Finding Text
Finding 2022-001 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135
Statement of Condition: Internal control processes over financial accounting did not ensure that all transactions were properly recorded. Internal control processes over financial accounting did not ensure that key accounts were reconciled or reviewed on a periodic basis.
Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 requires the books and accounts to be complete and accurate. HUD Handbook 4370.2 REV-1, Chapter 2, Section 12 requires monthly reconciliations of all cash accounts. Additionally, 2 CFR Part 200 Section 200.302 Financial Management states that the financial management system of each non-federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award in accordance with the reporting requirements. Additionally, 2 CFR Part 200 Section 200.303(a), Internal Controls, requires that non-federal entities must establish and maintain effective internal controls over the federal award that provides reasonable assurance that the non-federal entity is managing the award in compliance with federal statutes, regulations and the terms and conditions.
Effect: Noncompliance with HUD and Uniform Guidance requirements and the possibility of undetected material misstatements and/or undetected misappropriation of assets.
Cause: Management oversight.
Context: An understanding of processes and internal controls was performed with the Corporation's management and tests were performed to determine if the processes and internal controls were implemented and effective. As part of this process we noted the following processes and internal controls were not effective and/or implemented. 1) Only two of the six bank accounts were reconciled. The outsourced bookkeeper only performed a bank reconciliation for the operating and security deposit cash accounts. 2) The accounts receivable, tenants and accounts receivable, HUD were not reconciled. 3) The monthly review process of the Corporation's financial information is not fully supported by evidence of such review.
Questioned Costs: N/A
Recommendation: We recommend management review/enhance its accounting and internal control procedures to ensure that all key accounts are reconciled and reviewed with supporting evidence of such review.
Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding and will review the accounting and financial procedures, system of internal controls and policies.