Poweshiek Area Housing, Inc.Non-Profit

Condition: Material adjustments were needed for the accounting records to be prepared in accordance with accounting principles generally accepted in the United States of America. Criteria: Financial reporting requires accurate information to be useful to readers and prevent deception and inaccuracies. Cause: Certain expenditures from prior years paid in 2021 were not adjusted out of payables resulting in a material audit adjustment. Effect: A material audit entry was needed in order for the financial statements to be materially correct for the year ended December 31, 2021. Recommendations: We recommend that management implement a process to track and review outstanding payables of the organization to reflect the proper accrual basis of accounting.

Finding 2020-006: Material Weakness - Segregation of duties Condition: Internal controls over compliance for the prior management companies were determined to not have the appropriate segregation of duties for an effective control environment as auditor was unable verify procedures or perform walkthroughs. Criteria: No individual should possess the three main functions of accounting (custody, authorization, & recordkeeping). Separation of these duties is recommended to prevent and deter fraudulent activities. Effect: Potential exists for errors regarding revenue and expenses that could materially misstate the reported change in net assets for the year under audit. Context: Procedures from the prior management company were not able to be verified or any of the controls in place during the current fiscal year. Cause: Prior management company did not possess the proper level of skills, knowledge, experience or administrative capabilities required to manage HUD regulated organizations. Recommendations: We recommend that the new management company implements effective internal controls to prevent material misstatements in the financial statements. Response: Rightway Management, upon assumption of management agent responsibilities. has adequately segregated duties.

Finding 2020-007: Material Weakness - Administrative capability Condition: The prior management company did not possess and maintain the appropriate level of administrative capability for managing HUD financed properties. Criteria: Certain administrative and compliance requirements necessitate a proper level of capabilities to record accurate financial information and stay current with compliance requirements. Effect: The Organization could not be compliant with HUD regulations and financial information could be inaccurate and not reported timely to the users. Context: Not applicable to this finding. Cause: Prior management company did not demonstrate the ability to manage HUD regulated projects effectively due to lack of training and experience. Recommendations: We recommend that the new management company implements effective internal controls and maintain sufficient training on the HUD related regulations to prevent material misstatements or compliance issues in the financial statements. Response: Rightway Management, upon assumption of management agent responsibilities, has implemented effective procedures for managing and reporting on HUD-financed properties.

Finding 2020-008: Questioned costs for unallowable expenditures and insufficient documentation Condition: Certain expenses either lacked sufficient supporting documentation or were deemed unallowable for operations of the Organization. Criteria: The Code of Federal Regulations Chapter 2 Part 200 Subpart 84 describes questioned costs to include costs that appear non-compliant with federal awards, unsupported by adequate documentation, or unreasonable in amount. Effect: Potential noncompliance of federal awards due to questions costs from inadequate supporting documentation. Context: For the total expenses of $458,347 reported on the audited financial statements as of December 31, 2020, a sample of 25 disbursement totaling $31,897 were selected for testing. Of the sample population, supporting documentation to support an allowable expenditure was unable to be supplied to us for 5 items in our sample totaling $1,200. All errors were from the period prior to the switch in management company that was effective May 1, 2020. Projected questioned costs from the error totaled $11,859. Questioned costs: $11,859 Cause: Prior management company did not possess the proper level of skills, knowledge, experience or administrative capabilities required to manage HUD regulated organizations. The lack of these requirements resulted in an inadequacy for documenting and reviewing expenses incurred by the project. Recommendations: We recommend the new management company review expenses reported by the previous management company for transactions lacking supporting documentation to determine the reasonableness of said expense and to ensure supporting documentation is maintained. In addition we also, recommend that management implement effective internal controls over financial reporting and compliance to detect and prevent future questions costs. Response: Rightway Management, upon assumption of management agent responsibilities, has implemented effective procedures, along with adequate knowledge and experience with HUD financed organizations including the criteria for allowable cost and activities of the federal award programs. Procedures will be put into place to accurately track expenses and accounts payable balances for Poweshiek Area Housing.

