Saint Francis Village, Inc.Non-Profit

Finding 2024-001: Criteria: Formal segregation of duties is a form of risk management that requires record keeping, custody of assets, and authorization for the use of assets be fully segregated functions. Condition and Context: During the audit, we observed that the Executive Director has both signature authority and direct access to financial recording. Cause: The Executive Director has authorization for the use of assets and access to the financial records. Effect: The lack of segregation of duties increases the risk to the Village. Recommendation: We recommend implementing appropriate segregation of duties associated with control of cash assets in the accounting system, which could include implementation of an electronic payables system or positive pay system. Responsible Official’s Response: Subsequent to year-end, Management hired a Controller which has allowed the Village to modify its internal control practices to ensure proper segregation of duties. This allows the Village to modify access to the financial accounting system to be limited to the Business Manager and the Controller and restricting the Executive Director’s access to “view only.” Additionally, management will evaluate the implementation of an electronic payables system and a positive pay system with its banks to enhance segregation of duties. Planned Implementation Date of Corrective Action: Management has implemented this change subsequent to year-end. Person Responsible for Corrective Action: Executive Director with advice from the Board of Directors.

Finding 2023-001: Criteria: Accounting standards generally accepted in the United States of America (“US GAAP”) establishes criteria for when cash, accounts receivable, accounts payable, fixed assets transactions should be recorded in the financial statements, and how capitalized expenses, debt payments, and accrued expenses should be recorded in the financial statements. Condition and Context: During the year ended December 31, 2023, the former Executive Director retired prior to a replacement being located. As a result of this transition and the gap in Executive Directors, we identified several audit adjustments that were, both individually and in aggregate, material to the financial statements and several key review processes were no longer occurring. Cause: The transition to a new Executive Director with a change in skillset was not addressed to compensate for the change in accounting experience. Effect: Several audit adjustments, both individually and in aggregate, were material to the financial statements. Adjustments were needed to correct cash, accounts receivable, fixed assets, accounts payable, accrued expenses, and debt balances. Some of these adjustments were a result of several key review processes that were no longer occurring, such as: • Review of expenses and fixed assets for additions, disposals, construction in process placed into service, and recording of accumulated depreciation / depreciation expense. • Review of accrued liability accounts for balances reflecting the amounts incurred or the best estimate known by management. • Review of expenses to identify payments made on the principal balance of debt. • Review of security deposit cash balances to ensure cash is being maintained in a segregated bank account. • Review of security deposit liabilities to ensure tenant funds are being properly tracked. • Review of net asset roll forward to ensure transactions are recorded in the proper period and ending net assets are properly stated each period. • Review of monthly bank reconciliations on a timely basis and review all check images for authorized signatures. Recommendation: We recommend the Village restructure and hire a controller to assist with the overall accounting cycle. We recommend that management should review their monitoring and reconciliation policies and implement adjustments to these procedures to improve the internal controls in the accounting process. Responsible Official’s Response: Management will modify its internal control practices to ensure that proper daily and monthly accounting processes and procedures are being followed for all asset and liability accounts by the Business Manager and reviewed timely each month by the Executive Director. Management is in the process of hiring a Controller to assist with monthly accounting cycle, reconciliations, and financial statement reporting, allowing the Executive Director to have more oversight responsibilities for the financial statements as a whole. Planned Implementation Date of Corrective Action: Management will implement this change immediately. Person Responsible for Corrective Action: Executive Director in conjunction with advice from the Board of Directors.

Finding 2023-002: Criteria: Formal segregation of duties is a form of risk management that requires record keeping, custody of assets, and authorization for the use of assets be fully segregated functions. Condition and Context: During the audit, we observed that the Executive Director has both signature authority and direct access to financial recording. Cause: The Executive Director has authorization for the use of assets and access to the financial records. Effect: The lack of segregation of duties increases the risk to the Village. Recommendation: We recommend implementing appropriate segregation of duties associated with control of cash assets in the accounting system, which could include implementation of an electronic payables system or positive pay system. Responsible Official’s Response: Management will modify its internal control practices to ensure proper segregation of duties as soon as reasonably practicable and upon the hiring of a Controller which will allow access to the financial accounting system by the Business Manager and the Controller and restricting the Executive Director’s access to “view only.” Additionally, management will evaluate the implementation of an electronic payables system and a positive pay system with its banks to enhance segregation of duties. Planned Implementation Date of Corrective Action: Management will implement this change immediately. Person Responsible for Corrective Action: Executive Director with advice from the Board of Directors.

