SWOPE GARDENS HOUSING CORPORATIONNon-Profit

Finding 2023-001- Residual Receipt Deposits Federal Agency: U. S. Department of Housing and Urban Development Program Name: Section 811 Capital Advance Assistance Listing NO 14.181 ($1,835,000) Questioned Costs None Condition Found The $5,280 of surplus cash at June 30, 2023 was not deposited into the residual receipts account within ninety days. Criteria: According to HUD’s guidelines, a Project must deposit surplus cash due to residual receipts within ninety days after the fiscal period ends (REAC submission due date) Cause Project management did not transfer the surplus cash of $5,280 from the operating account to the residual receipts Effect: The Project held excess cash and did not make the required residual receipts deposits. Recommendation: The Project should make a deposit of $5,280 for the year ended June 30, 2023. Procedures should be improved to ensure that surplus cash is calculated and transferred to the residual receipt account timely. Management’s response Management will fund residual receipts within the required timeframe going forward.

Finding 2022-001- Residual Receipt Deposits Federal Agency: U. S. Department of Housing and Urban Development Program Name: Section 811 Capital Advance Assistance Listing NO 14.181 ($1,835,000) Questioned Costs None Condition Found The $14, 786 of surplus cash at June 30, 2022 was not deposited into the residual receipts account within ninety days. Criteria: According to HUD?s guidelines, a Project must deposit surplus cash due to residual receipts within ninety days after the fiscal period ends (REAC submission due date) Cause Project management did not transfer the surplus cash of $14,786 from the operating account to the residual receipts Effect: The Project held excess cash and did not make the required residual receipts deposits. Recommendation: The Project should make a deposit of $14,786 for the year ended June 30, 2022. Procedures should be improved to ensure that surplus cash is calculated and transferred to the residual receipt account timely. Management?s response Management will fund residual receipts within the required timeframe going forward.

Finding 2021-001- Residual Receipt Deposits Federal Agency: U. S. Department of Housing and Urban Development Program Name: Section 811 Capital Advance Assistance Listing NO 14.181 ($1,835,000) Questioned Costs None Condition Found The $8,236 of surplus cash at June 30, 2021 was not deposited into the residual receipts account within ninety days. Criteria: According to HUD?s guidelines, a Project must deposit surplus cash due to residual receipts within ninety days after the fiscal period ends (REAC submission due date) Cause Project management did not transfer the surplus cash of $8,236 from the operating account to the residual receipts Effect: The Project held excess cash and did not make the required residual receipts deposits. Recommendation: The Project should make a deposit of $8,236 for the year ended June 30, 2021. Procedures should be improved to ensure that surplus cash is calculated and transferred to the residual receipt account timely. Management?s response Management will fund residual receipts within the required timeframe going forward.

FINDING 2020-001 ? Material Adjustments Due to Gross Rent Change Federal Agency: U.S. Department of Housing and Urban Development Pass through Entity: Not applicable Program Name: Section 811 Project Rental Assistance Payments CFDA# and Program Expenditures: 14.181 ($97,850) Award Number: N/A Federal Award Year: July 1, 2019 to June 30, 2020 Questioned Costs: None Condition Found: During the course of the audit for the Project, we proposed a prior period adjustment to correct the beginning balances of accounts receivable ? HUD and net assets without donor restrictions due to a gross rent change not being updated through the Project?s software to the Contract Administrator or TRACS. Criteria: Based on professional standards, identification by an auditor of a material misstatement in the financial statements under audit that was not initially identified by the entity's internal control is a strong indicator of a material weakness. In addition according to HUD Handbook 4350, Chapter 7, Section 4, 7-17C, ?Owners must submit approved gross rent changes through their software package to the contract administrator or to TRACS. Cause: A gross rent change at November 1, 2018 was not updated through the Project?s software to the contract administrator or TRACS until December 2019. Possible Asserted Effect: Because the aforementioned adjustments would have materially misstated the statement of financial position and statement of activities, we believe that this matter is a material weakness in the controls and practices of the Project. The incorrect gross and contract rents were used to determine the amount of rent paid by the tenant and HUD. A $16,464 prior period adjustment was made to record the November 1, 2018 gross rent change. Repeat Finding: A material audit adjustment finding was included in the prior audit as Finding 2019-001. However, the material adjustments made in the prior year did not relate to gross rent changes. Recommendation: We recommend that the management company develop and implement procedures to properly record transactions before its records are submitted for audit. The management company should review each PRAC agreement and promptly enter gross rent changes into their software system and update TRACS. The Project has received the amount due from HUD for the November 1, 2018 gross rent change. Management Response: The management company will continue to increase review of the general ledger and record all necessary adjustments prior to the audit. Procedures will be improved to ensure that gross rent changes are promptly entered into the software system.

