LUTHERAN HOUSING CORPORATION / NORTH SIOUX CITY, INC.Non-Profit

2020-002 U.S. Department of Housing and Urban Development Federal Financial Assistance Listing #14.157 Supportive Housing for the Elderly (Section 202) Eligibility Material Weakness in Internal Control over Compliance and Qualified Opinion on Compliance Criteria: The Project is required to maintain tenant files in accordance with HUD requirements. Condition: We were unable to perform testing to determine compliance with eligibility requirements. Cause: All tenant files were destroyed in a fire during 2020. Effect: We were unable to determine compliance with eligibility requirements. Questioned Costs: Unable to identify Context/Sampling: No sampling was performed. Repeat Finding from Prior Year: No Recommendation: Based on the circumstances, Eide Bailly has no recommendation. Views of Responsible Officials: Management agrees with the finding.

2020-003 U.S. Department of Housing and Urban Development Federal Financial Assistance Listing #14.157 Supportive Housing for the Elderly (Section 202) Special Tests and Provisions: Use of Project Funds Significant Deficiency in Internal Control over Compliance Criteria: The Project?s funds are to be used only for the operation of the Project or to make required deposits to the replacement reserve or the residual receipts reserve. In addition, the Project is required to have approved documentation to adequately support disbursement of the Project?s funds. Condition: Our testing of disbursements detected one instance where an invoice was approved by an individual outside of their approval limits and one instance where the Project paid for a payroll expense incurred by a related Project. Cause: There was a lapse in the internal control process ensuring disbursements of the Project?s funds are approved by authorized individuals within their approval limits and payroll expenses are properly billed to other Projects where the expense is incurred. Effect: Lack of compliance with designed internal controls over use of project funds could adversely affect the Project?s compliance with HUD regulations. Questioned Costs: $18 Context/Sampling: A nonstatistical sample of 60 of the Project?s 381 disbursements ($171,325 of the $449,039 total disbursements) including payroll and non-payroll disbursement was selected for testing. Repeat Finding from Prior Year: Yes ? see finding 2019-004. Recommendation: We recommend management review their policies and procedures with applicable employees and remind them of the importance of review and monitoring processes. Views of Responsible Officials: Management agrees with the finding and the recommendation.

2020-004 U.S. Department of Housing and Urban Development Federal Financial Assistance Listing #14.157 Supportive Housing for the Elderly (Section 202) Procurement and Suspension and Debarment Material Weakness in Internal Control over Compliance Criteria: Uniform Guidance ?180 contains prohibitions on non-procurement transactions entered into by a non-Federal entity and imposes a duty upon the non-Federal entity to ensure the transactions are not entered into with certain parties that have been suspended or debarred by the government. In addition, 2 CFR 200.320 identifies specific circumstances where noncompetitive sole source procurements can be used. Condition: During our testing, we noted the Project entered into transactions with two vendors exceeding $25,000 in the aggregate for the year and did not verify that the vendors were not included as excluded parties within the System for Award Management (SAM). In addition, there was one instance where the Project entered into transactions from a single source due to the building fire; however, no documentation was retained to support the sole source vendor selection. Cause: There was a lapse in the internal control process over procurement and suspension and debarment. Effect: The Project could enter into a covered transaction with a party that is suspended or debarred or otherwise excluded and the Project?s compliance with procurement regulations could be impacted. Questioned Costs: None Reported Context/Sampling: Sampling was not used. Repeat Finding from Prior Year: No Recommendation: We recommend the Project?s sponsor review its policies and procedures to ensure all vendors are compared to the SAM before the Project enters into a covered transaction and review Uniform Guidance to ensure procurement requirements are followed. Views of Responsible Officials: Management agrees with the finding and the recommendation.

2019-002 U.S. Department of Housing and Urban Development CFDA #14.157 Supportive Housing for the Elderly ? Section 202 Capital Advance and Project Rental Assistance Contract Reporting Material Weakness in Internal Control over Compliance Criteria: The Project is required to submit financial data to REAC within 90 days after its fiscal year end. Condition: The Project did not submit the REAC filing within the required 90-day time period. Cause: The auditors were engaged too late in the year to allow for a timely REAC filing.Effect: Lack of compliance with timely filing within the HUD?s REAC system could adversely affect the Project?s compliance with HUD guidelines. Questioned Costs: None Reported Context/Sampling: No sampling was performed. Repeat Finding from Prior Year: No Recommendation: We recommend management continually be aware of the financial reporting requirements as it relates to HUD reporting. Views of Responsible Officials: Management agrees with the finding and the recommendation.

2019-003 U.S. Department of Housing and Urban Development CFDA #14.157 Supportive Housing for the Elderly ? Section 202 Capital Advance and Project Rental Assistance Contract Special Tests and Provisions: Residual Receipts Material Weakness in Internal Control over Compliance Criteria: The Project?s regulatory agreement requires surplus cash to be deposited into a residual receipt reserve within 60 days after fiscal year end. Condition: The Project did not deposit surplus cash of $15,928 calculated for the year ended December 31, 2018 until July 2019. Cause: The auditors were engaged too late in the year to allow for the final calculation of the residual receipts deposit to be determined and deposited. Effect: Lack of compliance with designed internal controls over residual receipts could adversely affect the Project?s compliance with regulatory agreement. Questioned Costs: None Reported Context/Sampling: Sampling was not used. Repeat Finding from Prior Year: No Recommendation: We recommend management review their processes to ensure surplus cash is deposited in accordance with the requirements of the regulatory agreement. Views of Responsible Officials: Management agrees with the finding and the recommendation.

2019-004 U.S. Department of Housing and Urban Development CFDA #14.157 Supportive Housing for the Elderly ? Section 202 Capital Advance and Project Rental Assistance Contract Special Tests and Provisions: Use of Project Funds Significant Deficiency in Internal Control over Compliance Criteria: The Project is required to have documentation to adequately support disbursement of the Project?s funds. Condition: Our testing of disbursements detected two instances where no agreement to support the employee wage rate was available. Cause: There was a lapse within internal controls over retention of documentation. Effect: Lack of supporting documentation may cause the Project to not appropriately use Project funds. Questioned Costs: None Reported Context/Sampling: A nonstatistical sample of 60 of the Project?s 449 disbursements ($33,051 of the $253,032 total disbursements) including payroll and non-payroll disbursement was selected for testing. Repeat Finding from Prior Year: Yes. 2018-003 reported a similar finding over use of Project funds. Recommendation: We recommend management review their policies and procedures with applicable employees and remind them of the importance of review and monitoring processes. Views of Responsible Officials: Management agrees with the finding and the recommendation.

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