Finding 575727 (2024-002)

Material Weakness
Requirement
A
Questioned Costs
$1
Year
2024
Accepted
2025-09-05
Audit: 365724
Organization: Parkview Services (WA)

AI Summary

  • Core Issue: Federal funds of $100,000 were improperly used for general operations instead of designated lending purposes.
  • Impacted Requirements: Cash draws from federal funds must only support specific program activities, and there is a lack of a written policy against borrowing from these funds.
  • Recommended Follow-Up: Limit management access to federal fund accounts, involve board members in withdrawals, create a cash-management policy, and have an independent accountant review bank reconciliations monthly.

Finding Text

Identification as a Repeat Finding: Not a repeat Finding: Federal funds of $100,000 held for the restricted purpose of lending to qualified homeowners were utilized for general operational activities. Criteria: Cash draws from Federal funds may only be used for program purposes. Sample Size and Population: Not applicable Condition and Context: The Organization maintains a separate bank account for Federal funds that are returned when homeowners that received federally funded downpayment assistance loans repay their mortgages. During our review of 2024 bank account statements for this account, we noted a $100,000 transfer from the account to the general operating account on October 10, 2024 that was returned to the account on December 18, 2024. No supporting program expenditure documentation was available for the interim use of cash as no loans of federal funds were made to homeowners in 2024. Effect: Federal cash was used for unallowable purposes, exposing the Organization to potential liability. Cause: Management approved a short-term inter-fund loan to cover unrestricted cash-flow needs. The Organization lacks a written policy prohibiting temporary borrowing from federal accounts. Additionally, we observed errors in recording cash transactions in the operating bank account that preceded the date of the transfer. These transactions were not correctly identified and corrected in the bank reconciliations prepared between March and December 2024. As a result, the cash balances management used for decision making during this period were misstated by approximately $12,000 - $44,000. Recommendations: Remove management access to bank account used to hold Federal funds. Add board members to the account used to hold Federal funds so that future withdrawals from the fund require the authorization of a board member. Adopt a written cash-management policy that prohibits inter-fund borrowing Assign bank-reconciliation review to an independent accountant within 30 calendar days of monthend. Questioned Costs: $100,000 Management Response: Management response is reported in the “Corrective Action Plan” at the end of this report. Contact Person: Marc Cote, Executive Director 206-542-6644

Corrective Action Plan

Management agrees with this finding. Parkview Services will adopt and implement a written policy by October 31st, 2025 that strictly prohibits the use of federal funds for any non-program purpose, including temporary inter-fund loans. The policy will require that all federal program cash remain in the designated account until disbursed for documented, allowable purposes in accordance with federal regulations and grant agreements. Any transfers from the federal account will require pre-approval from the Finance Director, written justification, and documentation that the expenditure is allowable under the grant. The organization will also incorporate additional cash-flow monitoring procedures to prevent situations where federal funds might be considered for operational use. To address related reconciliation issues, the bank reconciliation process will include a review of the federal account by the Board Vice President or Treasurer within 30 days of month-end, starting with the September 30th reconciliation. This reviewer will verify that all transactions are allowable, properly documented, and recorded in the correct period. Any discrepancies will be immediately investigated and resolved.

Categories

Questioned Costs Allowable Costs / Cost Principles Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 575726 2024-001
    Significant Deficiency
  • 575728 2024-002
    Material Weakness
  • 575729 2024-002
    Material Weakness
  • 575730 2024-003
    Material Weakness
  • 1152168 2024-001
    Significant Deficiency
  • 1152169 2024-002
    Material Weakness
  • 1152170 2024-002
    Material Weakness
  • 1152171 2024-002
    Material Weakness
  • 1152172 2024-003
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
59.008 Disaster Assistance Loans $584,853
14.218 Community Development Block Grants/entitlement Grants $306,528
14.239 Home Investment Partnerships Program $140,000
14.871 Section 8 Housing Choice Vouchers $119,953
21.026 Homeowner Assistance Fund $90,413
14.169 Housing Counseling Assistance Program $53,863
14.230 Rental Housing Rehabilitation $40,000