2023-001 Financial Reporting – Disclaimer of Opinion
Material Weakness in Internal Control
Material Noncompliance
Condition: During our audit of the Authority’s financial statements, numerous adjustments were needed to properly report the financial statements in accordance with generally accepted accounting principles. Certain accounts had not been properly reconciled and corrective entries were not readily available. Significant audit adjustments were necessary for several audit areas and the audit was significantly delayed due to these adjustments. Given the amount of adjustments needed 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.
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.
Action Taken:
The Houston Housing Authority agrees with this finding and related recommendations. During this audit, as these issues arose, notes were taken, evaluation of what had happened was made so that we could make the necessary adjustments to our procedures to prevent the continuation of these issues. In addition, we hired a firm to come in and undertake a review of the finance department. The purpose of this review was to review our existing staffing levels, workloads, experience, etc., for purposes of proposing a reorganization of the finance department to address any deficiencies.
We have reviewed the recommendations from this consultant and are in the process of implementing many of the recommended changes. We are in the process of bringing in additional staff to expand the capacity of the Finance department.
As we had fallen behind on our audits we anticipated the weaknesses noted in prior audits would continue to be present in future audits including the 2023 audit. We have been working very diligently to address the issues within the finance department that gave rise to this finding. We fully expected this finding or a similar finding to be present for the 2023 audit as many of the departmental improvements and changes were not in place during the 2023 calendar year. We have also been somewhat limited in the time available to implement changes as we have been working on clearing up the prior audit delinquencies since hiring out new outside auditors. This will be the first time in years where we will have a prior year audit available to us prior to the end of the current year. We will be able to have any 2023 audit adjustments posted to the general ledger prior to yearend 2024 so many of the reconciliation issues that have been encountered on the prior audits are not expected to be present when we move into the 2024 audit.
The VP Fiscal and Business Operations as well as the Director of Finance are responsible for implementing the necessary process and procedural changes to eliminate the need for this type of finding for the 2024 audit.