Finding 2020-009: EIV documentation Condition: Review of EIV master file resulted in multiple instances of EIV reports required monthly and quarterly not completed and documented. Criteria: HUD requires management to complete certain Enterprise Income Verification reports timely in order to prevent failures in recertifications, tenants from receiving rental housing assistance from multiple programs, and prevent tenants from underreporting income. Effect: Potential noncompliance of federal awards due to questions costs from incorrect calculation of tenant rental assistance. Context: Compliance testing for Enterprise Income Verification reports revealed multiple findings where the prior management company did not complete the filings of monthly and quarterly reports required by HUD. Questioned costs: $-0- Cause: Prior management company did not possess the proper level of skills, knowledge, experience or administrative capabilities required to manage HUD regulated organizations. Recommendations: We recommend that the new management company implement controls and procedures for the tenant files and the timely completion of HUD required EIV reports. Response: Rightway Management, upon assumption of management agent responsibilities, has implemented effective procedures over compliance, along with adequate knowledge and experience with HUD financed organizations, including criteria for effectively completing tenant file recertifications in accordance with HUD requirements. Procedures will be put into place to accurately track the timeliness of required EIV reports for Poweshiek Area Housing.

Finding 2019-007: Material Weakness - Segregation of duties Condition: Internal controls over compliance for the prior management companies were determined to not have the appropriate segregation of duties for an effective control environment as auditor was unable verify procedures or perform walkthroughs. Criteria: No individual should possess the three main functions of accounting (custody, authorization, & recordkeeping). Separation of these duties is recommended to prevent and deter fraudulent activities. Effect: Potential exists for errors regarding revenue and expenses that could materially misstate the reported change in net assets for the year under audit. Context: Procedures from the prior management company were not able to be verified or any of the controls in place during the current fiscal year. Cause: Prior management company did not possess the proper level of skills, knowledge, experience or administrative capabilities required to manage HUD regulated organizations. Recommendations: We recommend that the new management company implements effective internal controls to prevent material misstatements in the financial statements. Response: Rightway Management, upon assumption of management agent responsibilities. has adequately segregated duties.

Finding 2019-008: Material Weakness - Administrative capability Condition: The prior management company did not possess and maintain the appropriate level of administrative capability for managing HUD financed properties. Criteria: Certain administrative and compliance requirements necessitate a proper level of capabilities to record accurate financial information and stay current with compliance requirements. Effect: The Organization could not be compliant with HUD regulations and financial information could be inaccurate and not reported timely to the users. Context: Not applicable to this finding. Cause: Prior management company did not demonstrate the ability to manage HUD regulated projects effectively due to lack of training and experience. Recommendations: We recommend that the new management company implements effective internal controls and maintain sufficient training on the HUD related regulations to prevent material misstatements or compliance issues in the financial statements. Response: Rightway Management, upon assumption of management agent responsibilities, has implemented effective procedures for managing and reporting on HUD-financed properties.

Finding 2019-009: Lack of supporting documentation Condition: The prior management company did not maintain an adequate detailed summary of amounts included in accounts payable and amounts for tenant security deposits as well as supporting documentation of allowable costs to the project. Criteria: The Code of Federal Regulations Chapter 2 Part 200 Subpart 84 describes questioned costs to include costs that appear non-compliant with federal awards, unsupported by adequate documentation, or unreasonable in amount. Effect: Potential noncompliance of federal awards due to questions costs from inadequate supporting documentation. Context: For the total expenses of $527,912 reported on the audited financial statements as of December 31, 2019, a sample of 25 disbursement totaling $34,214 were selected for testing. Of the sample population, supporting documentation for $2,571 was unable to be supplied by the prior management company. Questioned costs: $39,670 Cause: Prior management company did not possess the proper level of skills, knowledge, experience or administrative capabilities required to manage HUD regulated organizations. The lack of these requirements resulted in an inadequacy for documenting and reviewing expenses incurred by the project. Recommendations: We recommend the new management company review expenses reported by the previous management company for transactions lacking supporting documentation to determine the reasonableness of said expense and to ensure supporting documentation is maintained. In addition we also, recommend that management implement effective internal controls over financial reporting and compliance to detect and prevent future questions costs. Response: Rightway Management, upon assumption of management agent responsibilities, has implemented effective procedures, along with adequate knowledge and experience with HUD financed organizations including the criteria for allowable cost and activities of the federal award programs. Procedures will be put into place to accurately track expenses and accounts payable balances for Poweshiek Area Housing.

