affect the auditee’s eligibility for future federal awards or result in audit findings by the federal awarding agencies or pass-through entities.
Cause
the Housing Trust did not have adequate policies and procedures to ensure that the information reported in its SEFA was accurate and complete. Also, the Housing Trust did not have a system to reconcile its SEFA with its general ledger and other supporting documents.
Recommendation
We recommend the Housing Trust improve the financial tracking of its grants, corresponding expenses and other activity related to those federal grants to ensure the information reported in its SEFA is accurate and complete. We also recommend that the auditee establish a system to reconcile its SEFA with its general ledger and other supporting documents, including the name of grantor, the assistance listing #, the pass-through number, if applicable, and review its SEFA for any errors or omissions before submission.
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022-005–INSUFFICIENT AUDIT EVIDENCE
Federal Agency: All presented in the Schedule of Expenditures of Federal Awards (SEFA).
Federal Program Name: All presented in the SEFA.
Assistance Listing Number: All presented in SEFA.
Federal Award Identification Number and Year: All presented in SEFA.
Award Period: N/A
Questioned Costs: None
Estimated Questioned Costs: Unknown
Type of Finding
• (A) Material Weakness in Internal Control Over Financial Reporting
• (D) Material Weakness in Internal Control Over Compliance of Federal Awards
• (F) Instance of Noncompliance related to Federal Awards
Statement of Condition
During our audit, we were unable to obtain sufficient appropriate audit evidence to conclude the financial statements as a whole, are free from material misstatement. The following are key areas in which audit evidence was deemed insufficient:
• Receivables, mortgage loan receivables, development costs, land trust assets, liabilities, donor restricted net assts, revenues and expenditures and the schedule of expenditures of federal awards
Criteria
AU-C Section 705 Modifications to the Opinion in the Independent Auditor’s Report addresses the auditor’s responsibility to issue an appropriate report in circumstances when, in forming an opinion in accordance with section 700, Forming an Opinion and Reporting on Financial Statement.
Cause
the Housing Trust has undergone significant turnover during the year ended December 31, 2022, which has in turn caused the organization to lose institutional knowledge.
Effect
The possible effects of this inability to obtain sufficient appropriate audit evidence are deemed to be both material and pervasive to the financial statements and on compliance for each major federal program and on internal control over compliance required by the uniform guidance. Accordingly, the auditor’s reports both contain disclaimers of opinions.
Recommendation
We recommend Housing Trust maintain accurate and timely information in order to be ready for its annual audit.
View of Responsible Officials and Corrective Action Plan
Agreed. Where feasible, the Housing Trust will aim to improve management of all financial and non-financial data. A thorough review of the current policies and procedures will be conducted to identify new or updated processes that need to be changed. The bank reconciliations, monthly closings of the books, and thorough review of the financial reports will be done monthly. Staff changes have taken place to allow additional time for the Business Operations Manager to conduct these reviews. Consultations with an external accountant will be completed monthly to ensure the processes are correct.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2023-006—LATE DATA COLLECTION FORM
Funding Agency: All
Title: All
AL #: All
Award #: All
Award Period: All periods
Estimated Questioned Costs: None
Type of Finding
• (E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
• (F) Instance of Non-Compliance Related to Federal Awards
Statement of Condition
the Housing Trust Data Collection Form for the year ended December 31, 2022 was submitted after the required due date.
Criteria
The audit shall be completed and the data collection form and reporting package shall be electronically transmitted within the earlier of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)).
Cause
The expected deliverables requested to complete the audit were not received by the aforementioned deadline, which resulted in a late submission.
Effect
the Housing Trust is not in compliance with Federal Award data collection form requirements as required under Uniform Guidance regulations.
Recommendation
the Housing Trust should implement controls to ensure that all future data collection forms are completed in a timely manner.
