Finding Text
S3800-010 ? Finding Reference Number: 2022-002 Program Information S3800-011: Federal Program Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects Section 207/223f (AL # 14.155) Federal Agency: U.S. Department of Housing and Urban Development Federal Award Identification Number and Year: N/A Pass-through Entity: None COVID-19 Identification: N/A Type of Compliance Finding: N ? Special Tests and Provisions S3800-015: Type of Finding Financial Statement and Federal Award Finding S3800-016: Finding Resolution Status In-progress S3800-017: Information on Universe Population Size N/A S3800-018: Sample Size Information N/A S3800-019: Repeat Finding Number N/A S3800-020: Criteria HUD Handbook 4370.2 REV-1 ?Financial Operations and Accounting Procedures for Insured Multifamily Projects? Chapter 2-2 states in pertinent part that the books and records should be maintained in accordance with Generally Accepted Accounting Principles. Section 11(e) of the Organization?s Regulatory Agreement states the books and records should be maintained in accordance with requirement of HUD. A critical component of ensuring the books and records are maintained in accordance with GAAP is that an Organization has established an internal control process that produces reliable financial reporting. One of the key components of internal control is the ?control environment.? And one of the key elements of the ?control environment? is that those charged with governance (the Board of Directors; hereinafter the Board) exercise oversight of the development and performance of internal control over financial reporting. S3800-030: Statement of Condition During our audit of the Organization?s fiscal year ended March 31, 2022 financial statements, we noted that the Board did not exercise oversight of management nor monitor the Organization?s financial performance or compliance with applicable laws and regulations. S3800-032: Cause The Board did not have board meetings nor receive periodic financial reports from management. S3800-033: Effect or Potential Effect Due to the Boards lack of oversight/monitoring, management could misappropriate assets without fear of detection by the Board and the Organization could be noncompliant with applicable laws and regulations without the Board?s knowledge. S3800-035: Auditor Non-Compliance Code S ? Internal Control Deficiencies S3800-040: Questioned Costs None S3800-045: Reporting Views of Responsible Officials Management agreed with the auditor?s finding S3800-050: Context The Board failed to exercise is responsibility to provide oversight of and accountability to the Organization. S3800-080: Recommendation The Board should meet on a periodic basis, recommend no less frequently than quarterly and at these meeting they should review the Organization?s key performance indicators, both financial and nonfinancial. S3800-090: Auditor?s Summary of the Auditee?s Comments on the Findings and Recommendations Concur S3800-130: Response Indicator Agree S3800-140: Completion Date December 31, 2022 S3800-150: Response See Corrective Action Plan