Finding Text
2023-001 Financial Reporting
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.
Context: We obtained the financial information from the Authority’s general ledger system. As part
of our audit process, the financial information was compared to the unaudited submission sent to the
U.S. Department of Housing and Urban Development Real Estate Assessment Center (“REAC”).
While applying audit procedures, significant adjustments were identified as necessary to properly
reflect the financial data in accordance with generally accepted accounting principles and to reflect
the data schedule in accordance with HUD requirements. The required audit procedures were unable
to be completed.
Criteria: In accordance with AU-C 265, when a deficiency or a combination of deficiencies in internal
control is identified, which indicates that there is a reasonable possibility that a material misstatement
of the financial statements will not be prevented or detected and corrected on a timely basis, a
material weakness should be reported.
Cause: The Authority was unable to maintain proper oversight of its financial closing processes and
recording keeping during COVID. As a result the Authority did not have access to accurate closing
schedules and was not able to implement the internal controls and processes to ensure that the
general ledger and the unaudited REAC submission was complete and accurate.
Effect: The general ledger and the unaudited data submitted to REAC required numerous and
material audit adjustments that delayed the audit, and therefore HUD could not provide proper timely
financial oversight based on the unaudited REAC submission.
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.
Management Response: See Corrective Action Plan.