View of Responsible Official
The contractors hired to do the accounting and payroll functions are no longer under contract with the Housing Trust. All financial functions are now being taken care of in-house. The financials are already in the process of being adjusted and all numbers being accounted for with documentation. This will continue through 2023 and in 2024, the chart of accounts will be changed to reflect the current practices for a nonprofit organization. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department has started. Staff changes will also need the Business Operations manager to provide a thorough monthly review. The current administrative assistant will take on the role of accounting technician to handle the day-to-day QuickBooks-related processes. Work has already started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designated Employee Responsible for Corrective Action:
Business Operations Manager
2022-002—ALLOWABLE COSTS AND ACTIVITIES
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Housing Opportunities For Persons With Aids
Assistance Listing Number: 14.241
Federal Award Identification Number and Year: NMH200032-2020 and NMH2001W068- 2020
Award Period: 6/9/2020 – 06/9/2023 for Grant68 and 05/20/2021 – 05/20/2024 for Grant32
Questioned Costs: $453,784.05
Type of Finding
• (D) Material Weakness in Internal Control Over Compliance of Federal Awards
• (F) Instances of Noncompliance related to Federal Awards
Statement of Condition
During our testing of allowable activities and costs, we noted a lack of evidence of internal controls over compliance and lack of evidence of compliance for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068.
Context
Internal Control over Compliance
40 transactions out of 40 tested did not have evidence of approval of review of budget to actual, review of allowable activities and allowable costs. The dollar amount of the exceptions were $469,439.37.
Compliance
21 transactions out of 40 tested did not have evidence of supporting documentation necessary to determine if the transaction was in compliance with grant requirement. The dollar amount of the exceptions were $453,784.05.
Criteria
As set forth in 2 CFR part 200 internal controls should be put in place to ensure costs and activities allowable under a Federal award are made in accordance with the government-wide cost principles in the Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
In addition, § 200.430 Compensation—personal services. (I) Standards for Documentation of Personnel Expenses: charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
Examples of illustrative control activities can be found in OMB Compliance Supplement, part 6—Internal Control, Appendix 2. Some examples of control activities as follows:
• Supervisors review and approve invoices, cost allocations, efforts of personnel, fringe benefits and indirect charges for allowability, adherence to cost principles, accuracy, and completeness.
• Grant supervisor reviews the budget vs. actual report investigating unusual or unexpected variances and documents results of follow-up work performed.
• Journal entries to transfer costs from one project to another are reviewed for appropriateness and approved.
Effect
The organization does not appear to have sufficient internal controls in place and does not appear to be in compliance with grant requirements as set forth in 2 CFR part 200. The lack of compliance has resulted in a disclaimer of opinion for allowable costs for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068. A potential effect of noncompliance of the federal award or future funding decisions could result in disallowance of costs, suspension or termination of the award, or reduction of future allocations.
Cause
Internal controls over compliance do not appear to have been adequately implemented due to lack of training, oversight, or resources.
Recommendation
We recommend the organization prevent recurrence of noncompliance by developing and implementing written policies and procedures, conducting regular reviews and reconciliations, provide training and guidance to staff and monitoring compliance
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022-003—LACK OF INTERNAL CONTROL OVER COMPLIANCE FOR ELIGIBILITY
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Housing Opportunities For Persons With Aids
Assistance Listing Number: 14.241
Federal Award Identification Number and Year: NMH200032-2020 and NMH2001W068- 2020
Award Period: 6/9/2020 – 06/9/2023 for Grant68 and 05/20/2021 – 05/20/2024 for Grant32
Questioned Costs: None
Type of Finding
(E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
Statement of Condition
During our testing of eligibility, we noted a lack of evidence of internal controls over compliance for the Housing Opportunities For Persons With Aids grants NMH200032 and NMH2001W068.
Context
5 transactions out of 8 tested did not have evidence of management review of approval of the participant’s eligibility.
Criteria
As set forth in 2 CFR part 200 internal controls:
• The organization should maintain written policies and procedures outlining processes and control activities for determining eligibility of participants and amounts awarded, as applicable.
