Finding 951100 (2023-002)

Finding Type: - Immaterial noncompliance with major program requirements - Significant deficiency in internal control over compliance Title and Assistance Listing Number of Federal Program - Supportive Housing for the Elderly - Project Rental Assistance Contract and Capital Advance (ALN 14.157) Finding Resolution Status - In progress Information on Universe and Population Size - There was one withdrawal made from the replacement reserve during the year ended June 30, 2023. Sample Size Information - 100 percent of withdrawals for HUD approval and 10 percent or a minimum of two replacement reserve withdrawals to test for proper expenditure of requested funds Identification of Repeat Finding and Finding Reference Number - N/A Criteria - The Organization should have internal controls in place to reconcile the replacement reserve accounts on a timely basis to ensure all withdrawals are approved by HUD and all required monthly deposits are made as required by the Regulatory Agreement. Statement of Condition - There was a lack of timely reconciliation performed by the Organization to ensure all withdrawals from the replacement reserve account had proper HUD-approval, all required monthly deposits were made, and HUD approved loans were repaid timely. The Organization received approval from HUD for a $35,000 loan advance to be repaid to the replacement reserve when unpaid voucher payments were received (October 31, 2022); however, the loan was not repaid until December 13, 2022. Cause - The Organization failed to perform a reconciliation of the reserve for replacement account in a timely manner. Effect or Potential Effect - The lack of reconciliation procedures led to the reserve for replacement account being underfunded during the current year until the loan was refunded on December 13, 2022. Auditor Noncompliance Code - S - Internal control deficiency and N - Reserve for replacement deposits Reporting Views of Responsible Officials - Management agrees with the finding as reported. Recommendation - The Organization should implement internal controls to properly reconcile the reserve for replacement account in a timely manner. Response Indicator - Agree Completion Date - December 13, 2022 Response - Management acknowledges the significant deficiency in internal control over compliance and has taken measures to improve internal control over compliance. Management also acknowledges that it did not repay the replacement reserve timely with voucher funds subsequently received, but it did repay the $35,000 advance to the replacement reserve account on December 13, 2022.