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