Crestview Senior Housing, Inc.Non-Profit

Finding 2019-003: Management Fees/Cost Allocation Section 202 Capital Advance Program ? CFDA 14.157 Allowable Costs - Material Weakness/Noncompliance Questioned Cost: $2,520 Criteria: The Project should have proper procedures and controls to ensure the management fee expense is based on the approved management agreement. Further, the Project should have proper procedures and controls to ensure expenses are coded to the correct category. Condition: During our audit, we noted the Project was not basing its monthly management fee expense on the terms of the management agreement and was using a per unit fee instead of percentages allowed in the agreement. This resulted in the management fee being understated by $1,381 and adjustment was made during the audit to correct the error. The Project is managed by the Housing Authority of the City of Gothenburg, Nebraska. The Housing Authority of the City of Gothenburg, Nebraska pays a management fee to the Housing Authority of the City of Cozad, Nebraska. The Housing Authority of the City of Gothenburg, Nebraska started allocating $420 per month of its management fee to the Project which is not an allowable costs. This occurred for the last six months of the fiscal year which resulted in questioned costs of $2,520. We further noted various front-line costs the Project incurred were miscoded. Project administrative wages were charged to management fee expense, maintenance wages were charged to contract costs and payroll benefits were coded to other administrative expenses. Adjustments were recorded during the audit to correct these misstatements. Cause: The Project?s management and staff was not aware of the terms of the management agreement for which the management fee expense are to be based on or the proper expense accounts to be used for the other expense categories. Regarding the questioned costs of $2,520, the managing Housing Authority has had cost allocation issues and misunderstood the corrective action need for that issue and began allocating costs to the Project that should not have been allocated. Effect or Potential Effect: The monthly financial records maintained by the Project were materially misstated prior to adjustments made during the audit. The excess $2,520 of management fees are being questioned. Recommendation: The Housing Authority of the City of Gothenburg should refund the $2,520 to the Project. Further, the Project should modify its procedures so the management fee is based on the terms of the agreement. The staff should review its chart of accounts and correctly code the items in question. View of the Responsible Officials of the Auditee: The auditee?s management agrees with the finding and will try to address the issues in the current year.

Finding 2019-004: Replacement Reserves Section 202 Capital Advance Program CFDA 14.157 Special Tests and Provisions - Noncompliance Repeat Finding, prior Finding 2018-002 Criteria: An amount as required by HUD will be deposited monthly in the replacement reserve fund. Condition: The Project only made 9 of the required $735 monthly reserve deposits during the fiscal year ended September 30, 2018 which were not caught up on during the fiscal year ended September 30, 2019. The Project only made 6 of the required $735 monthly reserve deposits during the fiscal year ended September 30, 2019. Cause: The Project has had cash flow issues which resulted in the Project not making the deposits. Effect or Potential Effect: The Project was in noncompliance with the requirement and $6,615 that was required to be deposited into the replacement reserve was not made. Recommendation: The Project should make a $6,615 deposit to catch up and make the required monthly deposits when cash flows allow. View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.

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