Finding 2023-003: Federal Procurement Requirements for Suspension and Debarment Information on the Federal Program: CFDA 14.135—U.S. Department of Housing and Urban Development, Section 221(d)(4) Mortgage Insurance Rental Housing for the Elderly, grant number 113-35459. Criteria: Uniform Guidance §200.213, Suspension and Debarment, states that non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities. To ensure compliance with HUD regulations, the Village should have internal controls in place to ensure no contracts are entered into with vendors who are debarred or suspended from participation in federal programs. Condition: Procurement procedures applied for the year ended December 31, 2023 included a control to verify vendors were not debarred or suspended from participation in federal programs. This was identified in a test of a sample of contracts procured in 2023 and during our walkthrough of internal controls. None of the vendors selected in the testing were debarred or suspended, but no step was documented by the Village to ensure this was the case. Cause: The internal control process for the Village did not require the retention of proper documentation for this specific requirement in the federal procurement requirements. Effect or Potential Effect: Entering into contracts with debarred or suspended vendors could lead to noncompliance with HUD regulations and could result in corrective action by HUD. Questioned Costs: $0. The audit testing identified no vendors who were suspended or debarred. Context / Sampling: The finding was identified in our test of a non-statistical sample of two vendors requiring suspension and debarment procedures. Repeat Finding from Prior Year(s): Yes Recommendation: The board of directors and management of the Village should ensure the Village’s policies for procurement activities are consistent with current federal requirements, and a review of internal controls should be performed to ensure all such requirements are addressed by procurement procedures being performed. Responsible Official’s Response: Management will modify its internal control practices to ensure procurement activities are consistent with the current federal requirements and specifically with the regard to ensuring contractual parties are not disbarred. This is to ensure compliance with HUD entering into contracts with vendors who are disbarred or suspended from participation in federal programs. Maintain documentation in each vendor file to verify selected vendors are not disbarred or suspended. Planned Implementation Date of Corrective Action: Management will implement this change immediately. Person Responsible for Corrective Action: Executive Director.

Finding 2023-004: Federal Procurement Requirements for Policies and Documentation Information on the Federal Program: CFDA 14.135—U.S. Department of Housing and Urban Development, Section 221(d)(4) Mortgage Insurance Rental Housing for the Elderly, grant number 113-35459. Criteria: Uniform Guidance §200.318, General Procurement Standards, states that a non-Federal entity must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. Condition: Procurement procedures applied for the year ended December 31, 2023 included a control to obtain a minimum of three bids in response to a formal Request for Proposal. These three written competitive bids must be obtained and retained in the procurement files. The Village obtained three competitive bids, per board minutes, but did not retain these bids in the procurement file. Cause: The internal control process for the Village did not require the retention of proper documentation for this specific requirement in the federal procurement requirements. Effect or Potential Effect: Not maintaining records sufficient to detail the history of each procurement transaction could lead to noncompliance with HUD regulations and could result in corrective action by HUD. Questioned Costs: $0. The audit testing identified no vendors who were suspended or debarred. Context / Sampling: The finding was identified in our test of a non-statistical sample of two vendors requiring suspension and debarment procedures. Repeat Finding from Prior Year(s): No Recommendation: The governing body and management of the Village should ensure the Village’s policies for procurement activities are consistent with current federal requirements, and a review of internal controls should be performed to ensure all such requirements are addressed by procurement procedures being performed. Responsible Official’s Response: Management will modify its internal control practices to ensure procurement activities in response to a formal Request for Proposal are consistent with current federal requirements and specifically with the regard to ensuring that proper documentation and records are maintained in sufficient detail to support the history of each procurement transaction by having three competitive bids and retaining the bids in the procurement file. Planned Implementation Date of Corrective Action: Management will implement this change immediately. Person Responsible for Corrective Action: Executive Director in conjunction with the Board of Directors.

