Finding 58752 (2022-001)

Significant Deficiency

Requirement

Questioned Costs

Year

2022

Accepted

2023-05-29

Audit: 54820

Organization: Sycamore Square Housing Corporation (CA)

Auditor: Cohnreznick LLP

AI Summary

Core Issue: Unauthorized loans of $1,455 were made from project cash to an affiliate without HUD approval.
Impacted Requirements: Cash disbursements must be limited to project operating costs and require prior authorization from HUD.
Recommended Follow-Up: Management should ensure reimbursement is completed and implement procedures to prevent future unauthorized payments.

Finding Text

Finding No. 2022-001; Section 8 Housing Assistance Payments Program, Assistance Listing 14.195 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 $1,455 on behalf of an affiliate from project cash without HUD approval. The amount due to the Project as of December 31, 2022 is $1,455. 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 $1,455 were unauthorized loans and are therefore considered to be questioned costs. Questioned Costs Questioned costs totaled $1,455. Context In connection with the procedures applied to a sample of 25 disbursements, there were two instances, totaling $1,455, where management did not detect and timely correct disbursements made on behalf of another EHI managed project with a similar project name. 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 $1,455 for the funds disbursed on behalf of a different EHI managed project on February 27, 2023. Views of Responsible Officials Management concurs that the Project paid expenses in the amount of $1,455 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 been reimbursed from the affiliate project.

Corrective Action Plan

CORRECTIVE ACTION PLAN Project Legal Name: Sycamore Square Housing Corporation. HUD Project No.: CA390079004 Audit Firm: CohnReznick, LLP Period covered by the audit: 1/1/22-12/31/22 Corrective Action Plan prepared by: Name: Julia Fromme Position: Associate Director of Property Operations Telephone Number: 510-305-4800 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 $1,455 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 received reimbursement from the affiliate project.

Other Findings in this Audit

58753 2022-002

Significant Deficiency
635194 2022-001

Significant Deficiency
635195 2022-002

Significant Deficiency

Programs in Audit

ALN	Program Name	Expenditures
14.195	Section 8 Housing Assistance Payments Program	$788,173