BOYLSTON HOUSING, INC.Non-Profit

Findings 2020-1 Late fees and tenant certification Statement of Condition: Significant Deficiency ? The Organization has incurred a late fee due to late recertification. Criteria: Proper internal controls over accounting and management transactions would include the ability to recertify tenant income with Rural Development on a timely basis. Effect: The results of our tests revealed the Organization has incurred a late recertification fee. Cause: The Third Party Administrator did not recertify a tenant?s income based on tenant renewal date. Recommendation: The Third Party Administrator should be more aware of deadlines involving tenant finances and certification of rental assistance. Views of Responsible Officials and Plan Corrective Actions: A new third party administrator has taken over as of January 1, 2021.

Findings 2019-1 Late fees and tenant certification Statement of Condition: Significant Deficiency - The Organization has incurred a number of late fees and lost subsidized rental income due to late recertifications. Criteria: Proper internal controls over accounting and management transactions would include the ability to recertify tenant income with Rural Development on a timely basis. Effect: The results of our tests revealed the Organization has incurred several late recertification fees and lost subsidized renal income. Cause: The Third Party Administrator did not recertify several tenants? income based on tenant renewal dates. Recommendation: The Third Party Administrator should be more aware of deadlines involving tenant finances and certification of rental assistance. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator will strive to recertify tenant income in a timely manner. The Third Party Administrator reimbursed the Organization for late fees prior to year end. Therefore, losses were not incurred by the Organization.

Findings 2019-2 Surplus Cash Statement of Condition: Significant Deficiency - The Organization does not have an internal control procedure to prepare the calculation of surplus cash to be approved by Rural Development annually. Criteria: Proper internal controls over financial reporting would include the ability to prepare the calculation of surplus cash annually.Effect: Surplus cash has not been moved from operating cash since 2018. Cause: The Third Party Administrator was unaware of the surplus cash requirement by RD. Recommendation: The Third Party Administrator should develop a process to review surplus cash at end of year and have RD approve the transfer. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator has the knowledge to calculate surplus cash and will make deposits in a timely manner. The 2018 surplus cash calculation was computed by the Third Party Administrator, but cash was not available to make the deposit required.

Findings 2019-3 Annual Budget Statement of Condition: Significant Deficiency - The Third Party Administrator did not submit a 2019 budget to RD timely and therefore the budget for 2018 would remain in effect for 2019. The Third Party Administrator was unware that when you do not submit a timely budget and have it approved that the previous budget remains in effect. Criteria: Proper internal controls over submitting an annual budget through the MINC system is a requirement of RD. Effect: The Third Party Administrator significantly overspent the budget for office site staff salaries. Cause: The Third Party Administrator developed a 2019 internal budget that was never approved by RD. The results of not having an approved budget for 2019 would therefore make the 2018 budget remain in effect for 2019. Recommendation: The Third Party Administrator should work with RD to make sure annual budgets are approved timely and spending is within budget limits. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator will develop and seek RD?s timely approval of budgets moving forward.

Findings 2019-4 Accounts Receivable and Billing Statement of Condition: Significant Deficiency ? The Third Party Administrator made numerous errors in the billing and collections of tenant rent, as well as postings of monthly subsidy rent payments. Criteria: Proper internal controls over accounting include recording correct amounts due from tenants at the end of every month. Effect: The results of our audit procedures found that the Third Party Administrator incorrectly billed amounts in months where recertification?s were supposed to happen. At times, the Third Party Administrator failed to collect monthly rent from tenants and misposted rental payments. Cause: The staff of the Third Party Administrator changed during the year. The Third Party Administrator?s staff are unfamiliar with RD regulations, did not understand the billing program and collection process on lost subsidy rents. Recommendation: The Third Party Administrator should review and correct the tenant and subsidy accounts receivable balances prior to the audit. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator has proposed an allowance for accounts receivable to provide them time to correct the errors noted. The Third Party Administrator will develop a procedure to ensure that tenant and subsidy accounts receivable balances are kept up to date and accurate.

Findings 2019-5 Replacement Reserve Statement of Condition: Significant Deficiency - The Third Party Administrator was unaware that there was a bid process that was to be followed for project costs or that they are allowed to use vendors from a preapproved RD list of vendors. Criteria: Proper internal controls over understanding of RD laws and regulations will assist in minimizing errors in property management. Effect: The Third Party Administrator spent Replacement Reserve funds without proper approval. Cause: The results of our procedures found that the Third Party Administrator did not go out to bid for a carpet installation job. Recommendation: The Third Party Administrator should review RD requirements and maintain proper documentation of jobs that use Replacement Reserve Funds. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator has received proper approval from RD for all replacement reserve releases and will continue to do so. Going forward, the Third Party Administrator will obtain bids per RD guidelines and will seek prior authorization from RD on all capital improvements projects that will seek replacement reserve reimbursements.

