Finding 2023-001: U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects (Section 223(f)/207)
Statement of Condition: During the year ended December 31, 2022, the Project paid expenses of a related entity for payroll fees of $15,985.
Criteria: Per Section 9 g. of the Regulatory Agreement, Project funds can only be used for reasonable operating expenses of the Project.
Effect: Noncompliance with HUD regulations.
Cause: The use of the Project account by a related entity.
Context: A test was performed to review for reasonableness of related party transactions.
Recommendation: We recommend that the Project funds are only used for expenses of the Project. Additionally, we recommend the related entity reimburse the operating cash of the Project $15,985 for the payroll fees paid.
Questioned Costs: $15,985
Views of Responsible Officials and Corrective Action Plan: Management acknowledges the Project funds were used for expenses of another entity. Management will ensure the related entity reimburses the operating cash of the Project $15,985 for the payroll fees paid and ensure that the Project funds are only used for expenses of the Project.
Finding 2023-002: U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects (Section 223(f)/207)
Statement of Condition: Internal control processes over financial reporting did not ensure that all transactions were properly recorded.
Criteria: The HUD Handbook 4370.2, Chapter 2 requires the books and accounts to be complete and accurate. Additionally, 2 CFR Part 200 Section 200.302 Financial Management states that the financial management system of each non-federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award in accordance with the reporting requirements. Additionally, 2 CFR Part 200 Section 200.303(a), Internal Controls, requires that non-federal entities must establish and maintain effective internal controls over the federal award that provides reasonable assurance that the non-federal entity is managing the award in compliance with federal statutes, regulations and the terms and conditions.
Effect: Noncompliance with HUD and Uniform Guidance regulations.
Cause: Management oversight.
Context: A review of journal entries made during the year revealed journal entries made in the incorrect period and erroneous journal entries. Additionally, the review process of the Corporation's financial information did not discover these errors.
Recommendation: We recommend management review/enhance its accounting and internal control procedures to ensure that all key accounts are reconciled and reviewed with supporting evidence of such review.
Questioned Costs: N/A
Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding and will review the accounting and financial procedures, system of internal controls and policies.
Finding 2023-003: U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects (Section 223(f)/207)
Statement of Condition: Surplus cash as of December 31, 2022 in the amount of $4,285 was not deposited into the Project's residual receipts account during the year ending December 31, 2023.
Criteria: The Regulatory Agreement requires that surplus cash be deposited into the Project's residual receipts account within 90 days of year end.
Effect: Noncompliance with HUD regulations.
Cause: Management oversight.
Context: A test to verify that the surplus cash as of December 31, 2022 was deposited into the residual receipts account within 90 days of year end was performed. The required deposit to the residual receipts of $4,285 was not deposited during the year ended December 31, 2023.
Recommendation: We recommend that management review its policies and procedures in place to ensure that the residual receipts deposit is made per regulatory guidelines.
Questioned Costs: $0
Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding and acknowledges that surplus cash as of December 31, 2022 was not deposited into the Project's residual receipts account during the year ended December 31, 2023. Management will review its policies and procedures in place to ensure that the residual receipts deposit is made per regulatory guidelines.
Finding 2023-001: U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects (Section 223(f)/207)
Statement of Condition: During the year ended December 31, 2022, the Project paid expenses of a related entity for payroll fees of $15,985.
Criteria: Per Section 9 g. of the Regulatory Agreement, Project funds can only be used for reasonable operating expenses of the Project.
Effect: Noncompliance with HUD regulations.
Cause: The use of the Project account by a related entity.
Context: A test was performed to review for reasonableness of related party transactions.
Recommendation: We recommend that the Project funds are only used for expenses of the Project. Additionally, we recommend the related entity reimburse the operating cash of the Project $15,985 for the payroll fees paid.
Questioned Costs: $15,985
Views of Responsible Officials and Corrective Action Plan: Management acknowledges the Project funds were used for expenses of another entity. Management will ensure the related entity reimburses the operating cash of the Project $15,985 for the payroll fees paid and ensure that the Project funds are only used for expenses of the Project.
Finding 2023-002: U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects (Section 223(f)/207)
Statement of Condition: Internal control processes over financial reporting did not ensure that all transactions were properly recorded.
Criteria: The HUD Handbook 4370.2, Chapter 2 requires the books and accounts to be complete and accurate. Additionally, 2 CFR Part 200 Section 200.302 Financial Management states that the financial management system of each non-federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award in accordance with the reporting requirements. Additionally, 2 CFR Part 200 Section 200.303(a), Internal Controls, requires that non-federal entities must establish and maintain effective internal controls over the federal award that provides reasonable assurance that the non-federal entity is managing the award in compliance with federal statutes, regulations and the terms and conditions.
Effect: Noncompliance with HUD and Uniform Guidance regulations.
Cause: Management oversight.
Context: A review of journal entries made during the year revealed journal entries made in the incorrect period and erroneous journal entries. Additionally, the review process of the Corporation's financial information did not discover these errors.
Recommendation: We recommend management review/enhance its accounting and internal control procedures to ensure that all key accounts are reconciled and reviewed with supporting evidence of such review.
Questioned Costs: N/A
Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding and will review the accounting and financial procedures, system of internal controls and policies.
Finding 2023-003: U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects (Section 223(f)/207)
Statement of Condition: Surplus cash as of December 31, 2022 in the amount of $4,285 was not deposited into the Project's residual receipts account during the year ending December 31, 2023.
Criteria: The Regulatory Agreement requires that surplus cash be deposited into the Project's residual receipts account within 90 days of year end.
Effect: Noncompliance with HUD regulations.
Cause: Management oversight.
Context: A test to verify that the surplus cash as of December 31, 2022 was deposited into the residual receipts account within 90 days of year end was performed. The required deposit to the residual receipts of $4,285 was not deposited during the year ended December 31, 2023.
Recommendation: We recommend that management review its policies and procedures in place to ensure that the residual receipts deposit is made per regulatory guidelines.
Questioned Costs: $0
Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding and acknowledges that surplus cash as of December 31, 2022 was not deposited into the Project's residual receipts account during the year ended December 31, 2023. Management will review its policies and procedures in place to ensure that the residual receipts deposit is made per regulatory guidelines.