Finding Text
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Titles: Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Projects Federal Assistance Listing Numbers: 14.155
Material Noncompliance
Non Compliance Material to the Financial Statements: Yes
Material Weakness in Internal Control over Compliance
Criteria: As a recipient of a HUD insured loan as part of the Mortgage Insurance for the Purchase or Refinancing of Existing Multi-family Projects Program (the "Program"), the Authority is responsible to comply with the rules and regulations governing the Program. Evidence of compliance with Program rules and regulations needs to be documented, maintained and available for review. Condition: The Authority did not maintain appropriate evidence documenting compliance with the Program and as such audit testing could not be completed over areas such as; cash disbursements, new move-in testing, new move-outs testing, management agent certification, regulatory reviews and management functions. Additionally, the Authority did not record material transactions related to the HUD loans, closing costs and funds held with trustees.
Context: The Authority was unable to provide requested documentation at the time of audit to properly test the HUD compliance requirements: Cause: There is a material weakness in internal controls over compliance for the compliance related to the maintenance of accounts and other records. The Authority has not properly considered, designed, implemented, maintained and monitored a system of internal controls that reasonably assures the program is in compliance.
Effect: The Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Projects is in material non-compliance with the compliance requirements of the program.
Recommendation: We recommend that the Authority implement a process whereby Authority personnel receive the appropriate training in all areas of Program compliance. Safeguards should be put into place so that if an employee or manager leaves a department, other employees have been trained to fill that void.
Authority's Response: The Authority experienced significant turnover in employees during the year and as a result certain processes were not followed and source documents were misplaced or destroyed. Management agrees with the Auditors' finding and has hired a new Executive Director who will implement the required safeguards and ensure that the Authority follows HUD compliance requirements to remedy the aforementioned deficiencies.