HIGHLAND RIM TERRACE, INC.Non-Profit

Finding 2022-001 (repeated from 2021-001) Condition: Inadequate segregation of duties. Internal controls are not designed effectively. Criteria: Internal controls are designed to safeguard assets and help or detect losses from employee dishonesty or error. A fundamental concept in a good system of internal control is the segregation of duties. The Project?s office staff consists of just two employees ? the assistant and the administrator. Because of the limited number of employees, the assistant performs all cash receipt duties, some of which are incompatible. The administrator performs all cash disbursement duties, some of which are also incompatible. In order to provide adequate internal control, the same person should not receive rent payments, make deposits, and record transactions in the subsidiary ledgers. In addition, the same person should not receive and approve invoices, write checks, record disbursements in the general ledger, and reconcile the bank statement. The board chairman does review the financial statements on a monthly basis. Cause: The Project does not have sufficient staff to adequately divide internal control responsibilities. Effect of Condition: The project is not in compliance with recommended internal control policies and procedures for adequate segregation of duties. Number of Units and Dollar Amount of Population: N/A Perspective Information/Context: This is a systemic problem that was identified during our documentation of the understanding of internal controls. Questioned Costs: None Recommendation: We believe the cash receipts process represents a lesser risk to the Project because the only funds easily susceptible to fraud or error would be receipts other than rent payments; these other receipts are immaterial to the Project. Regarding cash disbursements, with the administrator having responsibility for approving invoices, entering them into the general ledger, and signing checks, there remains a material weakness that could only be improved by hiring additional personnel. Views of responsible officials and planned corrective actions: Highland Rim Terrace, Inc. is not financially able to hire a third person in order to adequately divide the responsibilities. Representatives of Highland Rim Terrace, Inc. have discussed the situation with local HUD representatives and have determined not to hire additional personnel at this time.

Finding 2021-001 (repeated from 2020-001) Condition: Inadequate segregation of duties. Internal controls are not designed effectively. Criteria: Internal controls are designed to safeguard assets and help or detect losses from employee dishonesty or error. A fundamental concept in a good system of internal control is the segregation of duties. The Project?s office staff consists of just two employees ? the assistant and the administrator. Because of the limited number of employees, the assistant performs all cash receipt duties, some of which are incompatible. The administrator performs all cash disbursement duties, some of which are also incompatible. In order to provide adequate internal control, the same person should not receive rent payments, make deposits, and record transactions in the subsidiary ledgers. In addition, the same person should not receive and approve invoices, write checks, record disbursements in the general ledger, and reconcile the bank statement. The board chairman does review the financial statements on a monthly basis. Cause: The Project does not have sufficient staff to adequately divide internal control responsibilities. Effect of Condition: The project is not in compliance with recommended internal control policies and procedures for adequate segregation of duties. Number of Units and Dollar Amount of Population: N/A Perspective Information/Context: This is a systemic problem that was identified during our documentation of the understanding of internal controls. Questioned Costs: None Recommendation: We believe the cash receipts process represents a lesser risk to the Project because the only funds easily susceptible to fraud or error would be receipts other than rent payments; these other receipts are immaterial to the Project. Regarding cash disbursements, with the administrator having responsibility for approving invoices, entering them into the general ledger, and signing checks, there remains a material weakness that could only be improved by hiring additional personnel. Views of responsible officials and planned corrective actions: Highland Rim Terrace, Inc. is not financially able to hire a third person in order to adequately divide the responsibilities. Representatives of Highland Rim Terrace, Inc. have discussed the situation with local HUD representatives and have determined not to hire additional personnel at this time.

"Condition: Inadequate segregation of duties. Internal controls are not designed effectively. Criteria: Internal controls are designed to safeguard assets and help or detect losses from employee dishonesty or error. A fundamental concept in a good system of internal control is the segregation of duties. The Project?s office staff consists of just two employees ? the assistant and administrator. Because of the limited number of employees, the assistant performs all cash receipt duties, some of which are incompatible. The administrator performs all cash disbursements duties, some of which are also incompatible. In order to provide adequate internal control the same person should not receive rent, make deposits and record transactions in the subsidiary ledgers. In addition, the same person should not receive and approve invoices, write checks, record disbursements in the general ledger and reconcile the bank statement. The board chairman does review the financial statements monthly. Cause: The Project has a limited number of staff in which to divide internal control responsibilities. Effect of Condition: The project is not in compliance with recommended internal control policies and procedures for adequate segregation of duties. Number of Units and Dollar Amount of Population: n/a Perspective Information/Context: This is a systematic problem that was identified during our documentation of the understanding of internal controls. Questioned Costs: None Recommendation: We believe the cash receipts process represents a lesser risk to the Project because the only funds easily susceptible to fraud or error would be receipts other than rent which are immaterial to the Project. Regarding cash disbursements, with the administrator responsible for approving invoices, entering them into the general ledger and signing checks there remains a material weakness that could only be improved by hiring additional personnel. Views of responsible officials and planned corrective actions: Highland Rim Terrace, Inc. is not financially able to hire a third person so as to divide the responsibilities any more than they are now. We have discussed with local HUD representatives and have determined not to hire additional personnel at this time. "

Condition: Inadequate segregation of duties. Internal controls are not designed effectively. Criteria: Internal controls are designed to safeguard assets and help or detect losses from employee dishonesty or error. A fundamental concept in a good system of internal control is the segregation of duties. The Project?s office staff consists of just two employees ? the assistant and administrator. Because of the limited number of employees, the assistant performs all cash receipt duties, some of which are incompatible. The administrator performs all cash disbursements duties, some of which are also incompatible. In order to provide adequate internal control the same person should not receive rent, make deposits and record transactions in the subsidiary ledgers. In addition, the same person should not receive and approve invoices, write checks, record disbursements in the general ledger and reconcile the bank statement. The board chairman does review the financial statements monthly. Cause: The Project has a limited number of staff in which to divide internal control responsibilities. Effect of Condition: The project is not in compliance with recommended internal control policies and procedures for adequate segregation of duties. Number of Units and Dollar Amount of Population: n/a Perspective Information/Context: This is a systematic problem that was identified during our documentation of the understanding of internal controls. Questioned Costs: None Recommendation: We believe the cash receipts process represents a lesser risk to the Project because the only funds easily susceptible to fraud or error would be receipts other than rent which are immaterial to the Project. Regarding cash disbursements, with the administrator responsible for approving invoices, entering them into the general ledger and signing checks there remains a material weakness that could only be improved by hiring additional personnel. Views of responsible officials and planned corrective actions: Highland Rim Terrace, Inc. is not financially able to hire a third person so as to divide the responsibilities any more than they are now. We have discussed with local HUD representatives and have determined not to hire additional personnel at this time.

Condition and Cause: The Project did not certify and ensure the auditors certified the data collection form for the year ended June 30, 2018, within the specified period. Criteria: Form SF-SAC (the data collection form) is due within the earlier of 30 days after receipt of the auditors? reports, or nine months after the end of the audit period. Effect of Condition: The Project did not comply with the timely filing requirement with respect to the data collection form referred to above. Questioned Costs: None Response and Corrective Action Plan: The Project agrees with the auditors? finding and will take actions to ensure that future forms are filed timely.

Condition and Cause: The Project did not deposit surplus cash within 90 days after the end of the audit period. Criteria: Surplus cash is required to be deposited within 90 days after the end of the audit period into a residual receipts account. Effect of Condition: The Project did not comply with the timely deposit of surplus cash. Questioned Costs: None Response and Corrective Action Plan: The Project agrees with the auditors? finding and will take actions to ensure that future forms are filed timely.

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