Finding 30400 (2022-001)

Section II --- Financial Statement Findings ? Criteria or specific requirement: Assignment of responsibility that the Board of Directors or management company is responsible for confirming contract terms and that these terms are reported correctly each year in the financial statements. ? Condition: Accrued interest of loan from Long Beach Housing Development Company had been accrued at 3% for all prior years. Actual interest rate is 6.625% per original signed contract. ? Effect: Could result in undetected errors and misstated financial statements. ? Cause: Governing body relied on management company and auditors to confirm loan terms each year ? Recommendation: Improve internal controls to prevent these types of adjustments. The auditor will work with the management company and Board of Directors about it's responsibility for the financial statements. ? Management's response: Board of Directors and management company will incorporate additional internal controls to detect material adjustments and prevent materially misstated financial statements.