Findings 2019-6 Subcontractor Statement of Condition: Significant Deficiency - The Third Party Administrator hired an external subcontractor to assist with functions covered under the monthly management fee. Criteria: Proper understanding of RD laws and regulations will assist in minimizing errors in property management. Effect: The results of our procedures found that the Third Party Administrator paid $1,272 to a subcontractor for functions covered under the management fee. Cause: The Third Party Administrator was unaware that they cannot use funds for expenses that are covered under the management fee. Recommendation: The Third Party Administrator should make sure they understand the proper use of funds and budget line items. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator will not charge for services that should be covered under the management fee.

Findings 2019-7 Training Costs Statement of Condition: Significant Deficiency - The Third Party Administrator paid for training for the maintenance staff related to ?Live Fair Housing? training. Criteria: Proper understanding of RD laws and regulations of allowed and disallowed costs will assist in minimizing errors in property management. Effect: The results of our procedures found that the Third Party Administrator paid $703 for disallowed training and meal costs for the maintenance staff. Cause: The Third Party Administrator was unaware that training costs for management staff is included in the monthly management fee, costs associated with training of site office staff is allowed by RD regulations. Recommendation: The Third Party Administrator should make sure they understand the proper use of funds. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator will follow the RD guidelines regarding trainings for site employees. The guidelines do not state training costs are to be covered by the management fee

Findings 2019-8 Insurance Statement of Condition: Significant Deficiency - The Third Party Administrator discontinued Director & Officer Insurance without discussion with the Board of Directors. Criteria: Proper internal control between management and the Board would include discussion and understanding of previous insurance coverage before discontinuing coverage. Effect: The Third Party Administrator discontinued D&O insurance coverage. Cause: The Third Party Administrator was unaware that the Board wanted this coverage.Recommendation: The Third Party Administrator should discuss changes in insurance coverage with the Board before making changes. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator will discuss obtaining D & O insurance with the Board.

Findings 2019-9 RD Self Certifications Statement of Condition: Significant Deficiency ? During the audit the auditor requested a copy of the RD required self-certification to be attached with the annual filing with RD. Criteria: Effective for 2019 RD requires sites to provide a self-certification. A sample can be found in the HB 3560 guidance issued November 2019 Attachment 4F. Effect: The Third Party Administrator was unable to provide a copy of this required certification. Cause: The Third Party Administrator was unfamiliar with the requirement or where to find the sample provided by the RD guidance. Recommendation: The Third Party Administrator should become familiar with RD requirements and where to find and research information. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator provided the self-certification to the auditor per the HB 3560 guidance attachment 4C.

Findings 2019-10 Vacancies Statement of Condition: Significant Deficiency - The Third Party Administrator is not maintaining the MINC system appropriately for changes in tenants and vacancies during 2019. There remains a discrepancy between RD vacancies of 10 and the Third Party Administrator noted vacancies of 6 for 2019. Criteria: Each month the Third Party Administrator needs to properly update the MINC system for tenants that move out, move in and apartments that are vacant. Effect: The facility has lost rental income due to these errors. In addition, vacancies reduce the amount of management fees the Third Party Administrator should be paying themselves in those months. Cause: The Third Party Administrator was unaware the effect of incorrect information in the MINC system would affect income to the site as well as and the management fee. Recommendation: The Third Party Administrator should properly account for vacancies in the MINC system every month, and review the RD monthly revenue sheet for accuracy. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator will review RD monthly income reports and correct errors on a timely basis.

Findings 2019-11 Drafting of Financial Statements Statement of Condition: Significant Deficiency - The Third Party Administrator does not have an internal control system designed to provide for the preparation of the financial statements and related financial statement disclosures being audited. As auditors, we were requested to draft the financial statements and accompanying notes to the financial statements. Criteria: Proper internal controls over financial reporting would include the ability to prepare financial statements including footnote disclosures. Effect: The absence of this control procedure is considered a significant weakness because the potential exists that a misstatement of the financial statements could occur and not be prevented or detected by the Organization?s internal control. Cause: The Third Party Administrator does not possess the knowledge or tools to prepare financial statement footnotes and required schedules. Recommendation: The Third Party Administrator should appoint a competent individual who possesses the skill, knowledge and experience to review and approve the draft reports and assume all relevant management responsibilities. Views of Responsible Officials and Plan Corrective Actions: The Third Party Administrator already employees a competent individual with the skills, knowledge and experience to review and approve drafts and assume all relevant management responsibilities.