Finding 2025-001
material weakness
- Program
- MORTGAGE INSURANCE_COOPERATIVE PROJECTS (14.126)
- Compliance requirement
- Other
- FAC record
- FY2025 audit on fac.gov
Finding text from the filing
Material Weakness – Lack of Internal Controls
Criteria - Management is responsible for establishing and maintaining internal controls in order to safeguard the assets of the Cooperative and achieve accurate financial reporting.
Condition - The Cooperative lacked sufficient controls and procedures related to financial reporting, resulting in no formal documentation and review of financial activity, and a lack of understanding the segregation of duties.
Cause - Appropriate internal controls and procedures related to financial reporting were not established when the property management agent was hired.
Effect - The Cooperative was exposed to an increased risk that misstatements (whether caused by error or fraud) may occur and not be prevented or detected by management on a timely basis. A significant number of journal entries were required to adjust the 2025 financial statements.
Recommendation - We recommend that management design and document their internal control process to ensure that they have an adequately designed system of internal controls.
Auditee’s comment - In June 2025, the Cooperative entered into a management agreement with Paramark Real Estate Services to manage the Cooperative. The management company maintains sufficient controls and procedures related to financial reporting and have proper segregation of duties in place to safeguard the assets of the Cooperative.
Status - Resolved