Finding 374663 (2023-001)

Finding Type: - Immaterial noncompliance with major program requirements - Significant deficiency in internal control over compliance Title and Assistance Listing Number of Federal Program - Supportive Housing for the Elderly Project Rental Assistance Contract and Capital Advance (ALN #14.157) Finding Resolution Status - In progress Information on Universe and Population Size - N/A Sample Size Information - N/A Identification of Repeat Finding and Finding Reference Number - N/A Criteria - The Organization should have internal controls in place to reconcile the replacement reserve account to ensure all withdrawals have HUD approval and all required monthly deposits or repayments of HUD approved loans are made timely as required by the Regulatory Agreement and/or the loan terms. Statement of Condition - There was a lack of timely reconciliation performed by the Organization of the replacement reserve account activity. The Organization received approval in 2019 from HUD for a $22,427 loan advance to be repaid to the replacement reserve when the January 2019 voucher payment was received. Of this amount, $6,740 was received and deposited back into the replacement reserve in 2019. The remaining $15,687 was received by the Organization on February 6, 2023; however, this amount was not deposited back to the replacement reserve until after year end on August 16, 2023. Cause - The Organization failed to perform a timely reconciliation of the replacement reserve account to ensure that all required deposits were made into the replacement reserve based on the loan terms. Effect or Potential Effect - The lack of reconciliation procedures led to the reserve for replacement account being underfunded as of June 30, 2023. Auditor Noncompliance Code - S - Internal control deficiency and N Reserve for replacement deposits Reporting Views of Responsible Officials Management agrees with the finding as reported. Recommendation - The Organization should implement internal controls to properly reconcile the replacement reserve account in a timely manner. Response Indicator - Agree Completion Date - August 16, 2023 Response - Management acknowledges the significant deficiency in internal control over compliance that resulted in the late deposit back into the replacement reserve account as required and has taken measures to improve internal control over compliance.