Finding 1096352 (2024-002)

Finding 2024-002: Replacement Reserves Material Weakness Special Tests and Provisions Criteria: The Project should have procedures to account for its replacement reserve monthly and to review for any errors. Condition: The Project’s management, the Housing Authority of the City of Lexington, Nebraska, incorrectly handled a replacement reserve transaction and did not identify the error for it to be corrected by the fiscal year end. In April, 2024, the Project was approved to transfer $22,606.44 from its replacement reserve to its checking account to pay for capital improvements. In error, the management agent transferred funds of $22,606.44 from another program into the Project’s replacement reserve. The error was not caught and corrected as of our audit fieldwork date. Cause: The Project did not have procedures to reconcile approved replacement reserve withdrawals to the bank account and further was not adequately reviewing the account activity to identify errors. Effect or Potential Effect: The Project deposited funds into its replacement reserve from another program and did not identify the mistake or realize funds were not deposited into the checking account. Recommendation: The Project should have procedures in place to monitor approved withdrawals and transferred to the correct account and have reconciliation procedures to identify these errors. View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.