Finding Text
Criteria - Special tests and provisions
Effective January 1, 2023, Cheval changed from a fiscal year end of June 30 to December 31. The prior period audit report, dated October 31, 2023, represents a six-month fiscal transition period from July 1, 2022 through December 31, 2022. Any required residual receipts reserve deposits should be made on or before October 31, 2023.
Condition
During the year ended December 31, 2023, management did not make the required residual receipts reserve deposit in the amount of $18,304, as required by HUD.
Cause
Controls are not in place to ensure that required residual receipts reserve deposits are made timely. In addition, operating cash was insufficient to fund the reserve as of October 31, 2023.
Effect or Potential Effect
Cheval is not in compliance with the requirements of the regulatory agreement.
Questioned Costs
None
Context
Isolated instance
Identification as a Repeat Finding
Not a repeat finding.
Recommendation
Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely. In addition, management should withdrawal $18,304 from operating cash and immediately deposit this amount into the residual receipts account.
Auditor Noncompliance Code: B - Failure to make required residual receipts deposits
Finding Resolution Status: In-Process
Views of Responsible Officials
The required residual receipts reserve deposit in the amount of $18,304 was not made as required by HUD. Management has processes in place to account for these requirements, but in this case the year end changed, and a stub period audit was conducted. We could not make a deposit by October 31, 2023 since we did not have the final audit by then and there were not sufficient funds in the operating account to cover the funding. Going forward, management will ensure that any shortage is funded on time even if operating funds are short and we have to request funds from ownership.