EL PASO LAS PUERTAS ABIERTAS, INC.Non-Profit

Compliance Requirement: Reporting Criteria: In accordance with the Department of Housing and Urban Development Chapter 3 Audit Guidance, the regulatory agreement related to the Project requires that the Project submit an annual operating budget 30 days before the beginning of each fiscal year. Condition: During our audit procedures and per review of prior year audit Finding 2022-005, it was noted that management failed to prepare and submit an annual operating budget to HUD for the fiscal year ending June 30, 2023. Management submitted an annual operating budget to HUD approximately 23 days after the fiscal year began. Cause: Management was unaware of certain reporting requirements Effect: The Organization is not in full compliance with the requirements prescribed in its regulatory agreement with HUD. Recommendation: To avoid potential non-compliance, we recommend that the executive director and property manager prepare and submit an annual operating budget no later than 30 days prior to the beginning of the next fiscal year. Management’s Response: Refer to Corrective Action Plan.

Compliance Requirement: Special Tests and Provisions Criteria: In accordance with the Project’s regulatory agreement with HUD, management shall establish a residual receipts account and make deposits into the account in accordance with HUD requirements (within 90 days after the close of the fiscal year). Disbursements from such fund may be made only after written consent is received from HUD. Condition: Based on the Computation of Surplus Cash, the deposit due to the residual receipts fund is $5,015. The deposit has not been made. Cause: Management was unaware of how to calculate the amount due to the residual receipts funds. Effect: The organization is not in compliance with this requirement. Recommendation: To avoid potential non-compliance, we recommend that management only make deposits into the residual receipts account of surplus cash at the end of each fiscal year. The required deposit should be made within 90 days after the close of the fiscal year. Disbursements will only be made after obtaining written consent from HUD. Management’s Response: Refer to Corrective Action Plan.

Compliance Requirement: Special Tests and Provisions Criteria: In accordance with the Project’s regulatory agreement with HUD, management shall establish and maintain a replacement reserve account to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally secured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund. All disbursements from the reserve must be approved by HUD. Condition: Based on the evaluation of the cash account that holds the replacement reserve funds, the account is not interest-bearing. Cause: Management was unaware of replacement reserve compliance requirements. Effect: The organization is not in compliance with this requirement. Recommendation: To avoid potential non-compliance, we recommend that management transfer the funds into an interest-bearing account. Management’s Response: Refer to Corrective Action Plan.

Compliance Requirement: Special Tests and Provisions Criteria: In accordance with the Project’s regulatory agreement with HUD, management shall establish and maintain a replacement reserve account to aid in funding extraordinary maintenance and repair and replacement of capital items. HUD regulation mandates that permission be obtained prior to any withdrawals from the replacement reserve. Condition: Based on the evaluation of withdrawal and permission obtained, it was noted that withdrawal took place prior to receiving permission from HUD. Cause: Management was unaware of replacement reserve compliance requirements. Effect: The organization is not in compliance with this requirement. Recommendation: To avoid potential non-compliance, we recommend that management request and receive permission for withdrawals prior to processing any withdrawals. Management’s Response: Refer to Corrective Action Plan.

Compliance Requirement: Activities Allowed or Unallowed and Special Tests and Provisions Criteria: The organizations’ disbursements must be supported by approved bills, invoices, or other supporting documentation. Funds should also be reasonable and necessary for the operation and maintenance of the project. Condition and Context: During our audit procedures, it was noted that management was unable to provide sufficient documentation of certain expenses. Specifically, 17 of 40 disbursements did not have any supporting documentation to support their purpose, approval, or appropriateness. Questioned Costs: $7,287.80 Cause: The organization does not policies in place for record retention, and there is no evidence of oversight from the Board of Directors. Effect: The organization is not in full compliance with the requirements with its regulatory agreement with HUD or the Uniform Guidance. Recommendation: We recommend that all supporting documentation for all expenditures be retained by the organization and that the organization involve the Board of Directors to approve disbursements for the organization. We also recommend that the organization stop using petty cash, and not use debit or credit cards in the future. Management Response: See Corrective Action Plan.

