WAYNE HOUSING PARTNERS INCLocal Government

2021-001 CFDA#14.195 ? Section 8 Housing Assistance Payments ? Special Tests and Provisions Condition and Criteria: The Corporation is required to establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. All disbursements from the reserve must be approved or directed by HUD through use of HUD from 9250, Authorization of Funds. The Corporation must place the security deposits in a segregated interest-bearing account. The amount of the segregated, interest-bearing account maintained must at all times equal the total amount collected from the households (or families, as applicable) then in occupancy. As part of the Rental Assistance Demonstration (RAD) conversion, they were required to make an initial deposit to the Operating Reserve. Context: During our audit, it was determined that internal control deficiencies in the Corporation's management operations existed such that the Corporation did not obtain HUD approval prior to withdrawing funds from the replacement reserve account. The Corporation did not obtain and use HUD form 9250 for Authorization of Funds for withdraws made during the year. Replacement reserve account was analyzed for the ended September 30, 2021, to ensure compliance with HUD requirements. These requirements are listed in the Rental Assistance Demonstration (RAD) Conversion Commitment (HUD form 52624) and the Corporation?s Housing Assistance Payments contract (HUD form 52618). It was also determined that the Corporation's management did not properly establish the security deposits in an interest-bearing account and was not properly restricting cash for and funding the security deposit liability. The amount restricted for tenant security deposits at year was equal to $30,254, while the actual tenant security deposit liability was equal to $31,725. Additionally, it was determined that the initial deposit to the Operating Reserve of $221,935 was never made. This was required as part of the RAD Conversion and outlines in the Sources & Uses document. Questioned Costs None Cause: The Corporation?s internal controls over management operations were not adequate to ensure the Corporation made the proper deposits to the cash accounts restricted for tenant security deposits and the operating reserve. In addition, internal controls failed to establish the security deposit funds in an interest-bearing account. The Corporation's internal controls over management operations also failed to follow replacement reserve provisions requiring HUD approval for any withdraws though use of HUD form 9250. The project was not in compliance with HUD replacement reserve, tenant security deposit, and the initial operating reserve deposit requirements. Auditor?s Recommendation: We recommend the Corporation begins obtaining HUD approval through use of HUD form 9250 (Authorization of Funds) for any replacement reserve withdraws. We also recommend depositing enough cash into the security deposit account to properly fund the liability and to move these funds over to an interest-bearing account. We recommend that they Corporation implements these changes immediately to correct this finding going forward. It is also advised that management add an additional level of review to monthly reserve deposits / withdraws and the tenant security deposits to ensure compliance with HUD requirements. Management has already taken necessary action subsequent to year end and made the required initial deposit to the Operating Reserve account. Thus, this will not be an issue going forward. Grantee Response: Management acknowledges the finding and is following the auditor?s recommendation.

2020-001 CFDA#14.195 ? Section 8 Housing Assistance Payments ? Special Tests and Provisions Condition and Criteria: The Corporation is required to make monthly deposits to a replacement reserve account in an amount specified/approved by HUD. The Corporation must place the security deposits in a segregated interest-bearing account. The amount of the segregated, interest-bearing account maintained must at all times equal the total amount collected from the households (or families, as applicable) then in occupancy. Context: During our audit, it was determined that internal control deficiencies in the Corporation's management operations existed such that the Corporation did not make the required monthly deposits to their replacement reserve account for the year ended September 30, 2020. The Corporation had been experiencing issues with their bank software that limited their ability to make the required deposits and did not resolve the issue within the audit period. Replacement reserve account was analyzed for the ended September 30, 2020 to ensure compliance with HUD requirements. These requirements are listed in the Rental Assistance Demonstration (RAD) Conversion Commitment (HUD form 52624) and the Corporation?s Housing Assistance Payments contract (HUD form 52618). It was also determined that the Corporation's management was not properly restricting cash for and funding the security deposit liability. The amount restricted for tenant security deposits at year end was equal to $358, while the actual tenant security deposit liability was equal to $28,465. Questioned Costs None Cause: The Corporation?s internal controls over management operations were adequate to ensure the Corporation made the proper deposits to cash accounts restricted for the replacement reserve and tenant security deposits; however, there were issues with the bank software that prevented the Corporation from making the proper deposits. Auditor?s Recommendation: We recommend the Corporation begin making the HUD required monthly deposits and deposit enough cash into the security deposit account to properly fund the liability. We recommend that they Corporation implement these changes immediately to correct this finding going forward. It is also advised that management add an additional level of review to monthly reserve deposits and the tenant security deposits to ensure compliance with HUD requirements. Grantee Response: Management acknowledges the finding and is following the auditor?s recommendation. The Corporation has already corrected the issue subsequent to year end and should be in compliance with this requirement moving forward.