Audit 366462

2025-001 Delay in Deposit of Surplus Cash into Residual Receipts Account Program Name/Assistance Listing Title: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects Federal Assistance Listing No: 14.155 Federal Agency: U.S. Department of Housing and Urban Development Type of Finding: Federal Award Finding Compliance Requirements: Special Tests and Provisions Population Size and Sample Size Information: N/A Criteria: According to HUD Handbook 4370.2 REV-1, Chapter 2, Paragraph 2-17, Owners of HUD-assisted projects are required to deposit surplus cash into the Residual Receipts account within 60 days after the end of the fiscal year unless otherwise directed by HUD. The surplus cash must be calculated using HUD Form 93486 (Computation of Surplus Cash) and the amount must be deposited promptly to ensure funds are preserved for project use and available for HUD-approved purposes. Condition: During the audit of the Residual Receipts account as of the fiscal year ended May 31, 2025, we noted that the residual receipts deposit from surplus cash for the year ended May 31, 2024, was made on September 8, 2024 — 98 days after year-end — exceeding HUD’s 60-day requirement. Cause of Condition: Management delayed depositing surplus cash into the Residual Receipts account until the audited financial statements were finalized on September 6, 2024. However, HUD regulations require the deposit to be made based on the project’s year-end surplus cash computation and do not require waiting for the audit to be completed. This resulted in a delay in meeting the 60 day deposit requirement. Potential Effect: Failure to timely deposit surplus cash into the Residual Receipts account constitutes noncompliance with HUD requirements and exposes the project to risk of findings during HUD reviews. Additionally, it may impact on the project's ability to demonstrate sound financial management and regulatory adherence. Questioned Cost: None – The surplus cash of $76,388 was allowable and fully deposited into the Residual Receipts account; the finding relates only to late compliance with HUD’s deposit timeframe. Reporting Views of Responsible Officials: The Organization agrees with the findings and recommendations and will adhere to the corrective action plan. Context: As part of our audit of the Residual Receipts account for the fiscal year ended May 31, 2025, we reviewed deposits made during the year for compliance with HUD requirements. We noted that the surplus cash from the fiscal year ended May 31, 2024, totaling $76,388, was deposited into the Residual Receipts account on September 8, 2024. HUD regulations require surplus cash to be deposited within 60 days after fiscal year-end, based on the year-end surplus cash computation. The deposit occurred 98 days after year-end, which is 38 days beyond the HUD-required deadline. While the amount was allowable and fully deposited, the delay represents noncompliance with HUD’s timing requirement. Recommendation: We recommend the following: a. Ensure that future surplus cash deposits to the Residual Receipts account are made within 60 days after fiscal year-end, based on the unaudited surplus cash computation. b. Establish internal procedures to track and schedule these deposits in advance of the deadline, regardless of the audit completion status. c. If a deferral is necessary, formally submit a written request to HUD explaining the reason for the delay and obtain documented approval. d. Maintain supporting documentation of all communications and approvals related to any delayed or deferred deposits for audit and compliance purposes. Management’s Response: This has been paid on September 4, 2024, with check # 9841. Working on an implementation program for the future.