Finding 1222746 (2025-001)

Material Weakness Repeat Finding
Requirement
B
Questioned Costs
-
Year
2025
Accepted
2026-07-01
Audit: 406329
Organization: Lynn Street Manor Apartments (MI)
Auditor: MANERCOSTERISAN

AI Summary

  • Core Issue: There is a material weakness in internal controls due to management agents circumventing established procedures.
  • Impacted Requirements: The organization failed to enforce proper controls, leading to potential fraud risks and non-compliance with federal guidelines.
  • Recommended Follow-Up: Implement stronger internal controls, including better segregation of duties and regular independent reviews of project expenditures.

Finding Text

Finding 2025-001- Considered a material weakness in internal control and program non-compliance. Federal Program: Section 223(f) Direct Loan ALN #: 14.155 Federal agency: U.S. Department of Housing and Urban Development (HUD) Criteria: Organization management is responsible for ensuring proper controls are followed and in place around the use of project funds. Condition: The Organization maintained adequate internal controls, however, the controls were circumvented by individuals employed by the management agent. Questioned costs: $45,969 Cause: Organization had collusion take place forgoing formal policies addressing segregation of duties and conflict-of-interest safeguards. Effect: Project funds were exposed to an increased risk of fraud and collusion. Recommendation: The entity should design and implement stronger internal controls over project funds, including enhanced segregation of duties, documented procurement procedures, conflict-of-interest monitoring, and periodic independent review of project expenditures to ensure compliance with Uniform Guidance. Management Comments: We agree with the facts and circumstances of this finding and will be reviewing and enhancing current internal controls that are in place. Auditor Noncompliance Code: Z -Other

Corrective Action Plan

Tyler Luce, Executive Vice President & CFO, respectfully submits the following corrective action plan for the year ended September 30, 2025. Name and address of independent public accounting firm: Maner Costerisan, P.C. 2425 E. Grand River Ave, Ste 1 Lansing, MI 48912 Audit period: October 1, 2024 – September 30, 2025 The findings from the September 30, 2025 schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Finding 2025-001 Recommendation: The entity should design and implement stronger internal controls over project funds, including enhanced segregation of duties, documented procurement procedures, conflict-of-interest monitoring, and periodic independent review of project expenditures to ensure compliance with Uniform Guidance. Management Comments: We agree with the facts and circumstances of this finding. Management has taken corrective action in response to this finding. The employees involved are no longer employed in connection with the project, and the matter was reported to the HUD Office of Inspector General. Management has reviewed and strengthened the project's controls over conflict-of-interest monitoring and enforcement of existing time-clock policies. In addition, we have and will continue to perform independent reviews of project expenditures to ensure compliance with Uniform Guidance.

Categories

Internal Control / Segregation of Duties Procurement, Suspension & Debarment Student Financial Aid Subrecipient Monitoring HUD Housing Programs Material Weakness Matching / Level of Effort / Earmarking

Programs in Audit

ALN Program Name Expenditures
14.155 MORTGAGE INSURANCE FOR THE PURCHASE OR REFINANCING OF EXISTING MULTIFAMILY HOUSING PROJECTS $1.54M
14.195 SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM $355,410
14.191 MULTIFAMILY HOUSING SERVICE COORDINATORS $18,518