Finding Text
Finding # 2024-001
Federal Grantor: U.S. Department of Housing and Urban Development
AL # / Program: 14.181 - Supportive Housing for Persons with Disabilities
Type of Finding: Financial Statement Finding - Material Weaknesess in Internal Control
Finding Resolution Status: In Process
Information on Universe Population Size: N/A
Sample size information: N/A
Criteria: Nonfederal entities must establish internal control procedures such that there is a reasonable possibility that a material misstatement in the financial statements will be prevented, or detected and corrected on a timely basis.
Statement of Condition / Context: During performance of audit procedures we noted insufficient processes and controls relating to the calculation of monthly gross rent potential and the recording of gross rent potential in the general ledger. We noted an unsubstantiated entry was recorded during the year ending June 30, 2023 for vacancies. We noted that in the Owner Certified financial statements submitted to HUD in the REAC FASSUB for the year ended June 30, 2024, there was an unsubstantiated entry for vacancies of $27,297. We noted a significant year end journal entry was recorded to adjust tenant rental income and tenant subsidy assistance income.
Cause: Insufficient processes and inadequate design of internal controls over financial reporting.
Effect or Potential Effect: The financial statements could be materially misstated.
Auditor Non-Compliance Code: S - Internal control deficiencies
Questioned Costs: No questioned costs associated with this finding.
Recommendations: We recommend that Management implement a process whereby monthly gross rent potential is calculated monthly based on contract rents, including manager rent free unit and vacancies, if any. This calculation should be automated and subject to system checks in the Yardi Breeze application or similar property management software. The monthly gross rent potential should then be recorded timely, ideally the beginning of every month, in the general ledger. The entry should then be reviewed by an individual who did not prepare the monthly gross rent potential or prepare the journal entry prior to posting.
Finding # 2024-001 (continued)
Response Indicator: Agree
Completion Date: 6/30/2025
Reporting Views of Responsible Officials and Planned Corrective Action: "By April 1, 2025, HCEB will implement a process whereby monthly gross rent potential is calculated monthly based on contract rents, including manager rent free unit and vacancies, if any.
This calculation will be automated and subject to system checks in HCEB’s Yardi Breeze
software, utilizing the following workflow:
• Portfolio Assistant calculates the monthly gross rent potential within Yardi Breeze based on contract rents.
• Portfolio Assistant will alert the General Ledger A/R accountant when the task is completed, and the General Ledger A/R accountant will download the information and will record in the general ledger.
• Once the monthly gross rent potential general ledger entry is complete, it will be reviewed by the Controller or their designee.
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