Finding Text
SECTION II ? FINANCIAL STATEMENT FINDINGS Finding 2022-1 Lack of Internal Controls Over Monthly Replacement Reserve Funding Finding Resolution Status: Resolved Information on Universal Population Size: Two Instances Sample Size: 12 Identification of Repeat Finding and Finding Reference Number: N/A Questioned Costs: $0 Criteria: Monthly deposits to the Replacement Reserve account must be made monthly in accordance with HUD required amounts. Condition: In accordance with the HUD requirements, the Project was required to make monthly deposits to the Replacement Reserve account in the total amount of $16,128 for the year ended June 30, 2022. The Project made monthly deposits to the Replacement Reserve account in the total amount of $13,440 for the year ended June 30, 2022, which created a deficiency of $2,688 in the Replacement Reserve account at June 30, 2022. Two monthly deposits were not made during the year ended June 30, 2022. There were no internal controls in place to detect or prevent missed deposits to the Replacement Reserve account. Cause: Unknown Effect: Replacement Reserve account is underfunded and the Project is not in compliance with HUD?s regulations. If a significant replacement need were to arise, there may not be adequate funds in Replacement Reserve to cover the cost. Auditors? Recommendation: Management should implement internal controls suitable to detect and prevent missed replacement reserve deposits and to ensure that the Management makes all required monthly deposits to the Replacement Reserve account. Also, Management should make the necessary deposit to restore the funding shortfall as of June 30, 2022. In addition, Management should establish internal control procedures to reconcile, on a monthly basis, the Replacement Reserve account balance and the Replacement Reserve general ledger to the total amount of the Replacement Reserve required by HUD. Auditor Non-Compliance Code: N ? Reserve for Replacement Requirements FHA/Contract Number: 064- HD044 Auditor?s Summary of the Auditee?s Comments on the Findings and Recommendations: The Auditee has resolved this finding as of September 15, 2022, by depositing the two missed deposits in the amount of $2,688. The Auditee has also taken steps to prevent this finding in the future by implementing new controls of automatic monthly transfer of deposit to the Replacement Reserve. Reporting Views of Responsible Officials: We agree with the auditor?s finding and recommendations. Magnolia Manor has taken steps to assure that the Replacement Reserve account will not be underfunded again by making the transfer an automatic transfer from the Operating account to the Replacement Reserve account. The amount that the account was underfunded was deposited on September 15, 2022. Response Indicator: Agree Completion Date: September 15, 2022 Response: Magnolia Manor has taken steps to assure that the Replacement Reserve account will not be underfunded again by making the transfer an automatic transfer from the Operating account to the Replacement Reserve account. The amount that the account was underfunded was deposited on September 15, 2022. Contact Person: Rhonda M. Kay SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Supportive Housing for Persons with Disabilities CFDA # 14.181 See Finding 2022-1 under Section II ? Financial Statement Findings.