Finding 2019-001: Federal Procurement Requirements for Suspension and Debarment Information on the Federal Program: CFDA 14.135?U.S. Department of Housing and Urban Development, Section 221(d)(4) Mortgage Insurance Rental Housing for the Elderly, grant number 113-35459. Criteria: Uniform Guidance ?200.213, Suspension and Debarment, states that non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities. To ensure compliance with HUD regulations, the Village should have internal controls in place to ensure no contracts are entered into with vendors who are debarred or suspended from participation in federal programs. Condition: Procurement procedures applied for the year ended December 31, 2019 did not include a control to verify vendors were not debarred or suspended from participation in federal programs. This was identified in a test of a sample of contracts procured in 2019. None of the vendors selected in the testing were debarred or suspended, but no step was performed by the Village to ensure this was the case. Cause: The internal control process for the Village overlooked this specific requirement in the federal procurement requirements. Effect or Potential Effect: Entering into contracts with debarred or suspended vendors could lead to noncompliance with HUD regulations and could result in corrective action by HUD. Questioned Costs: $0. The audit testing identified no vendors who were suspended or debarred. Context / Sampling: The finding was identified in our test of a non-statistical sample of the largest four vendors requiring suspension and debarment procedures. Repeat Finding from Prior Year(s): No Recommendation: The governing body and management of the Village should ensure the Village?s policies for procurement activities are consistent with current federal requirements, and a review of internal controls should be performed to ensure all such requirements are addressed by procurement procedures being performed. Responsible Official?s Response: Management will modify its internal control practices to ensure procurement activities are consistent with current federal requirements and specifically with regard to ensuring contractual parties are not disbarred. Planned Implementation Date of Corrective Action: Management will implement this change immediately. Person Responsible for Corrective Action: Executive Director.

Finding 2019-002: Federal Procurement Requirements for Policies and Documentation Information on the Federal Program: CFDA 14.135?U.S. Department of Housing and Urban Development, Section 221(d)(4) Mortgage Insurance Rental Housing for the Elderly, grant number 113-35459. Criteria: Uniform Guidance ?200.318, General Procurement Standards, states that a non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards of Uniform Guidance. Uniform Guidance ?200.318 through ?200.326 provide details of what must be included in such policies, which in turn establishes the documentation that should be prepared and maintained for various procurement activities of the Village in addition to certain HUD-specific requirements. Condition: The Village refers to HUD Handbook 4350.1 for procurement requirements rather than formally adopting its own procurement procedures. The most recent update to HUD Handbook 4350.1 predates the changes enacted as part of Uniform Guidance. Therefore, reliance on only HUD Handbook 4350.1 does not incorporate all applicable laws and regulations that may be applicable to the Village. In addition, certain specific documentation requirements for procurement were lacking or only informally addressed. For example: ? Uniform Guidance states that procurement through solicitation of a proposal from only one source and may be used only when one or more of the following circumstances apply: (1) The item is available only from a single source; (2) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; (3) The Federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity; or (4) After solicitation of a number of sources, competition is determined inadequate. The Village selected its health insurance through a process that appears to conclude that, given the totality of circumstances, circumstance (1) was applicable. However, the documentation and control process does not clearly ensure that this evaluation was made or updated in 2019. ? Uniform Guidance requires that the reason for selecting a vendor be clearly documented. From the Village?s documentation of procurement activities, the reason for selection can be readily inferred, and generally relates to price, but the reason is not typically formally stated. ? Uniform Guidance requires that purchases deemed to be within the small purchase threshold (as defined by an entity?s policy) should include price or rate quotations must be obtained from an adequate number of qualified sources. While management affirm this activity is occurring, no documentation is retained related to this activity. Cause: The internal control process for the Village relies on the HUD Handbook which may differ in various details from more recent requirements from Uniform Guidance. Also, the Village has relied on somewhat informal processes and documentation methods. Effect or Potential Effect: Failure to follow all applicable federal procurement requirements, including requirements to document and retain documentation of key details of the procurement process, could lead to noncompliance with HUD regulations and could result in corrective action by HUD. Questioned Costs: $0. Context / Sampling: The finding was identified in our review of procurement policies and in a test of a non-statistical sample of small- and large-purchase threshold vendors. Repeat Finding from Prior Year(s): No Recommendation: The governing body and management of the Village should ensure the Village?s policies for procurement activities are consistent with current federal requirements, and a review of internal controls should be performed to ensure all such requirements are addressed by procurement procedures being performed. Responsible Official?s Response: Management will modify its internal control practices as needed to ensure vendor selection rationale is more clearly documented consistent with current federal requirements. In the particular health insurance instance cited, we strongly believe our current health insurance vendor is the only reasonably viable option for the quality of health coverage for our small business with less than 10 insured employees while still maintaining reasonable premiums. We investigated the Affordable Care Act and found that both the cost and quality of coverage was unsatisfactory. Planned Implementation Date of Corrective Action: Management will implement this change immediately. Person Responsible for Corrective Action: Executive Director.

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