Finding 9400 (2023-001)

Material Weakness Repeat Finding
Requirement
E
Questioned Costs
-
Year
2023
Accepted
2024-01-22
Audit: 12871
Organization: D H, Incorporated (OR)
Auditor: Jones & Roth PC

AI Summary

  • Core Issue: DH, Incorporated failed to recertify tenants on time and did not collect required security deposits, leading to material non-compliance with HUD regulations.
  • Impacted Requirements: Compliance with HUD's annual tenant recertification and security deposit collection mandates.
  • Recommended Follow-Up: Management should enhance internal controls to ensure timely recertifications and proper collection of security deposits.

Finding Text

Finding 2023-001 Type of Finding: Material weakness in internal control over compliance and noncompliance. Federal program: HUD Section 223(f) Insured Mortgage (Assistance Listing #14.134) Compliance Requirement: Eligibility Criteria: In accordance with DH, Incorporated’s regulatory agreement with HUD for its HUD Section 223(f) Insured Mortgage and HUD Section 8 Housing Assistance Payments contract, DH, Incorporated is required to annually recertify its tenants. It is the responsibility of management to design and implement internal controls to ensure the tenants are recertified within the applicable timeframe required by HUD. Additionally, HUD requires minimum security deposits of $50 to be collected for all tenants. Condition: DH, Incorporated did not perform recertifications for all tenants within the timeframe specified by HUD. Additionally, we noted security deposits were not collected from several tenants. We also noted a calculation error for one of the tenants’ adjusted income and tenant portion of rent and rent assistance. Cause: There were not properly designed or implemented internal controls to ensure the tenant recertifications were performed accurately and in the timeframe required by HUD and to ensure security deposits were collected as required. Effect: The effect is material non-compliance with the terms of the HUD program listed above. Questioned Costs: None. Repeat Finding: Yes, see Finding 2022-002. Context: We noted from review of the Forms HUD-52670 Schedule of Tenant Assistance Payments Due and other client prepared schedules, several tenants had not been recertified during the fiscal year as required. From the total 19 tenants at June 30, 2023, the annual recertifications for twelve tenants were past due. We selected a sample of 6 tenants from a population of 19 for eligibility testing. The sample was not a statistically valid sample. We performed procedures to determine whether the annual tenant recertification occurred within the timeframe specified by HUD. We noted 1 instance in our sample in which the tenant recertification had not been completed timely. As noted above, there were also indications of additional late tenant recertifications for tenants that fell outside of our sample. From our sample of 6 tenants, we noted one instance in which there was an error in the calculation of tenant adjusted income and therefore the tenant portion of rent. There was a transposition in the income amount used in the calculation from the actual income resulting in a minor error in the amount of tenant adjusted income, tenant portion of rent and rent assistance. We also noted from the total 19 tenants, there were 5 tenants that did not have security deposits collected as required. Recommendation: We recommend management review the current internal control procedures and implement additional procedures to ensure annual recertifications are performed as required by HUD. Views of Responsible Officials: Management agrees with the finding. See Corrective Action Plan.

Corrective Action Plan

Finding 2023-001 Response Type of Finding: Material weakness in internal control over compliance and noncompliance. Criteria: In accordance with DH, Incorporated’s regulatory agreement with HUD for its HUD Section 223(f) Insured Mortgage and HUD Section 8 Housing Assistance Payments contract, DH, Incorporated is required to annually recertify its tenants. It is the responsibility of management to design and implement internal controls to ensure the tenants are recertified within the applicable timeframe required by HUD. Additionally, HUD requires minimum security deposits of $50 to be collected for all tenants. Management’s Response and Planned Corrective Actions: 1. The name of the contact person(s) responsible for the corrective action: a. Kathleen Broadhurst, Sr. Director of Finance/ShelterCare b. Amanda Smith, Property Development Manager/ShelterCare 2. The corrective action planned: a. Pinehurst Management was overseeing property through 4/30/2023. ShelterCare was assigned as new managing agent 5/1/2023. b. ShelterCare is working to ensure that the onsite manager will be trained in HUD compliance. Training started in October 2023. c. We are currently prioritizing recertifications by oldest first so we are able to catch them up and get the property certifications back on track. d. Monthly review of Tenant Rental Assistance Certification System (TRACS) reports to ensure recertifications are being completed in a timely manner. 3. The anticipated completion date: a. New training was started in October 2023 and to be completed by 12/31/2023. Monthly review of TRACS reports was implemented 10/1/2023.

Categories

HUD Housing Programs Eligibility Material Weakness Internal Control / Segregation of Duties

Other Findings in this Audit

  • 9401 2023-002
    Significant Deficiency
  • 585842 2023-001
    Material Weakness Repeat
  • 585843 2023-002
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
14.134 Mortgage Insurance_rental Housing $630,268
14.195 Section 8 Housing Assistance Payments Program $124,896