Compliance Requirement: Reporting Criteria: In accordance with 2 U.S. Code of Federal Regulations (CFR) 200.512, the Organization is required to submit its single audit reporting package and data collection form to the Federal Audit Clearinghouse (FAC) no later than 30 days after the date of its audited financial statements or 9 months after the fiscal year end, whichever occurs earlier. Due to the ongoing Coronavirus Pandemic, the Office of Management and Budget issued memorandum M-20-26 extending the deadline 3 months beyond the normal due date. Condition and Context: The federal reporting due date for the Organization’s June 30, 2022 single audit reporting package is March 31, 2023. However, the organization did not issue its single audit reporting package until November 2023. Effect: Late filing is considered in noncompliance with timely submission of financial information to the Federal Audit Clearinghouse. Cause: The Organization suffered operational difficulties as a result of key employee turnover and internal control deficiencies. As a result, material adjustments to the financial statements were made. In order to support the adjustments and comply with Generally Accepted Government Auditing Standards significantly more time and documentation was required to be obtained. This significantly delayed the closing and delivery of the financial reporting package. Recommendation: The Organization should implement the recommendations described here in to ensure that future reporting requirements are complied with in a timely manner. Management Response: See Corrective Action Plan.

Compliance Requirement: Reporting Criteria: In accordance with the Department of Housing and Urban Development Chapter 3 Audit Guidance, the regulatory agreement related to the project requires that the Project submit audited financial statements within 9 months after the end of each fiscal year. Condition and Context: The required REAC submission and annual audit for the fiscal year ended June 30, 2022 were not completed within the required deadline. Cause: Management had difficulty in obtaining all supporting documentation in order to complete the required audit within the timeline prescribed by the Department of Housing and Urban Development. Additionally, current year’s report’s timeliness was affected by prior years untimely report because, the original trial balance had to be sent back to management to correct material misstatements and to complete bookkeeping for the fiscal year. Effect: The Organization is not in full compliance with the requirements prescribed in the Department of Housing and Urban Development Chapter 3 Guidance and its regulatory agreement with HUD. Recommendation: To avoid potential non-compliance, we recommend that management monitor the required timelines for reporting requirements and implement policies with respect to its financial close and reporting process. Management’s Response: Refer to Corrective Action Plan.

Compliance Requirement: Reporting Criteria: In accordance with the Department of Housing and Urban Development Chapter 3 Audit Guidance, the regulatory agreement related to the Project requires that the Project submit an annual operating budget 30 days before the beginning of each fiscal year. Condition: During our audit procedures and per review of prior year audit Finding 2020-002, it was noted that management failed to prepare and submit an annual operating budget to HUD for the fiscal year ending June 30, 2022. Management submitted an annual operating budget to HUD approximately 1 year after the fiscal year began. Cause: Management was unaware of certain reporting requirements Effect: The Organization is not in full compliance with the requirements prescribed in its regulatory agreement with HUD. Recommendation: To avoid potential non-compliance, we recommend that the executive director and property manager prepare and submit an annual operating budget no later than 30 days prior to the beginning of the next fiscal year. Management’s Response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Compliance Requirement: Special Tests and Provisions Criteria: In accordance with the Project’s regulatory agreement with HUD, management shall establish a residual receipts account and make deposits into the account in accordance with HUD requirements (within 90 days after the close of the fiscal year). Disbursements from such fund may be made only after written consent is received from HUD. Condition: Based on the Computation of Surplus Cash, the deposit due to the residual receipts fund is $46,837. The deposit has not been made. Cause: Management was unaware of how to calculate the amount due to the residual receipts funds. Effect: The organization is not in compliance with this requirement. Recommendation: To avoid potential non-compliance, we recommend that management only make deposits into the residual receipts account of surplus cash at the end of each fiscal year. The required deposit should be made within 90 days after the close of the fiscal year. Disbursements will only be made after obtaining written consent from HUD. Management’s Response: Refer to Corrective Action Plan.

Compliance Requirement: Special Tests and Provisions Criteria: In accordance with the Project’s regulatory agreement with HUD, management shall establish and maintain a replacement reserve account to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally secured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund. All disbursements from the reserve must be approved by HUD. Condition: Based on the evaluation of the cash account that holds the replacement reserve funds, the account is not interest-bearing. Cause: Management was unaware of replacement reserve compliance requirements. Effect: The organization is not in compliance with this requirement. Recommendation: To avoid potential non-compliance, we recommend that management transfer the funds into an interest-bearing account. Management’s Response: Refer to Corrective Action Plan.

Reference Number: 2021-003 Compliance Requirement: Activities Allowed or Unallowed and Special Tests and Provisions Criteria: The organizations? disbursements must be supported by approved bills, invoices, or other supporting documentation. Funds should also be reasonable and necessary for the operation and maintenance of the project. Condition and Context: During our audit procedures, it was noted that management was unable to provide sufficient documentation of certain expenses. Specifically, 23 of 40 disbursements did not have any supporting documentation to support their purpose, approval, or appropriateness. Questioned Costs: $8,495.29 Cause: The organization does not policies in place for record retention, and there is no evidence of oversight from the Board of Directors. Effect: The organization is not in full compliance with the requirements with its regulatory agreement with HUD or the Uniform Guidance. Recommendation: We recommend that all supporting documentation for all expenditures be retained by the organization and that the organization involve the Board of Directors to approve disbursements for the organization. We also recommend that the organization stop using petty cash, and not use debit or credit cards in the future. Management Response: See Corrective Action Plan.

