Finding Text
Financial Reporting - Disclaimer of Opinion Housing Voucher Cluster Public and Indian Housing - AL No. 14.850 Public Housing Capital Fund - AL No. 14.872 Material Weakness in Internal Control Material Noncompliance Condition: During our audit of the Authority’s financial statements, numerous material balances lacked full support and it was noted that certain accounts had not been properly reconciled and correcting entries were not available. Given these issues, the auditor did not have enough time to complete the necessary audit procedures and as such have issued a disclaimer of opinion on the financial statements. Context: We obtained the financial information from the Authority’s general ledger system. As part of our audit process, the financial information was compared to the unaudited submission sent to the U.S. Department of Housing and Urban Development Real Estate Assessment Center (“REAC”). Due to the lack of support, adequate audit procedures were not able to be performed on significant areas. Criteria: In accordance with AU-C 265, when a deficiency or a combination of deficiencies in internal control is identified, which indicates that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis, a material weakness should be reported. Cause: The Authority was unable to maintain proper oversight of its financial closing processes and recording keeping during a period of staff transitions. As a result the Authority did not have access to accurate closing schedules and was not able to implement the internal controls and processes to ensure that the general ledger and the unaudited REAC submission was complete and accurate. Effect: The general ledger and the unaudited data submitted to REAC required numerous and material audit adjustments that delayed the audit, and therefore HUD could not provide proper timely financial oversight based on the unaudited REAC submission. In addition, we were not able to complete the required audit procedures which resulted in a disclaimer of opinion on the financial statements. Questioned Costs: Unknown Auditor’s Recommendations: The Authority should continue to develop and implement internal controls over both internal and external reporting, and the year-end close process to ensure reporting remains accurate and timely, with any unexpected financial data being investigated and corrected before it is reported. The Authority should consider additional staff training on development activities.