WARDEN FARM HOMES, INC.Non-Profit

Finding No. 2021-001 Information on Universe Population Size: 209 Repairs and Maintenance Invoices Representing $28,287 in Costs Sample Size Information: 20 Repairs and Maintenance Invoices Tested Representing $21,388 in Costs Tested Identification of Repeat Finding Reference Number: Not Applicable Condition: Sampled invoices included 2 out of 20 instances where past due balances were paid or payment documentation consisted of vendor statements and not invoices. We were unable to determine expense allowability based solely upon payments of overdue balances included with invoice payments or payments from vendor statements. Criteria: Best practices for activity level internal control over expenses requires payment to be made from original vendor invoices only, and not from vendor statements or invoiced past due balances. In addition, USDA-RD Regulation 2-3560 Attachment 4-A provides guidance about allowable Project expenditures; documentation evidencing allowability must be maintained by management for all disbursements. Cause: Although the management agent has a policy of paying from invoices only, that policy was not consistently followed. Effect or Potential Effect: Paying past due balances on invoices or payments based on vendor statements could result in overpayments to vendors. In addition, the Corporation cannot demonstrate compliance with USDA-RD Attachment 4-A of USDA-RD Handbook 2-3560 with respect to payments on past due balances paid to vendors. Only invoices contain enough detail to demonstrate and document such compliance. Auditor?s Recommendation: Management should reinstitute the requirement that all payments to vendors be made based upon vendor invoices only, and management should obtain copies of any past due invoices representing past due balances before payment is approved. Reporting Views of Responsible Officials: After discussion with the auditor, the management agrees with the auditor?s recommendation and will reinstitute the policy of not paying vendors from statements or past due balances on invoices. FINDINGS ? FEDERAL AWARD PROGRAM AUDIT UNITED STATES DEPARTMENT OF AGRICULTURE, RURAL DEVELOPMENT Finding No. 2021-002: Section 515(a) & 521, CFDA #10.427 & #10.415 Information on Universe Population Size: 25 Residential Units Sample Size Information: 5 Residential Units Tested Identification of Repeat Finding Reference Number: Finding 2020-001 Condition: 1. Assets are not being properly verified leading to income from assets not being properly included on the certifications on 4 out of 5 tenant files tested. 2. Rent was not correctly computed in 1 out of 5 files tested. Gross income computed by management was $21,060 but the actual gross income was $24,570, resulting in overpayment of rental assistance and undercharging the tenant for rent. Criteria: 1. Under USDA-RD Handbook 2-3560 Paragraph 6-10 Asset Evaluation, Verification and Inclusions on Certifications, applicants must provide information about household assets at the time of application and whenever an income is reverified. Applicants must provide sufficient information to enable the borrower to verify the asset information and compute the market and cash value of assets. 2. The amount used for calculating rent did not match the amount on the third-party verification that should have been used for the calculation of rent. Cause: Management has not designed proper internal controls over documenting household assets and related income from assets as part of their certification/recertification process. Management therefore is not making additional inquiries of tenants about the potential sources of assets associated with their verified income source when no assets are reported by tenants. For the error in calculating income previously noted in condition paragraph, management should use figures from third-party verifications when calculating gross income. Effect or Potential Effect: Income from assets and rent calculations can affect an applicant?s ability to be qualified as an eligible tenant and determining the amount due for rent and rental assistance. Many types of assets generate income that must be included in the calculations of annual income that determine tenant rent and assistance. Because the full scope of missing assets is unknown, the amount of misstatement could not be determined, but the amount could be significant. Improper rent calculations led to overpayment of rental assistance and undercharging of tenant rent. Context: We sampled 5 of 25 tenant files and in 4 out of 5 files tested, assets were not properly verified despite tenant sources of income provided indication that they do have assets such as bank accounts, debit or prepaid cards or cash on hand. Auditor?s Recommendation: We recommend developing controls to ensure that asset verification and proper income calculation is an integral part of the income verification process. We would recommend re-training of site management on USDA-RD occupancy regulations and consistent oversight, continued future training and review of every certification processed to ensure correct internal controls are in operation for continued compliance. Reporting of Views of Responsible Officials: Management concurs with the auditor?s finding and will provide retraining of site management with regard to proper verification of tenant assets and ensure that all assets are identified and properly included in the income calculation of rent. In addition, all future rent calculations will be based upon third-party verifications. We will design controls to review and approve income calculations at the management office prior to implementation to prevent calculation errors.

FINDINGS ? FINANCIAL STATEMENTS AUDIT NONE. FINDINGS ? FEDERAL AWARD PROGRAM AUDIT UNITED STATES DEPARTMENT OF AGRICULTURE, RURAL DEVELOPMENT Finding No. 2020-001: Section 515(a) & 521, CFDA #10.427 & #10.415 Condition: 1. Assets were not declared by the households in 5 of 5 tenant files reviewed; 2. No assets are being verified or included on the certifications. Criteria: Under USDA-RD Handbook 2-3560 Paragraph 6-10 Asset Evaluation, Verification and Inclusions on Certifications, applicants must provide information about household assets at the time of application and whenever an income is reverified. Applicants must provide sufficient information to enable the borrower to verify the asset information and compute the market and cash value of the asset. Cause: Management has not designed proper internal controls over documenting household assets and related income from assets as part of their certification/recertification process. Management therefore is not making additional inquiries of tenants about the potential sources of assets associated with their verified income source when no assets are reported by tenants. Effect or Potential Effect: Assets can affect an applicant?s ability to be qualified as an eligible tenant and determining rent and rental assistance. Many types of assets generate income that must be included in the calculations of annual income that determine tenant rent and assistance. Because the full scope of missing assets is unknown, the amount of misstatement could not be determined, but the amount could be significant. Context: We sampled 5 of 25 tenant files and in every case, no assets were declared despite tenant sources of income provided indication that they do have assets such as bank accounts, debit or prepaid cards or cash on hand. Auditor?s Recommendation: We recommend developing controls to ensure that asset verification is an integral part of income verification. We would recommend re-training of site management on USDA-RD occupancy regulations and consistent oversight, continued future training and review of every certification processed to ensure correct internal controls are in operation for continued compliance. Reporting of Views of Responsible Officials: Management concurs with the auditor?s finding and will provide retraining of site management with regard to proper inquiry of tenants about disclosure of assets and ensure that all assets are identified and properly included in the income calculation of rent. In addition, we will design controls to ensure ongoing compliance with the identification and calculation of income associated with assets.