Reference Number: 2021-004 Compliance Requirement: Reporting Criteria: In accordance with 2 U.S. Code of Federal Regulations (CFR) 200.512, the Organization is required to submit its single audit reporting package and data collection form to the Federal Audit Clearinghouse (FAC) no later than 30 days after the date of its audited financial statements or 9 months after the fiscal year end, whichever occurs earlier. Due to the ongoing Coronavirus Pandemic, the Office of Management and Budget issued memorandum M-20-26 extending the deadline 3 months beyond the normal due date. Condition and Context: The federal reporting due date for the Organization?s June 30, 2021 single audit reporting package was extended from March 31, 2022 to September 30, 2022. However, the organization did not issue its single audit reporting package until November 2022. Effect: Late filing is considered in noncompliance with timely submission of financial information to the Federal Audit Clearinghouse. Cause: The Organization suffered operational difficulties as a result of key employee turnover and internal control deficiencies. As a result, material adjustments to the financial statements were made. In order to support the adjustments and comply with Generally Accepted Government Auditing Standards significantly more time and documentation was required to be obtained. This significantly delayed the closing and delivery of the financial reporting package. Recommendation: The Organization should implement the recommendations described in finding 2021-001 to ensure that future reporting requirements are complied with in a timely manner. Management Response: See Corrective Action Plan.

Reference Number 2021-005 Compliance Requirement: Reporting Criteria: In accordance with the Department of Housing and Urban Development Chapter 3 Audit Guidance, the regulatory agreement related to the project requires that the Project submit audited financial statements within 9 months after the end of each fiscal year. Condition and Context: The required REAC submission and annual audit for the fiscal year ended June 30, 2021 were not completed within the required deadline. Cause: Management had difficulty in obtaining all supporting documentation in order to complete the required audit within the timeline prescribed by the Department of Housing and Urban Development. Additionally, the original trial balance had to be sent back to management to correct material misstatements and to complete bookkeeping for the fiscal year. Effect: The Organization is not in full compliance with the requirements prescribed in the Department of Housing and Urban Development Chapter 3 Guidance and its regulatory agreement with HUD. Recommendation: To avoid potential non-compliance, we recommend that management monitor the required timelines for reporting requirements and implement policies with respect to its financial close and reporting process. Management?s Response: Refer to Corrective Action Plan.

Reference Number 2021-006 Compliance Requirement: Reporting Criteria: In accordance with the Department of Housing and Urban Development Chapter 3 Audit Guidance, the regulatory agreement related to the Project requires that the Project submit an annual operating budget 30 days before the beginning of each fiscal year. Condition: During our audit procedures and per review of prior year audit Finding 2020-002, it was noted that management failed to prepare and submit an annual operating budget to HUD for the fiscal year ending June 30, 2021. Management submitted an annual operating budget to HUD approximately 36 days after the fiscal year began. Cause: Management was unaware of certain reporting requirements Effect: The Organization is not in full compliance with the requirements prescribed in its regulatory agreement with HUD. Recommendation: To avoid potential non-compliance, we recommend that the executive director and property manager prepare and submit an annual operating budget no later than 30 days prior to the beginning of the next fiscal year. Management?s Response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Compliance Requirement: Special Tests and Provisions Criteria: In accordance with the Project?s regulatory agreement with HUD, management shall establish a residual receipts account and make deposits into the account in accordance with HUD requirements (within 90 days after the close of the fiscal year). Disbursements from such fund may be made only after written consent is received from HUD. Condition: Based on the Computation of Surplus Cash, the deposit due to the residual receipts fund is $36,156. The deposit has not been made. Cause: Management was unaware of how to calculate the amount due to the residual receipts funds. Effect: The organization is not in compliance with this requirement. Recommendation: To avoid potential non-compliance, we recommend that management only make deposits into the residual receipts account of surplus cash at the end of each fiscal year. The required deposit should be made within 90 days after the close of the fiscal year. Disbursements will only be made after obtaining written consent from HUD. Management?s Response: Refer to Corrective Action Plan.

