FAC Explorer

Finding 30409 (2022-003)

Significant Deficiency
Requirement
N
Questioned Costs
$1
Year
2022
Accepted
2023-09-07
Audit: 24844
Organization: Central Minnesota Housing Partnership, Inc. (MN)
Auditor: Cliftonlarsonallen LLP

AI Summary

  • Core Issue: Four out of six Rural Development projects had underfunded security deposit assets, meaning the cash held was less than what was owed to tenants.
  • Impacted Requirements: Funds collected as security deposits must be kept separate and should equal or exceed outstanding obligations.
  • Recommended Follow-Up: Implement a review process to ensure security deposit assets match or exceed liabilities, correcting any discrepancies promptly.

Finding Text

Federal Agency: U.S. Department of Agriculture Federal Program Title: Rural Rental Housing Loans Federal Assistance Listing Number: 10.415 Federal Award Identification Number(s) and Year(s): AMAS000000191197-2018, AMAS000000191198-2018, AMAS000000315075-2018, AMAS000000017172-2017 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Period: 01/01/22 to 12/31/22 Type of Finding: ? Significant Deficiency in Internal Control over Major Federal Programs Criteria or Specific Requirement: Funds collected as a security deposit shall be kept separate from other funds and shall remain equal to or exceed outstanding security deposit obligations. Condition: During our testing of the six Rural Development projects, we noted four had underfunded security deposit assets in relation to the security deposit liability. Questioned Costs: $1,011 Context: Each of the six Rural Development projects were reviewed to ensure proper funding over security deposits, and four were noted to be underfunded. Cause: During the tracking of security deposits, long-term tenants accrued interest at higher rates over time, resulting in a larger than expected interest accrual, which management did not prepare for, resulting in those projects to be underfunded (the security deposit cash is less than the liability). Effect: Potential for insufficient funds to remit all security deposits to tenants. Repeat Finding: No. Recommendation: The Organization should ensure the security deposit asset is equal to or greater than the security deposit liability in the event that any or all security deposits are required to be returned to tenants to ensure the Organization would have sufficient funding to do so. Views of Responsible Officials and Planned Corrective Actions: No disagreement with the finding. The Organization will implement a review step during the tracking of security deposits to verify the security deposit asset is equal to or greater than the security deposit liability and will correct any that are underfunded.

Corrective Action Plan

Department of Agriculture: Rural Development Central Minnesota Housing Partnership, Inc. respectfully submits the following corrective action plan for the year ended December 31, 2022. Audit period: January 1, 2022 ? December 31, 2022 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. FINDINGS?FINANCIAL STATEMENT AUDIT MATERIAL WEAKNESS 2022-001 Financial Statement Preparation Recommendation: The Organization should continue to evaluate their internal staff and expertise to determine if an internal control policy over annual financial reporting is beneficial. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: Management continues to weigh the cost benefits surrounding the financial statement preparation. Due to the complexity of the consolidated financial statements, it has been determined cost prohibitive to take on the entire process of creating the consolidated financial statement and will continue to collaborate with the auditors to complete this process. Names of the contact persons responsible for corrective action: Julie Schueller, Finance Director and Deanna Hemmesch, Executive Director Planned completion date for corrective action plan: December 31, 2023 2022-002 Material Audit Adjustments Recommendation: The Organization should continue review and establish month end and year end processes to ensure the account balances are accurately recording in accordance with GAAP. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: Management continues to review and establish month end and year end procedures to reduce the number of entries needed to ensure the financial statements are properly stated in accordance with GAAP. Management does acknowledge the fact that with the eliminating entries needed to consolidate the financial statements, this comment will likely not be removed in the near future but will continue to work on reducing entries on the individual entities within the consolidation. Names of the contact persons responsible for corrective action: Julie Schueller, Finance Director and Deanna Hemmesch, Executive Director

Categories

Questioned Costs Significant Deficiency Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties

Other Findings in this Audit

  • 606851 2022-003
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
10.415 Rural Rental Housing Loans $658,364
14.267 Continuum of Care Program $101,621
10.427 Rural Rental Assistance Payments $32,774