Finding Text
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 - Five withdrawals from replacement reserve
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 - During the year ended June 30, 2023, the Organization had five withdrawals from the replacement reserve totaling $150,316. Of these withdrawals, $71,998 was properly supported and $78,318 was withdrawn without proper HUD approval. The lack of timely reconciliations resulted in unauthorized amounts transferred out of the replacement reserve, and the funds were not returned to the replacement reserve account by June 30, 2023.
Cause - The Organization did not follow its own processes and failed to perform timely reconciliations of the replacement reserve account.
Effect or Potential Effect - The lack of reconciliation procedures led to three withdrawals in June 2023 that were not fully approved, resulting in the replacement reserve account being underfunded at June 30, 2023 by $78,318.
Auditor Noncompliance Code - A - Unauthorized withdrawals from replacement reserve account and S Internal control deficiency
Reporting Views of Responsible Officials - Management is aware of the required monthly deposits and the requirement to request and receive HUD approval for replacement reserve withdrawals and agrees that timely reconciliations should be performed. Management agrees with the finding and returned the money to the replacement reserve account in August 2023.
Recommendation - The Organization should implement internal controls to ensure timely reconciliation occurs for the replacement reserve accounts to ensure compliance with HUD requirements.
Response Indicator - Agree
Completion Date - August 2, 2023
Response - Management acknowledges the significant deficiency in internal control over compliance since it did not obtain prior HUD approval for three withdrawals totaling $78,318 during the year ended June 30, 2023 and is implementing measures to improve this internal control over compliance. Management returned $78,318 to the replacement reserve account in August 2023.