St. Croix Valley Supportive Housing for the Elderly, IncState Government

Type of Finding Material Weakness in Internal Control Compliance Federal Agency U.S. Dept. of Housing and Urban Development Federal Program Name Section 202 Capital Advance Assistance Listing Number 14.157 Federal Award Identification Number and Year WI39S971003-23Z-1998 Award Period 2025 HUD Code P - Residual Receipts Criteria The Project is required to make a deposit into the residual receipts account within 90 days after year end in the amount of any surplus cash. Condition Management did not make the deposit $48,646 by the March 31, 2025 deadline. Questioned Costs N/A Cause The project did not have the controls in place to ensure the deposit was made timely. Effect The residual receipts account was underfunded by $48,646 from March until October 2025. Repeat Finding No Recommendation We recommend management ensure they have the controls and processes in place to make the residual receipts deposit timely. Views of Responsible Officials and Planned Corrective Actions No disagreements with the finding. Management Response Management will review procedures to ensure they have the process in place to ensure timely deposit going forward.

Finding Number 2024-002 In Process Type of Finding Significant Deficiency in Internal Control over Financial Reporting and Significant Deficiency in Internal Control over Compliance Federal Agency U.S. Dept. of Housing and Urban Development Federal Program Name Section 202 Capital Advance Assistance Listing Number 14.157 Federal Award Identification Number and Year WI39S971003-23Z-1998 Award Period 2024 HUD Code G - Unauthorized Loans from Project Funds Criteria Payroll expenses were over allocated to the property. Condition During audit procedures, it was noted that payroll expenses from a shared employee allocated to the property exceeded the appropriate amount.This resulted in a receivable from the management agent as of year-end. Questioned Costs $9,132 Cause The transition in ownership on April 30th contributed to delays in fully understanding the Project’s requirements and properly configuring payroll allocations within the accounting system. Effect The Project was charged for payroll expenses exceeding the shared employee’s actual hours during 2024. To correct this issue, a receivable was recorded at year-end, effectively resulting in an unauthorized loan to the management/ownership group. Repeat Finding No Recommendation Payroll allocations should be reviewed monthly to confirm that only the appropriate share of expenses is charged to the Project. Views of Responsible Officials and Planned Corrective Actions No disagreements with the finding. Management Response The issue arose due to a salary allocation being missed during the general ledger conversion. Management continues to review and establish procedures related to payroll allocations to ensure correct expenses are allocated to the Project.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Capital Advance Assistance Listing Number: 14.157 Federal Award Identification Number and Year: WI39S971003-23Z-2023 Award Period: 10/1/2022-9/30/2023 Type of Finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: HUD requires the Organization to make monthly deposits into the Reserve for Replacement. Condition: The entity was required to make monthly deposits of $2,017 into the replacement reserve account for all 12 months of the fiscal year ending September 30, 2023. Deposits into the replacement reserve were not made for the months of February-September 2023. This resulted in a delinquent balance of $16,136 as of September 30, 2023. Known Questioned costs: $16,136 Cause: The entity relied on monthly auto-transfers set up through the bank to make the deposits. These monthly auto-transfers stopped in February 2023 by an undetermined user or system error. Effect: The Organization is in violation of HUD regulations, which could result in penalties or other enforcement actions. The Organization may not have sufficient funds to cover necessary repairs or replacements of building components, which could lead to deferred maintenance and decreased property values. The Organization may have to use operating funds to cover replacement reserve expenses, which could strain the entity's cash flow and limit its ability to make other necessary expenditures. Recommendation: Accounting staff should reconcile the Replacement Reserve account on a periodic (monthly or quarterly) basis to ensure the monthly transfers are being made. Management should also make the deposit to fully fund the replacement reserve as soon as possible. Views of responsible officials: Management is in agreement with the finding and has since corrected the issue.

Finding 2021-003 U.S. Department of Housing and Urban Development Federal Financial Assistance Listing #14.157 Supportive Housing for the Elderly (Section 202) Special Tests and Provisions: Use of Project Funds Significant Deficiency in Internal Control over Compliance Criteria: The Project?s funds should be supported by approved documentation prior to disbursement of the funds. Condition: Our testing of disbursements detected five instances where the support for the disbursement was not properly approved and one instance where the disbursement was not supported with a detailed receipt. Cause: There was a lapse in the internal control process ensuring disbursements of the Project?s funds are supported by approved documentation. Effect: Lack of compliance with designed internal controls over use of Project funds could adversely affect the Project?s compliance with HUD regulations. Questioned Costs: None Context/Sampling: A nonstatistical sample of 60 of the Project?s 845 disbursements ($45,364 of $235,892 total disbursements), including payroll and non-payroll, was selected for testing. Repeat Finding from Prior Year: No. Recommendation: We recommend the Project review policies and procedures with applicable employees and remind them of the importance of established review and monitoring processes. Views of Responsible Officials: Management agrees with the finding and the recommendation.

2019-001 U.S. Department of Housing and Urban Development CFDA #14.157 Supportive Housing for the Elderly ? Section 202 Capital Advance and Project Rental Assistance Contract Special Tests and Provisions: Use of Project Funds and Residual Receipts Significant Deficiency in Internal Control over Compliance Criteria: The Project?s funds are to be supported by approved documentation prior to disbursement of the funds and prior year surplus cash is to be deposited into the Project?s residual receipts account within 60 days following year-end. Condition: Our testing of disbursements detected one instance where the disbursement was not supported with a detailed receipt and two instances where the purchasing card packet was not approved on a monthly basis as required by the Project?s internal control policy. In addition, the Project?s calculated surplus cash as of September 30, 2018 was not deposited within 60 days after year-end into the Project?s residual receipt account. Cause: There was an oversight in the internal control process over processing of disbursements and ensuring disbursements of Project funds are supported by approved documentation. In addition, there was an oversight in the internal control process over depositing of funds in a timely manner into the residual receipts account. Effect: Lack of compliance with designed internal controls over cash disbursements and residual receipts could adversely affect the Project?s compliance with HUD guidelines. Questioned Costs: None Reported Context: A nonstatistical sample of 60 of the Project?s 727 disbursements ($61,925 of $302,794 total disbursements) including payroll and non-payroll were selected for testing. Repeat Finding from Prior Years: Yes Recommendation: We recommend the Project review internal control policies and procedures with applicable employees and remind them of the importance of established review and monitoring processes. Views of Responsible Officials: Management agrees with the finding and recommendation.

2019-002 U.S. Department of Housing and Urban Development CFDA #14.157 Supportive Housing for the Elderly ? Section 202 Capital Advance and Project Rental Assistance Contract Procurement Significant Deficiency in Internal Control over Compliance Criteria: Price or rate quotations must be obtained from an adequate number of qualified sources along with the reason for using a certain vendor should be documented as defined by the Project?s policy as it relates to small purchases. Condition: Price or rate quotations were not obtained and documentation of vendor selection was not retained for two contracts entered into by the Project during the year which met the small purchases threshold. Cause: There was an oversight in the internal control process over procurement as it relates to these two contracts and the vendors. Effect: The Project?s compliance with procurement regulations could be impacted. Questioned Costs: None Reported Context: Sampling was not used. Repeat Finding from Prior Years: No Recommendation: We recommend the Project review internal control policies and procedures with applicable employees and remind them of the procurement policy in place. Views of Responsible Officials: Management agrees with the finding and recommendation.

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