Finding 1057159 (2023-003)

U.S. Department of Housing and Urban Development Federal Financial Assistance Listing # 14.155 Section 223(f) Mortgage Insurance for the Purchase or Refinance of Existing Multifamily Housing Projects Special Tests and Provisions Significant Deficiency in Internal Control over Compliance Criteria: The Project’s internal control structure should be designed to have formal approval over each cash disbursement. Condition: The Project’s internal control system is designed to review and approve expenses only when the disbursements are submitted formally through the system. Credit card transactions and various expense reimbursements were processed manually with no formal documentation of review. In addition, there was no formal review of bank reconciliations. Cause: The controls in place did not operate as designed and did not account for documentation of a formal review process. Effect: There was no formal review over various cash disbursements and bank reconciliations. Questioned costs: None reported. Context: There were 443 invoices during the year that were subject to testing. A sample of 60 invoices during the year were selected for testing and noted no formal approvals were documented on 28 of the invoices. There was also no formal review of bank reconciliations. Repeat Finding from Prior Year: No Recommendation: We recommend management re-evaluate their internal control process over cash disbursements and cash receipts to ensure each disbursement and reconciliation is formally approved. Views of Responsible Officials: Management agrees with the finding.