Finding 2019-010: Unallowable costs Condition: Certain expenses for fringe benefits of the prior management company employees were unable to be substantiated as a direct cost or benefit to the project. Criteria: The Code of Federal Regulations Chapter 2 Part 200 Subpart 84 describes questioned costs to include costs that appear non-compliant with federal awards, unsupported by adequate documentation, or unreasonable in amount. Effect: Potential noncompliance of federal awards due to questions costs from inadequate supporting documentation to determine legitimacy of expense for certain fringe benefits. Context: Testing of expenses resulted in the uncertainty for certain fringe benefits. The amounts in question are for benefits billed and received by the previous management company, however, documentation did not include detail as to who received the benefits. All costs of health insurance and retirement benefits reported on statement of functional expenses are deemed questioned costs. Questioned costs: $7,506 Cause: Prior management company did not possess the proper level of skills, knowledge, experience or administrative capabilities required to manage HUD regulated organizations. Recommendation: We recommend the new management company review expenses reported by the previous management company for transactions lacking supporting documentation, to determine the reasonableness of expense and to ensure supporting documentation is maintained. In addition, we also, recommend that management implement effective internal controls over financial reporting and compliance to detect and prevent future questions costs. Response: Rightway Management, upon assumption of management agent responsibilities, has implemented effective procedures over compliance, along with adequate knowledge and experience with HUD financed organizations including the criteria for allowable cost and activities of the federal award programs. Procedures will be put into place to accurately track expenses for reasonableness and compliance considerations for Poweshiek Area Housing.

Finding 2019-011: EIV documentation Condition: Review of EIV master file resulted in multiple instances of EIV reports required monthly and quarterly not completed and documented. Criteria: HUD requires management to complete certain Enterprise Income Verification reports timely in order to prevent failures in recertifications, tenants from received rental housing assistance from multiple programs, and prevent tenants from underreporting income. Effect: Potential noncompliance of federal awards due to questions costs from incorrect calculation of tenant rental assistance. Context: Compliance testing for Enterprise Income Verification reports revealed multiple findings where the prior management company did not complete the filings of monthly and quarterly reports required by HUD. Questioned costs: $-0- Cause: Prior management company did not possess the proper level of skills, knowledge, experience or administrative capabilities required to manage HUD regulated organizations. Recommendations: We recommend that the new management company implement controls and procedures for the tenant files and the timely completion of HUD required EIV reports. Response: Rightway Management, upon assumption of management agent responsibilities, has implemented effective procedures over compliance, along with adequate knowledge and experience with HUD financed organizations, including criteria for effectively completing tenant file recertifications in accordance with HUD requirements. Procedures will be put into place to accurately track the timeliness of required EIV reports for Poweshiek Area Housing.

Finding 2019-012: Tenant file certifications Condition: Review of multiple tenant files resulted noted multiple certifications not performed or documented in 2019 or not supported by adequate documentation to support rental assistance calculations. Criteria: HUD requires rental assistance to be calculated as a percentage of gross income less qualifying medical expenses. Supporting documentation of income must be maintained in the tenant?s file and support the calculated amount of rental assistance the tenant receives. Effect: Potential noncompliance of federal awards due to questions costs for tenant rental assistance based on the supporting documentation of the tenant?s income. Context: For a sample seven tenant files selected for testing, it was noted that three tenant files for current tenants had no documentation supporting recertification in 2019. Rental assistance for the sample population totaled $2,966, with questioned rental assistance totaling $1,230. This sample was projected to total rental assistance reported in Note 2 of $288,019. Questioned costs: $119,441 Cause: Prior management company did not possess the proper level of skills, knowledge, experience or administrative capabilities required to manage HUD regulated organizations and resulting in noncompliance. Recommendations: We recommend that the new management company implement controls and procedures for the tenant file requirements set forth by HUD and the computation of rental assistance for each tenant. Response: Rightway Management, upon assumption of management agent responsibilities, has implemented effective procedures over compliance, along with adequate knowledge and experience with HUD financed organizations, including criteria for effectively completing tenant file recertifications in accordance with HUD requirements. Procedures will be put into place to timely prepare and review tenant certifications in accordance with HUD regulations.

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