Finding Text
Criteria: The Uniform Guidance Compliance Supplement requires only expenditures of the entity be included in project costs. Condition: Internal controls over payables were not implemented to detect the following: Expenses for payroll and payroll taxes were duplicated for 4 payroll periods and triple posted in one instance resulting in an overstatement of payroll expense of $49,679. Expenses for payroll and payroll taxes of van driver were posted in error repeatedly during the year resulting in an overstatement of $22,355. Expenses for payments in lieu of real estate taxes was not recorded or paid, and therefore real estate tax expense was understated by $10,000. Expenses for gas expense billings of a related party were posted to the books and records of Jefferson Apartments. And gas expense billings of Jefferson Apartments were not recorded. This resulted in an understatement of gas expense of $7,857. Expenses for the management agent were posted to the books and records of Jefferson Apartments, and paid from the cash account. This resulted in overstatement of expenses, in various accounts, of $15,645. Expenses for executive director salary historically paid by management agent was posted as an expense of Jefferson Apartments, in addition to management fees charged. This resulted in overstatement of payroll expense of $8,000. Context: The condition was noted during our testing over the entity’s accounting records and financial statement reconciliations. Effect: This resulted in an overall overstatement of expenses of $77,822. Cause: Lack of oversight and necessary internal controls over review and approval process surrounding reasonable and necessary expenses of the project. Recommendation: We recommend staff training at the property level to perform monthly review of accounting records on a comparative basis to detect and investigate unusual and/or significant variances which would have detected duplicate and errors in invoices prior to payments. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff to perform monthly analysis and investigate unusual and/or significant variances.