Finding 1161794 (2024-001)

HUD insured mortgage program Section 223(f), ALN 14.155 Criteria: In accordance with HUD regulations and the Uniform Guidance, recipients are required to submit audited financial statements to HUD and to submit the Single Audit reporting package to the Federal Audit Clearinghouse (FAC) within nine months after fiscal year end. Statement of Condition: The Organization did not submit its audited financial statements to HUD or its Single Audit reporting package to the FAC by the required due date. Cause: The delays in completing the audit resulted from the Organization’s difficulty completing year-end closing of the books due to issues from a change to new software and staff turnover during the year. Additional delays resulted from the Organization’s difficulty locating occupancy records requested by the auditor. Effect: Failure to submit required reports by the established deadlines places the Organization in noncompliance with federal requirements and may result in sanctions or restrictions on program funding. Recommendation: We recommend that management implement procedures to ensure that financial reconciliations are completed timely and that software issues are promptly identified and resolved. We also recommend that management strengthen recordkeeping procedures to ensure that occupancy records are maintained, organized, and provided timely to auditors. Views of Responsible Officials: We agree with the auditor’s finding. The issue was primarily due to staff turnover of nearly 90% since August 2024, with new staff receiving little to no training on HUD requirements and The Arc’s Standard Operating Procedures, continued use of a failed software system through a five-year contract that ended May 31, 2025, and failed management practices prior to March 2025. Corrective procedures are now in place, and we believe these steps will resolve the matter going forward. Supervisors will initiate corrective actions to strengthen tenant file documentation and compliance with HUD requirements. Staff have received refresher training on eligibility and documentation procedures and will receive ongoing training and mentoring as needed. A thorough review of all properties has been conducted and supervisory reviews of tenant files will be conducted on a periodic basis going forward. Missing or incomplete documentation in existing files will be addressed where feasible. These measures are expected to resolve the deficiency and prevent recurrence in future audits.