Audit 375591

Finding 2025-001 Significant Deficiency – Internal Control over Distributions to Owners Compliance U.S. Department of Housing and Urban Development – Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board and Care Homes and Assisted Living Facilities – ALN #14.129 – Program Year 2024 Criteria: The HUD Consolidated Audit Guide, Chapter 3. Multifamily Housing Programs, Section 3-5 Compliance Requirements and Audit Areas, Part F. Distributions to Owners states that “the allowable distribution for limited distribution owners is further restricted…as described in the regulatory agreement…with the balance of surplus cash required to be deposited in a residual receipts account.” Part II, Section 16 of the Project’s Regulatory Agreement dated September 1, 2024 also states that “if a Non-Profit Borrower has been permitted to take Distributions… such Non-Profit Borrower may make Distributions of such Surplus Cash, upon the following conditions… the balance of the Residual Receipts account remains equal to no less than six months of the Borrower’s required debt service.” Condition: There was one distribution paid during the year which was paid to CommCare Corporation (Owner) in the amount of $20,898. The distribution was not in compliance with the HUD regulatory requirements. The balance of the Residual Receipts account was $0 as of June 30, 2025, which is less than six months of the Borrower’s required debt service in order for distributions to be paid to the Owner. Cause: The distribution was made to CommCare Corporation (Owner) without a Residual Receipts account balance that is equal to no less than six months of the Borrower’s required debt service and without obtaining HUD approval. Effect: An improper distribution of Project funds was made, which could lead to the potential of immediate or accelerated repayment of the loan balance. Questioned costs: $20,898 Recommendation: CRI recommends that management review the HUD Healthcare Regulatory Agreement to understand the Program compliance requirements and prevent future noncompliance.