• Evidence of the review of the eligibility determinations by a knowledgeable supervisor should be documented.
Cause
The auditee did not have adequate policies and procedures to verify and document the eligibility of the recipients.
Effect
The organization does not appear to have sufficient internal controls in place and does not appear to be in compliance with grant requirements as set forth in 2 CFR part 200. A potential effect of noncompliance of the federal award or future funding decisions could result in suspension or termination of the award.
Recommendation
We recommend the organization:
• maintain written policies and procedures outlining processes and control activities for determining eligibility of participants and amounts awarded, as applicable.
• Document evidence of the review of the eligibility determinations by a knowledgeable supervisor.
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022‐001—FINANCIAL TRACKING OF FEDERAL GRANTS AND PREPARATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Federal Agency: All presented in the Schedule of Expenditures of Federal Awards (SEFA).
Federal Program Name: All presented in the SEFA.
Assistance Listing Number: All presented in SEFA.
Federal Award Identification Number and Year: All presented in SEFA.
Award Period: N/A
Questioned Costs: None
Type of Finding
• (E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
• (F) Instance of Noncompliance related to Federal Awards
Statement of Condition
During our audit, we were unable to determine if the Schedule of Expenditures of Federal Awards (SEFA) was accurate. While we believe the selection of the NMH200032-2020 and NMH2001W068-2020 grants were accurate as major federal programs per our determination calculation, we did not receive sufficient audit evidence on the accuracy of the expenditures presented in the SEFA. Therefore, we were unable to perform sufficient auditing procedures such as comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements, This has led us to disclaim our opinion related to whether the SEFA is fairly stated, in all material respects, in relation to the financial statements as a whole for the year ended December 31, 2022.
Criteria
2 CFR 200.510 indicates that the auditee must prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with 200.502 Basis for Determining Federal Awards Expended. Per 2 CFR 200.502 the determination of when a Federal award is expended should be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards. In addition, 2 CFR Part 200.303 requires the program establish and maintain effective internal controls over Federal awards that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of Federal awards.
Effect
Without an established process governed by effective internal controls, the Housing Trust may not prevent or detect material misstatements on its SEFA in a timely manner. In addition, the errors could result in improper selections of major federal program(s) for the single audit and a substandard single audit. This could affect the auditee’s eligibility for future federal awards or result in audit findings by the federal awarding agencies or pass-through entities.
Cause
the Housing Trust did not have adequate policies and procedures to ensure that the information reported in its SEFA was accurate and complete. Also, the Housing Trust did not have a system to reconcile its SEFA with its general ledger and other supporting documents.
Recommendation
We recommend the Housing Trust improve the financial tracking of its grants, corresponding expenses and other activity related to those federal grants to ensure the information reported in its SEFA is accurate and complete. We also recommend that the auditee establish a system to reconcile its SEFA with its general ledger and other supporting documents, including the name of grantor, the assistance listing #, the pass-through number, if applicable, and review its SEFA for any errors or omissions before submission.
View of Responsible Officials and Corrective Action Plan
Response. Agreed. Where feasible, the Housing Trust will aim to improve management of all federal grants. A process of documentation verification prior to any requests made for financial draws will include employee, supervisor, business operations manager, and executive director level approvals to ensure compliance and availability of funds. A monthly federal request for reimbursements with all grantee information will be used and reconciled monthly with QuickBooks. This report will mirror the SEFA form so auditors will receive the information in a timely manner. For any quarterly reports, the three months of reporting will again be reconciled prior to submission. All new processes and compliance will be updated in the policies and procedure manual. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department will be sought. A new position to prepare and work on all federal grant tasks will be hired and report to the Business Operations Manager. In the meantime, the Business Operations Manager has started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2022-005–INSUFFICIENT AUDIT EVIDENCE
Federal Agency: All presented in the Schedule of Expenditures of Federal Awards (SEFA).
