FAC Explorer

Finding 58014 (2022-001)

Significant Deficiency
Requirement
B
Questioned Costs
$1
Year
2022
Accepted
2023-05-29
Audit: 54338
Organization: Arroyo Commons, Inc, (CA)
Auditor: Cohnreznick LLP

AI Summary

  • Core Issue: Unauthorized loans of $4,993 were made from project cash to an affiliate without HUD approval.
  • Impacted Requirements: Procedures failed to restrict cash disbursements to only project operating costs, leading to questioned costs.
  • Recommended Follow-Up: Management should ensure reimbursement is completed and implement stronger controls to prevent future unauthorized disbursements.

Finding Text

Department of Housing and Urban Development Finding No. 2022-001; Section 811 Capital Advance, Assistance Listing 14.181 Criteria Loans are not permitted to be made from project cash without prior authorization from HUD. Condition During the year ended December 31, 2022, the Project paid expenses in the amount of $4,993 on behalf of an affiliate from project cash without HUD approval. The amount due to the Project as of December 31, 2022 is $4,993. Cause Procedures were not in place to ensure that cash disbursements of project funds were limited to project operating costs. Effect or Potential Effect The payments of $4,993 were unauthorized loans and are therefore considered to be questioned costs. Questioned Costs Questioned costs totaled $4,993. Context In connection with the procedures applied to a sample of 12 disbursements, there were two instances, totaling $2,944, where management did not detect and timely correct disbursements made on behalf of another EHI managed project with a similar project name. Upon review, management found additional invoices totaling $2,050. Identification as a Repeat Finding Not a repeat finding.Recommendation Management should immediately reimburse the amount due to the Project and establish procedures to ensure payments of this nature are not made in the future. Auditor Noncompliance Code: G ? Unauthorized loans from project assets. Finding Resolution Status: Resolved. The Project was reimbursed via check in the amount of $4,993 for the funds disbursed on behalf of a different EHI managed project on March 14, 2023. Views of Responsible Officials Management concurs that the Project paid expenses in the amount of $4,994 on behalf of an affiliate from project cash without HUD approval. Management further notes that they have retrained staff, reaffirmed the review and approval process to ensure accuracy and existence of each transaction to ensure no cash disbursements are made on behalf of affiliates without HUD approval. Management has made changes to internal controls to prevent and detect unauthorized cash disbursements from project assets. It has also requested reimbursement from the affiliate project and funds have been reimbursed.

Corrective Action Plan

CORRECTIVE ACTION PLAN Project Legal Name: Arroyo Commons, Inc.. HUD Project No.: 121-HD020 Audit Firm: CohnReznick, LLP Period covered by the audit: 1/1/22-12/31/22 Corrective Action Plan prepared by: Name: Julia Cerna Position: Controller Telephone Number: 510-247-8110 The following is a recommended format to be followed by the auditee for preparing a corrective action plan: A. Current Findings on the Schedule of Findings, Questioned Costs and Recommendations 1. Finding 2022-001 a. Comments on the Finding and Each Recommendation The auditee is to provide a statement of concurrence or nonconcurrence with each finding. The auditee is also to provide a statement of agreement or disagreement with each recommendation in the finding. Management concurs that the Project paid expenses in the amount of $4,994 on behalf of an affiliate from project cash without HUD approval. Management further notes that they have re-trained staff, reaffirmed the review and approval process to ensure accuracy and existence of each transaction to ensure no cash disbursements are made on behalf of affiliates without HUD approval. b. Action(s) Taken or Planned on the Finding The auditee should detail actions taken or planned to correct each finding identified in the report. Appropriate documentation should be submitted for actions taken. For planned actions, the auditee should provide the projected date for completion of all required action. The auditee should provide information on the task(s), subtask(s) and projected completion date(s) for the correction of the deficient condition and repayment of funds if appropriate. Officials responsible for completing the proposed task(s) and subtask(s) should also be identified. If the auditee believes a corrective action is not required, a statement describing the reasons should be included. Management has made changes to internal controls to prevent and detect unauthorized cash disbursements from project assets. It has also requested reimbursement from the affiliate project and funds have been reimbursed.

Categories

Questioned Costs HUD Housing Programs Cash Management Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties

Other Findings in this Audit

  • 634456 2022-001
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
14.181 Supportive Housing for Persons with Disabilities $1.18M
14.239 Home Investment Partnerships Program $497,900