Wesley Village, Inc.Non-Profit

Condition: As part of our audit, the auditor proposed adjusting entries to ensure that the financial statements were not materially misstated. Criteria: Management of the Village should ensure that controls are properly designed and implemented when closing the books and records and preparing for the year-end audit. This will ensure that the financial statements presented are free of material misstatement. Cause: The current system of internal control is not properly designed to ensure that the financial statements are not materially misstated. Effect of Potential Effect: The effect of this deficiency is that misstatements may not be identified and corrected on a timely basis. Repeat Finding, if applicable: Yes, similar finding was identified during last year. Recommendation: Management of the Village should review its processes and procedures and related controls to ensure that the trial balance is properly closed when provided to the auditors for audit procedures. View of Responsible Officials and Planned Corrective Action: Management feels due to the nature of operations that the current system is cost effective for a project of this size; however, they will consider adjusting accounts where possible in the future.

The details of this finding can be found in Finding 2025-004, included in Section III - Federal Award Findings and Questioned Costs. Please refer to that section for more details.

The details of this finding can be found in Finding 2025-005, included in Section III - Federal Award Findings and Questioned Costs. Please refer to that section for more details.

Criteria: All disbursements from the replacement reserve account were properly authorized by the USDA. Condition: A withdrawal from the replacement reserve account was not approved by the USDA. Cause: Management did not properly implement controls over compliance to ensure that no withdrawals are made from the replacement reserve account prior to approval from USDA. Effect of Potential Effect: The replacement reserve account had a withdrawal without USDA’s approval. Perspective: The Village made only one withdrawal from this account during the year. Questioned costs: $25,000 Repeat Finding, if applicable: Yes, similar finding was identified during last year. Recommendation: We recommend that controls are implemented to ensure the proper approvals are received for all withdrawals from restricted accounts such as the replacement reserve. View of Responsible Officials and Planned Corrective Action: Management agreed with the recommendation and will ensure all proper approvals are received prior to any withdrawals from the replacement reserve.

Criteria: All required deposits for the replacement reserve account were made in compliance with the USDA agreements. Condition: Monthly deposits made to the replacement reserve account were not the correct amount for the year. Cause: Management did not properly implement controls over compliance to ensure that correct monthly deposits were made in the replacement reserve account during the year. Effect of Potential Effect: The replacement reserve account was underfunded as of December 31, 2025. Perspective: For all 12 deposits required, amount deposited was $24,441 instead of the required $27,083, therefore total deposits were lower than required by $2,642. Repeat Finding, if applicable: This is not a repeat finding. Recommendation: We recommend that controls are implemented to ensure the proper deposits are made to the replacement reserve account. View of Responsible Officials Management agreed with the recommendation and will ensure they confirm with the USDA and Planned Corrective representative regarding the required monthly deposit amount at the beginning of the year in Action: future. In addition, management will make a deposit for the underfunded amount of $2,642 during 2026 related to 2025 required deposits.

Condition: A withdrawal from the replacement reserve account was not approved by the USDA. Criteria: A good system of internal control requires proper controls in place to ensure all replacement reserve withdrawals have a proper USDA approval. Cause: A withdrawal totaling $35,930 was used to pay for apartment renovations without prior approval from USDA. Effect of Potential Effect: The replacement reserve account had a withdrawal without USDA’s approval. Recommendation: We recommend that controls are implemented to ensure the proper approvals are received for all withdrawals. View of Responsible Officials and Planned Corrective Action: Management agreed with the recommendation and will ensure all proper approvals are received prior to any withdrawals from the replacement reserve.

Condition: The replacement reserve account was not funded in accordance with the USDA required deposits during the year. Criteria: A good system of internal control requires proper controls in place to ensure the proper and timely monthly deposits are made for the replacement reserve account. Cause: Management made the monthly deposits to the replacement reserve during the year; however, the monthly deposits were lower than the required deposit amounts. Effect of Potential Effect: The replacement reserve account was underfunded by $7,317 as of December 31, 2023. Recommendation: We recommend that the underfunded amount be deposited into the replacement reserve account and that controls are implemented to ensure the proper and timely deposits are made for the replacement reserve account. View of Responsible Officials and Planned Corrective Action: Management agreed with the recommendation and made the deposit of $7,317 subsequent to year end in April 2024.

Condition: Project funds including restricted funds (taxes and insurance) were invested in investments other than in accordance with the USDA Handbook. Criteria: In accordance with the USDA Handbook project funds should be in the form of a cash deposit or invested in obligations backed by the U.S. Government or an Agency of the U.S. Government, Triple A-rated Government National Mortgage Association or Triple A-rate pre-refunded bond. Cause: Management invested a portion of project funds and restricted deposits (taxes and insurance) in mutual funds in an effort to generate higher investment income for the Project. Effect of Potential Effect: The effect of this finding, which cannot be quantified, is that funds invested in mutual funds are exposed to various risks such as market and credit risks. Recommendation: We recommend that management invest Project funds and restricted funds in investments that are in accordance with the USDA Handbook. View of Responsible Officials and Planned Corrective Action: Management is aware of such market and credit risks and, therefore the Project Sponsor (Good Shepherd Home) is committed to reimburse the Project for any net cumulative realized investment losses that the Project incurs. There is a cumulative net gain through December 31, 2022.

