Finding 1079621 (2024-001)

SECTION II - FINANCIAL STATEMENT FINDINGS Finding 2024-1 Insufficient Internal Controls Over Monthly Replacement Reserve Funding Finding Resolution Status: Resolved Information on Universal Population Size: One Instance Sample Size: 12 Identification of Repeat Finding and Finding Reference Number: Not Applicable Questioned Costs: $0 Criteria: Monthly deposits to the Replacement Reserve account must be made monthly in accordance with HUD required amounts and all withdrawals must be approved by HUD. Condition: In accordance with the HUD requirements, the Project was required to make monthly deposits to the Replacement Reserve account in the amount of $2,000 for the year ended June 30, 2024. In August 2023, the Project withdrew the approved withdrawal amount of $6,525 twice in error. In September 2023, the Project deposited it back into the Replacement Reserve. The internal controls in place to the Replacement Reserve account were not sufficient enough to prevent this unapproved withdrawal from the Replacement Reserve. Cause: Unknown Effect: The Project is not in compliance with HUD’s regulations. If a significant replacement need were to arise, there may not be adequate funds in Replacement Reserve to cover the cost. Auditors’ Recommendation: Management should implement internal controls suitable to detect and prevent withdrawals without HUD approval. Auditor Non-Compliance Code: N – Reserve for Replacement Requirements FHA/Contract Number: 064-EE050 Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: We did observe that a withdrawal was processed twice in error. We also noted that the amount withdrawn was deposited back into the bank in the subsequent month. Appropriate corrective action has been taken. Reporting Views of Responsible Officials: An approval from HUD to withdraw funds from the replacement reserve account was processed twice in error. This was discovered when the bank reconciliation was done and immediately, the funds were returned to the replacement reserve account. At no time did the replacement reserve account fall under the required balance. Response Indicator: Agree Completion Date: 09/11/2023 Response: An approval from HUD to withdraw funds from the replacement reserve account was processed twice in error. This was discovered when the bank reconciliation was done and immediately, the funds were returned to the replacement reserve account. At no time did the replacement reserve account fall under the required balance. Contact Person: Janet Sanderford SECTION III - FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Federal Program: Supportive Housing for the Elderly – Section 202 Assistance Listing Number 14.157 See Finding 2024-1 under Section II – Financial Statement Findings.