Three Links Apartments

U.S. Department of Housing and Urban Development Federal Financial Assistance Listing # 14.155 Section 223(f) Mortgage Insurance for the Purchase or Refinance of Existing Multifamily Housing Projects Special Tests and Provisions Significant Deficiency in Internal Control over Compliance Criteria: The Project’s internal control structure should be designed to have formal approval over each cash disbursement. Condition: The Project’s internal control system is designed to review and approve expenses only when the disbursements are submitted formally through the system. Credit card transactions and various expense reimbursements were processed manually with no formal documentation of review. In addition, there was no formal review of bank reconciliations. Cause: The controls in place did not operate as designed and did not account for documentation of a formal review process. Effect: There was no formal review over various cash disbursements and bank reconciliations. Questioned costs: None reported. Context: There were 443 invoices during the year that were subject to testing. A sample of 60 invoices during the year were selected for testing and noted no formal approvals were documented on 28 of the invoices. There was also no formal review of bank reconciliations. Repeat Finding from Prior Year: No Recommendation: We recommend management re-evaluate their internal control process over cash disbursements and cash receipts to ensure each disbursement and reconciliation is formally approved. Views of Responsible Officials: Management agrees with the finding.

U.S. Department of Housing and Urban Development Federal Financial Assistance Listing # 14.155 Section 223(f) Mortgage Insurance for the Purchase or Refinance of Existing Multifamily Housing Projects Special Tests and Provisions Significant Deficiency in Internal Control over Compliance Criteria: The auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: During our testing, there was no documentation maintained for a portion of the sample selected. Cause: The Project did not have an internal control process in place to ensure that allowable expenses were all properly supported. Effect: The lack of adequate policies governing expenditure support increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported. Context: A nonstatistical sample of 60 expenditures were selected for testing, which accounted for $47,720 of $463,490 direct program expenditures. Of these 60 items, two were unsupported. Repeat Finding from Prior Years: No Recommendation: We recommend that the Project enhance internal control policies to ensure all expenditures are supported to ensure that all payments are necessary, correct, meet the requirements of the federal program, and are properly recorded in the reports required to be submitted to the federal agency. Views of Responsible Officials: Management agrees with the finding.