Federal Program Name: All presented in the SEFA.
Assistance Listing Number: All presented in SEFA.
Federal Award Identification Number and Year: All presented in SEFA.
Award Period: N/A
Questioned Costs: None
Estimated Questioned Costs: Unknown
Type of Finding
• (A) Material Weakness in Internal Control Over Financial Reporting
• (D) Material Weakness in Internal Control Over Compliance of Federal Awards
• (F) Instance of Noncompliance related to Federal Awards
Statement of Condition
During our audit, we were unable to obtain sufficient appropriate audit evidence to conclude the financial statements as a whole, are free from material misstatement. The following are key areas in which audit evidence was deemed insufficient:
• Receivables, mortgage loan receivables, development costs, land trust assets, liabilities, donor restricted net assts, revenues and expenditures and the schedule of expenditures of federal awards
Criteria
AU-C Section 705 Modifications to the Opinion in the Independent Auditor’s Report addresses the auditor’s responsibility to issue an appropriate report in circumstances when, in forming an opinion in accordance with section 700, Forming an Opinion and Reporting on Financial Statement.
Cause
the Housing Trust has undergone significant turnover during the year ended December 31, 2022, which has in turn caused the organization to lose institutional knowledge.
Effect
The possible effects of this inability to obtain sufficient appropriate audit evidence are deemed to be both material and pervasive to the financial statements and on compliance for each major federal program and on internal control over compliance required by the uniform guidance. Accordingly, the auditor’s reports both contain disclaimers of opinions.
Recommendation
We recommend Housing Trust maintain accurate and timely information in order to be ready for its annual audit.
View of Responsible Officials and Corrective Action Plan
Agreed. Where feasible, the Housing Trust will aim to improve management of all financial and non-financial data. A thorough review of the current policies and procedures will be conducted to identify new or updated processes that need to be changed. The bank reconciliations, monthly closings of the books, and thorough review of the financial reports will be done monthly. Staff changes have taken place to allow additional time for the Business Operations Manager to conduct these reviews. Consultations with an external accountant will be completed monthly to ensure the processes are correct.
Corrective Action Plan Timeline:
Immediately
Designation Of Employee Position Responsible For Meeting Deadline:
Business Operations Manager
2023-006—LATE DATA COLLECTION FORM
Funding Agency: All
Title: All
AL #: All
Award #: All
Award Period: All periods
Estimated Questioned Costs: None
Type of Finding
• (E) Significant Deficiency in Internal Control Over Compliance of Federal Awards
• (F) Instance of Non-Compliance Related to Federal Awards
Statement of Condition
the Housing Trust Data Collection Form for the year ended December 31, 2022 was submitted after the required due date.
Criteria
The audit shall be completed and the data collection form and reporting package shall be electronically transmitted within the earlier of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)).
Cause
The expected deliverables requested to complete the audit were not received by the aforementioned deadline, which resulted in a late submission.
Effect
the Housing Trust is not in compliance with Federal Award data collection form requirements as required under Uniform Guidance regulations.
Recommendation
the Housing Trust should implement controls to ensure that all future data collection forms are completed in a timely manner.
View of Responsible Official
The contractors hired to do the accounting and payroll functions are no longer under contract with the Housing Trust. All financial functions are now being taken care of in-house. The financials are already in the process of being adjusted and all numbers being accounted for with documentation. This will continue through 2023 and in 2024, the chart of accounts will be changed to reflect the current practices for a nonprofit organization. As the Executive Director prepares the 2024 budget, a reorganization of the business operations department has started. Staff changes will also need the Business Operations manager to provide a thorough monthly review. The current administrative assistant will take on the role of accounting technician to handle the day-to-day QuickBooks-related processes. Work has already started to develop checks and balances.
Corrective Action Plan Timeline:
Immediately
Designated Employee Responsible for Corrective Action:
Business Operations Manager