FINDING 2020-002 ? Replacement Reserve Deposits Federal Agency: U.S. Department of Housing and Urban Development Pass through Entity: Not applicable Program Name: Section 811 Capital Advance Program Section 811 Project Rental Assistance Payments CFDA# and Program Expenditures: 14.181 ($1,835,000) 14.181 ($ 97,850) Award Number: N/A Federal Award Year: July 1, 2019 to June 30, 2020 Questioned Costs: None Condition Found: The reserve for replacement deposits were not funded for the year ended June 30, 2020. Criteria: The regulatory agreement requires that $580 be deposited in the replacement reserve account each month from July 2019 through June 2020. Cause: The management company accidently transferred required deposits to another property?s replacement reserve account in June 2020. The error was discovered after the June 30, 2020 year-end. The funds were transferred back to Swope Gardens Housing Corporation in July 2020. Possible Asserted Effect: The replacement reserve was underfunded by $6,960 for the year ended June 30, 2020. There were not controls in place to prevent funds from being transferred to the incorrect account and corrected timely. Repeat Finding: This finding was reported in the immediately prior audit as Finding 2019-002. Recommendation: The overall reserve shortage of $6,960 should be returned as soon as possible. Management should implement procedures to ensure that the replacement reserve deposit transfers are completed monthly and that the deposits are placed in the correct bank account. Management Response: The $6,960 was transferred to the replacement reserve account in July 2020. The Project is now transferring the replacement reserve deposit each month as required by the regulatory agreement.

FINDING 2019-001 ? Material Adjustments Condition Found: During the course of the audit for the Project, we proposed journal entries to adjust the beginning accumulated depreciation amount and to correct net assets without restrictions. Criteria: Based on professional standards, identification by an auditor of a material misstatement in the financial statements under audit that was not initially identified by the entity's internal control is a strong indicator of a material weakness. Cause: The prior year audit entry was recorded twice in the Project?s general ledger. Possible Asserted Effect: Because the aforementioned adjustments would have materially misstated the statement of financial position and statement of activities, we believe that this matter is a material weakness in the controls and practices of the Project. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that the Project develop and implement procedures to properly record transactions before its records are submitted for audit. Management Response: The management company will continue to increase review of the general ledger and record all necessary adjustments prior to the audit.

FINDING 2019-002 ? Replacement Reserve Deposits Federal Agency: U.S. Department of Housing and Urban Development Pass through Entity: Not applicable Program Name: Section 811 Capital Advance Program CFDA# and Program Expenditures: 14.181 ($1,835,000) Award Number: N/A Federal Award Year: July 1, 2018 to June 30, 2019 Questioned Costs: None Condition Found: The reserve for replacement was not funded for three months during the year ended June 30, 2019. Monthly deposits totaling $1,740 for the year should have been deposited in the account. In addition, $4,470 is due to the replacement reserve for required deposits from the year ended June 30, 2017. A total of $6,480 is due to the replacement reserve account. Criteria: The regulatory agreement requires that $580 be deposited in the replacement reserve account each month from March 2019 through June 2019. HUD granted a waiver of the monthly deposit requirements from July 1, 2017 through March 31, 2019. Cause: The required deposits were not transferred from the operating account to the replacement reserve account after the waiver time period ended. Possible Asserted Effect: The replacement reserve was underfunded by $1,740 for the year ended June 30, 2019. The replacement reserve was also underfunded by $4,740 for the year ended June 30, 2017. The cumulative total due to the replacement reserve fund is $6,480. Repeat Finding: This finding was reported in the immediately prior audit as Finding 2018-002. Recommendation: The overall reserve shortage of $6,480 should be funded as soon as possible. Management should consider requesting a replacement reserve deposit waiver or a rent increase from HUD. Management Response: Management will transfer $6,480 from operating to reserve after evaluating available cash. In the absence of available cash, a waiver from HUD will be requested.

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