EL PASO LAS PUERTAS ABIERTAS, INCNon-Profit

Finding 2019-001: Late filing of annual REAC submission. Supportive Housing for Persons with Disabilities (Section 811) 14.181 Compliance Requirement: Reporting Criteria: In accordance with the Department of Housing and Urban Development Chapter 3 Audit Guidance, the regulatory agreement related to the project requires that the Project submit audited financial statements within 90 days after the end of each fiscal year. Condition: The required REAC submission and annual audit for the fiscal year ended June 30, 2019 were not completed within the required deadline. Known Questioned Costs: N/A Cause: It was noted that the property underwent a change in property management in the month subsequent to year-end, during which it was difficult for management to obtain all supporting documentation in order to complete the required audit within the timeline prescribed in the Department of Housing and Urban Development. Effect: The Organization is not in full compliance with the requirements prescribed in the Department of Housing and Urban Development Chapter 3 Guidance and its regulatory agreement with HUD. Recommendation: To avoid potential non-compliance, we recommend that management monitor the required timelines for reporting requirements and work with its external auditors to develop a timeline for preparing for each annual audit. Management?s Response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Finding 2019-002: Management did not submit an annual operating budget to HUD prior to the beginning of the fiscal year. Supportive Housing for Persons with Disabilities (Section 811) 14.818 Compliance Requirement: Special Tests Criteria: In accordance with the Department of Housing and Urban Development Chapter 3 Audit Guidance, the regulatory agreement related to the project requires that the Project submit an annual operating budget 30 days before the beginning of each fiscal year. Condition: During our audit procedures, we noted that management failed to prepare and submit an annual operating budget to HUD for the fiscal year ending June 30, 2019. Known Questioned Costs: N/A Cause: It was noted that the previous property manager was not aware of this reporting requirement, and failed to prepare the annual budget, under supervision of the Executive Director for the fiscal year ended June 30, 2019. Effect: The Organization is not in full compliance with the requirements prescribed in its regulatory agreement with HUD. Recommendation: To avoid potential non-compliance, we recommend that the executive director and property manager prepare and submit an annual operating budget no later than 30 days prior to the beginning of the next fiscal year. Management?s Response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Finding 2019-003: Management failed to establish a residual receipt account. Supportive Housing for Persons with Disabilities (Section 811) 14.181 Compliance Requirement: Special Tests Criteria: In accordance with the Project?s regulatory agreement with HUD, management shall establish a residual receipts account and make deposits into the account in accordance with HUD requirements (within 90 days after the close of the fiscal year). Disbursements from such fund may be made only after written consent is received from HUD. Condition: During our audit procedures, although there was no required deposits for the fiscal year ended June 30, 2019 and 2018, respectively, we noted that management has failed to establish a residual receipts account in the name of the property, in which surplus cash at the end of the fiscal year, if any, is to be deposited. Management does however have a fourth bank account, that has not been used as a residual receipts account. Known Questioned Costs: N/A Cause: Management was unaware of the residual receipt account requirements as prescribed by HUD. Effect: The Organization is not in full compliance with the requirements prescribed in its regulatory agreement with HUD. Recommendation: To avoid potential non-compliance, we recommend that management establish the fourth bank account as the formal residual receipts account. Any required surplus cash at the end of each fiscal year should be deposited into this account. The required deposit should be made within 90 days after the close of the fiscal year. Disbursements will only be made after obtaining written consent from HUD. Management's Response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Finding 2019-004: Unsupported expenditures of project funds. Supportive Housing for Persons with Disabilities (Section 811) 14.181 Compliance Requirement: Allowable Costs/Special Tests Criteria: In accordance with the Project?s regulatory agreement with HUD, all disbursements from the regular operating account must be supported by approved invoices, bills or other supporting documentation. Project funds should also be reasonable and necessary for the operation and maintenance of the project. Condition: During our audit procedures, we noted several instances in which management was unable to provide sufficient supporting documentation of expenses. Specifically, in 25 out of 40 instances, supporting invoices were unable to be obtained. We also noted several instances whereby ?petty cash? funds were used without retaining proper supporting documentation of the purpose of the disbursement. It was also noted that there was no proof that any excess funds were being returned to the Project?s petty cash fund. Likely Questioned Cost: $22,143 Cause: The Organization failed to obtain all supporting documentation for review and approval of the likely questioned costs noted above. Effect: The Organization is not in full compliance