Finding Text
FINDINGS – MAJOR FEDERAL AWARD PROGRAMS AUDIT
S3800-010 Finding Reference Number: 2024-004
S3800-011 Title and Assistance Number of Federal Program: 14.157 Supportive Housing for the Elderly
S3800-015 Type of Finding: Federal Award Finding
S3800-016 Finding Resolution Status: In Process
S3800-017 Information on Universe Population Size: 19 rental units
S3800-018 Sample Size Information: 6 rental units
S3800-019 Identification of Repeat Finding and Finding Reference Number: Not Applicable.
S3800-020 Criteria:
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework is a widely recognized framework for designing, implementing, and evaluating internal control systems. The COSO framework defines internal control as a process that is designed to provide reasonable assurance with respect to achievement of objectives of compliance with applicable laws and regulations. The COSO framework offers useful guiding principles that can be applied in establishing and operating an effective regulatory compliance program with the goal of closing compliance gaps, and ensuring the prevention of material noncompliance. The monitoring component of the COSO framework involves periodic or ongoing evaluations to verify that each of the five components internal control, including the controls that affect the principles within each component, are present and functioning. Monitoring helps ensure that internal controls continue to operate effectively.
S3800-030 Statement of Condition:
Management had developed activity level controls over compliance that included compliance review of all tenant certifications including income verifications used in determining the amount of rent amounts due from eligible PRAC 202 participants (tenants) by the management firm compliance department. However, during our testing it was discovered that the files were missing documentation of varying importance which if properly reviewed, should have been identified as missing; some files were missing evidence of file review.
S3800-032 Cause:
Management had properly designed activity level controls over compliance, but those controls were not functioning as intended. Proper monitoring of the compliance department was not occurring to detect deficiencies in tenant files documenting eligibility.
S3800-033 Effect or Potential Effect:
It is reasonably possible that ineligible tenants could improperly be granted tenancy to the property and given rental assistance for which they are not eligible. Such improper payments could be material.
S3800-035 Auditor Non-Compliance Code: S – Internal Control Deficiencies
S3800-040 Questioned Costs: $0
S3800-037: FHA Contract Number: 127-HD025
S3800-038: Questioned Costs: $0
S3800-045 Reporting Views of Responsible Officials:
The board had decided to change property management firms because of the history and severity of financial statement findings and major program fundings. The board believes that the new management firm has a properly designed and functioning system of internal controls to prevent tenants from being improperly housed at the property and granted rental assistance for which they are not eligible.
S3800-050 Context:
For the six files tested, we noted some late or missing documentation regarding eligibility and rent calculations.
S3800-080 Recommendation:
Management has a process to review and approve all tenant certifications being prepared by site staff (community managers). The approval process should include an approval stamp or some other evidence that each file has been reviewed by the compliance department and is approved for processing. Further, senior management should have an ongoing monitoring process to ensure that the compliance department is carrying out the review process.
S3800-090 Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations:
The board had decided to change property management firms because of the history and severity of financial statement findings and major program fundings. The board believes that the new management firm has a properly designed and functioning system of internal controls to prevent tenants from being improperly housed at the property and granted rental assistance for which they are not eligible.
S3800-130 Response Indicator: Agree (A)
S3800-140 Completion Date: February 3, 2025
S3800-150 Response:
The board had decided to change property management firms because of the history and severity of financial statement findings and major program fundings. The board believes that the new management firm has a properly designed and functioning system of internal controls to prevent tenants from being improperly housed at the property and granted rental assistance for which they are not eligible.