Finding Text
Finding 2025-007: Reporting Material Weakness/Noncompliance Special Tests and Provisions Assistance Listing 14.157 Criteria: The Project must establish and maintain effective internal controls over compliance and ensure timely submission of required financial and performance reports. Further, owners participating in HUD programs must submit owner-certified annual financial statements within 90 days of fiscal year end. Condition: The Section 202 Capital Advance Program did not file its required owner-certified financial submission to REAC within 90 days of fiscal year end. The submission was delayed because year-end financial records were not completed in time to meet HUD’s reporting deadline. Cause: The program lacked adequate controls and processes to ensure timely completion of financial records and submission. Specifically, management did not establish sufficient procedures or monitoring mechanisms to track reporting deadlines and ensure readiness of financial data. Effect or Potential Effect: The following are effects and potential effects of failure to report timely: • Noncompliance with HUD program requirements and Uniform Guidance reporting standards. • Increased risk of HUD sanctions, including potential administrative findings or restrictions on future funding. • Reduced reliability and timeliness of financial information available to HUD for oversight and program monitoring. Recommendation: We recommend that program management: • Strengthen internal controls over financial reporting by implementing a structured closing calendar and monitoring system to ensure timely completion of year-end records. • Assign responsibility to designated staff for tracking HUD reporting deadlines and preparing submissions. • Review with its fee accountant what steps can be taken to ensure timely financial records. View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.