with the requirements prescribed in its regulatory agreement with HUD. Recommendation: To avoid potential non-compliance, we recommend that all supporting documentation for all project-related expenses be appropriately maintained by the property manager. We also recommend that disbursements for miscellaneous property-related expenses either be paid with a debit card, or that a property credit card be established and reconciled monthly to pay for said miscellaneous expenses. We also recommend that management assign a second check signor in case the Executive Director is unavailable or unable to sign checks necessary to pay for property-related expenses. Lastly, we recommend that the use of the petty cash fund be eliminated. Management?s Response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Finding 2019-005: Performance of monthly bank reconciliations and Board of Director review of monthly financial statements. Supportive Housing for Persons with Disabilities (Section 811) 14.181 Compliance Requirement: Special Tests Criteria: In accordance with project requirements established by HUD in the Regulatory Agreement, management should exercise proper internal controls over the Project?s cash accounts during the fiscal year, including performing monthly bank reconciliations. Financial statement information should be reviewed by management and the Board of Directors on a monthly basis. Condition: During our audit procedures, we noted that management does not complete the monthly bank reconciliations in a timely manner. We noted that the reconciliations were completed shortly before the commencement of the audit. We also noted that management and the Board of Directors do not review the financial statements on a monthly basis. Known Questioned Costs: N/A Cause: Property manager did not complete the monthly reconciliations in a timely manner. We also noted that there was turnover in the property manager position shortly before year end. In addition, management did not present financial statements to the Board of Directors for monthly review during the year ended June 30, 2019. Effect: Due to the lack of a formal reconciliation procedure over all cash accounts, monthly reconciliations were not performed in line with timely financial reporting. Management and the Board of Directors are not reviewing financial statements on a monthly basis as a means of monitoring the property?s monthly financial performance. Recommendation: We recommend that management establish proper controls to perform monthly reconciliations of all cash accounts, ensuring timely financial reporting to the Board of Directors. Management's Response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Finding 2019-007: Management failed to deposit a delinquent balance due to the Replacement Reserve Account resulting from prior year audit Finding 2018-003. Supportive Housing for Persons with Disabilities (Section 811) 14.181 Compliance Requirement: Special Tests Criteria: In accordance with project requirements established by HUD in the Regulatory Agreement, management is required to obtain authorization for all withdrawals from the Replacement Reserve account from HUD. Condition: During our audit procedures and per review of prior year audit Finding 2018-003, it was noted that management had made withdrawals from the Replacement Reserve account without authorization from HUD. It was noted that the balance due to the Replacement Reserve account for year ended June 30, 2019, was $10,800. Known Questioned Costs: N/A Cause: Although management became aware of the HUD authorization requirement in the prior year, it was noted that management failed to repay the full underfunded amount identified in finding 2018-003 as of June 30, 2018, due to the property being financially incapable of repaying the full balance. Effect: Management has continued to fail to repay the remaining balance due to the Replacement Reserve account as of June 30, 2019. Recommendation: We recommend that management repay the remaining balance of $10,800 to the Replacement Reserve account, as soon as the Project is financially capable of doing so, whether in small amounts on a monthly basis or in total at a later date. Management?s Response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Finding 2019-008: Data Collection forms were not filed for fiscal years ended June 30, 2018, 2017 and 2016. Supportive Housing for Persons with Disabilities (Section 811) 14.181 Compliance Requirement: Reporting/Special Tests Criteria: In accordance with OMB Circular A-133 ?320 (a) and Uniform Guidance 2 CFR 200.512(a), audit packages and data collection forms shall be submitted the earlier of 9 months after the fiscal year end, or 30 days after receipt of the auditor?s report(s). Condition: During our audit procedures, it was noted that the data collection forms for fiscal years ended June 30, 2018, 2017 and 2016, had not yet been filed. Known Questioned Costs: N/A Cause: It was noted that the predecessor auditor, Gilbert Pineda, CPA had died subsequent to completing the audits of the financial statements for fiscal years ended June 30, 2018, 2017 and 2016. It was noted that Mr. Pineda, CPA had not certified the related data collection forms upon completion of the three audits. Effect: The Organization is not in full compliance with the requirements prescribed in OMB Circular A-133 ?320 (a) and Uniform Guidance 2 CFR 200.512(a). Recommendation: We recommend that management monitor the completion and submission of all financial reports as prescribed by OMB Circular A-133 ?320 (a) and Uniform Guidance 2 CFR 200.512(a) reporting requirements. Management's Response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.