Significant Deficiency 2021-003: Restricted funds Condition: Project funds including restricted funds (taxes and insurance) were invested in investments other than in accordance with the USDA Handbook. Criteria: In accordance with the USDA Handbook project funds should be in the form of a cash deposit or invested in obligations backed by the U.S. Government or an Agency of the U.S. Government, Triple A-rated Government National Mortgage Association or Triple A-rate pre-refunded bond. Cause: Management invested a portion of project funds and restricted deposits (taxes and insurance) in mutual funds in an effort to generate higher investment income for the Project. Effect of Potential Effect: The effect of this finding, which cannot be quantified, is that funds invested in mutual funds are exposed to various risks such as market and credit risks. Recommendation: We recommend that management invest Project funds and restricted funds in investments that are in accordance with the USDA Handbook. View of Responsible Officials and Planned Corrective Action: Management is aware of such market and credit risks and, therefore the Project Sponsor (Good Shepherd Home) is committed to reimburse the Project for any net cumulative realized investment losses that the Project incurs.

Significant Deficiency 2020-001: Segregation of Duties Condition: A number of overlapping duties are handled by the affiliated sponsor?s accounting staff. Criteria: A good system of internal control requires proper segregation of duties throughout the accounting process. Cause: Management feels due to the nature of operations that the current system is cost effective for a project of this size. Effect of Potential Effect: The effect of this deficiency, which cannot be quantified, is that misstatements may not be identified and corrected on a timely basis. However, there was no identified effect on the 2020 audited financial statements due to the lack of segregation of duties. Recommendation: We recommend that certain accounting duties and functions be segregated to enhance internal control. View of Responsible Officials and Planned Corrective Action: Management feels due to the nature of operations that the current system is cost effective for a project of this size, however, they will consider segregating accounting duties and functions where possible.

Significant Deficiency 2020-002: General Accounting Matters Condition: A number of journal entries are recorded through the year-end audit process. Criteria: A good system of internal control requires that management has an adequate understanding of all accounting matters affecting the operations of their organization. Cause: Management feels due to the nature of operations that the current system is cost effective for a project of this size. Effect of Potential Effect: The effect of this deficiency is that misstatements may not be identified and corrected on a timely basis. Recommendation: We recommend that where possible management record all adjustments prior to the year-end audit process. View of Responsible Officials and Planned Corrective Action: Management fees due to the nature of operations that the current system is cost effective for a project of this size, however, they will consider adjusting accounts where possible in the future.

Significant Deficiency 2020-003: Restricted funds Condition: Project funds including restricted funds (taxes and insurance) were invested in investments other than in accordance with the USDA Handbook. Criteria: In accordance with the USDA Handbook project funds should be in the form of a cash deposit or invested in obligations backed by the U.S. Government or an Agency of the U.S. Government, Triple A-rated Government National Mortgage Association or Triple A-rate pre-refunded bond. Cause: Management invested a portion of project funds and restricted deposits (taxes and insurance) in mutual funds in an effort to generate higher investment income for the Project. Effect of Potential Effect: The effect of this finding, which cannot be quantified, is that funds invested in mutual funds are exposed to various risks such as market and credit risks. Recommendation: We recommend that management invest Project funds and restricted funds in investments that are in accordance with the USDA Handbook. View of Responsible Officials and Planned Corrective Action: Management is aware of such market and credit risks and, therefore the Project Sponsor (Good Shepherd Home) is committed to reimburse the Project for any net cumulative realized investment losses that the Project incurs.

2019-001: Segregation of Duties Condition: A number of overlapping duties are handled by the affiliated sponsor?s accounting staff. Criteria: A good system of internal control requires proper segregation of duties throughout the accounting process. Cause: Management feels due to the nature of operations that the current system is cost effective for a project of this size. Effect of Potential Effect: The effect of this deficiency, which cannot be quantified, is that misstatements may not be identified and corrected on a timely basis. However, there was no identified effect on the 2019 audited financial statements due to the lack of segregation of duties. Recommendation: We recommend that certain accounting duties and functions be segregated to enhance internal control. View of Responsible Officials and Planned Corrective Action: Management feels due to the nature of operations that the current system is cost effective for a project of this size, however, they will consider segregating accounting duties and functions where possible.

2019-002: General Accounting Matters Condition: A number of journal entries are recorded through the year-end audit process. Criteria: A good system of internal control requires that management has an adequate understanding of all accounting matters affecting the operations of their organization. Cause: Management feels due to the nature of operations that the current system is cost effective for a project of this size. Effect of Potential Effect: The effect of this deficiency is that misstatements may not be identified and corrected on a timely basis. Recommendation: We recommend that where possible management record all adjustments prior to the year-end audit process. View of Responsible Officials and Planned Corrective Action: Management fees due to the nature of operations that the current system is cost effective for a project of this size, however, they will consider adjusting accounts where possible in the future.

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