Finding 2020-003: Management failed to properly maintain the residual receipt account. (Repeat finding with modifications) Supportive Housing for Persons with Disabilities (Section 811) 14.181 Compliance Requirement: Special Tests Criteria: In accordance with the Project?s regulatory agreement with HUD, management shall establish a residual receipts account and make deposits into the account in accordance with HUD requirements (within 90 days after the close of the fiscal year). Disbursements from such fund may be made only after written consent is received from HUD. Condition: During our audit procedures and per review of prior year audit Finding 2019-003, there were no required deposits for the fiscal years ended June 30, 2020 and 2019. We noted that management deposited regular tenant rent receipts into the bank account that had been previously established as the residual receipts account instead of the Project?s operating cash account. Known Questioned Costs: N/A Cause: Management was unaware of the residual receipt account requirements as prescribed by HUD. Effect: As prescribed by the Project?s regulatory agreement, disbursements from the residual receipts account may only be made after written consent is received from HUD. Various tenant rent receipts have been deposited into the residual receipts account by management. As a result, management has restricted the use of such deposits. Such amounts should have been deposited into the Project?s operating cash account. Recommendation: To avoid potential non-compliance, we recommend that management only make deposits into the residual receipts account of surplus cash at the end of each fiscal year. The required deposit should be made within 90 days after the close of the fiscal year. Disbursements will only be made after obtaining written consent from HUD. Management?s Response: Management disagrees with auditor recommendation and believes the account is being maintained in accordance with the HUD regulatory agreement. Refer to Corrective Action Plan.

Finding 2020-004: Unsupported expenditures of project funds. (Repeat finding with modifications) Supportive Housing for Persons with Disabilities (Section 811) 14.181 Compliance Requirement: Allowable Costs/Special Tests Criteria: In accordance with the Project?s regulatory agreement with HUD, all disbursements from the regular operating account must be supported by approved invoices, bills or other supporting documentation. Project funds should also be reasonable and necessary for the operation and maintenance of the Project. Condition: During our audit procedures, it was noted in several instances that management was unable to provide sufficient supporting documentation of expenses. Specifically, in 4 out of 25 instances, supporting invoices could not be located. In 1 out of 25 instances, supporting documentation related to Project property insurance expense, paid by the Organization?s affiliate, could not be located. We also noted that only $1,956.03 out of a total of $2,455.44 ?petty cash? transactions contained proper supporting documentation of the disbursement. It was also noted that there was no proof that any excess funds were being returned to the Project?s petty cash fund. Likely Questioned Cost: $5,216.34. Cause: The Organization failed to obtain all supporting documentation for review and approval of the likely questioned costs noted above. Effect: The Organization is not in full compliance with the requirements prescribed in its regulatory agreement with HUD. Recommendation: To avoid potential non-compliance, we recommend that all supporting documentation for all project-related expenses be appropriately retained by the Organization. We recommend that management adopt a policy for retaining support for all expenses that are paid by its affiliate and reimbursed by the Project. We also recommend that management assign a second check signor in case the Executive Director is unavailable or unable to sign checks necessary to pay for property-related expenses. Lastly, we recommend that the use of the petty cash fund be eliminated. Management?s Response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Finding 2020-007: Management failed to deposit a delinquent balance due to the Replacement Reserve Account resulting from prior year audit Finding 2019-007. (Repeat finding) Supportive Housing for Persons with Disabilities (Section 811) 14.181 Compliance Requirement: Special Tests Criteria: In accordance with project requirements established by HUD in the Regulatory Agreement, management is required to obtain authorization for all withdrawals from the Replacement Reserve account from HUD. Condition: During our audit procedures and per review of prior year audit Finding 2019-007, it was noted that management had made withdrawals from the Replacement Reserve account without authorization from HUD during the fiscal year ended June 30, 2018. It was noted that the balance due to the Replacement Reserve account for years ended June 30, 2020 and 2019, was $10,800. Known Questioned Costs: N/A Cause: Although management became aware of the HUD authorization requirement in the prior year, it was noted that management failed to repay the full underfunded amount identified in Finding 2019-007 as of June 30, 2020, due to the property being financially incapable of repaying the full balance. Effect: HUD may demand the amount due at any time. Recommendation: We recommend that management set up a small monthly payment plan which over time will reimburse the account the full amount. By doing so, it provides evidence that management is committed to repaying the amount. Eventually the funds will be used for major repairs made to the property. Management?s Response: Management agrees with auditor. However, there has been no corrective action initiated to replenish the unauthorized withdrawals of $10,800 made from the replacement reserve in fiscal year 2018. Management has only continued to make monthly payments in accordance with the Regulatory Agreement. Refer to Corrective Action Plan.