Audit 402616

Noncompliance With Surplus Cash Requirements Grantor: United States Department of Housing and Urban Development Federal Assistance Listing Number: 14.856 Cluster: Section 8 Project-Based Cluster Federal Program Name: Lower Income Housing Assistance Program Section 8 Moderate Rehabilitation Criteria: The Lower Income Housing Assistance Program Section 8 Moderate Rehabilitation requires that the Agency maintain a residual receipts account for surplus funds generated (as defined in form HUD-93486) and that agencies deposit any determined surplus funds into this account within 90 days of fiscal year end. Condition/Context: The Agency had $71,903 of surplus funds required to be deposited into the residual receipts account within 90 days of the fiscal year end, however the deposit was not made within that timeframe. The deposit was made in February 2026. The calculation is an annual requirement and therefore the calculated difference in surplus funds represents the entirety of the potential impact. Cause: A liability was incorrectly recorded as of August 31, 2025, for an expenditure that occurred after fiscal year end. The liability, with an offset to prepaid expenses, was not in conformity with GAAP. The liability did not apply to the current fiscal year as no services were performed prior to August 31, 2025. In addition, no payment was made to the vendor for the services prior to August 31, 2025. The audit adjustment impacted the surplus cash calculation, which resulted in a surplus cash position, which is required to be transferred to the residual receipts account. Effect: The surplus cash was not deposited into the residual receipts account within 90 days of August 31, 2025. Questioned Costs: None. Recommendation: We recommend that management review their internal controls over compliance relating to the Agency's surplus cash calculation, including the recording of balances impacting the calculation, to ensure the determination of surplus cash is prepared appropriately and reviewed timely. In addition, the Agency should ensure that any surplus cash determined is transferred to the residual receipts account within 90 days of the fiscal year end. Views of Responsible Officials and Planned Corrective Actions: Management concurs with the above finding. The Agency will ensure that surplus cash calculations are prepared and reviewed timely, and that all components that impact the calculation are accurate and in accordance with GAAP. In addition, for any resulting calculations that indicate surplus cash exists, the Agency will remit the funds to the residual receipts account within 90 days of fiscal year end.

Significant Deficiency - Internal Control Over Compliance Grantor: United States Department of Housing and Urban Development Federal Assistance Listing Number: 14.856 Cluster: Section 8 Project-Based Cluster Federal Program Name: Lower Income Housing Assistance Program Section 8 Moderate Rehabilitation Criteria: Uniform Guidance requires that internal controls over compliance are in place to ensure the Agency is in compliance with cash management requirements. This includes maintaining a residual receipts account for surplus funds generated (as defined in form HUD-93486) and depositing any determined surplus funds into this account within 90 days of fiscal year end. Condition/Context: The Agency’s calculation of surplus cash incorrectly concluded there was no surplus cash, when $71,903 of surplus cash actually existed and was required to be deposited into the residual receipts account. As a result, the Agency did not deposit the surplus cash into the residual receipts account within 90 days of fiscal year end. Cause: Proper internal controls over compliance were not in place for the calculation of surplus cash as of August 31, 2025, nor the review of inputs that comprise the surplus cash calculation. Effect: The surplus cash calculation was incorrect, and funds were not remitted to the residual receipts account within 90 days of fiscal year end. Questioned Costs: None Recommendation: We recommend that management review their internal controls over compliance relating to the Agency's surplus cash calculation, including the recording of balances impacting the calculation, to ensure the determination of surplus cash is prepared appropriately and reviewed timely. In addition, the Agency should ensure that any surplus cash determined is transferred to the residual receipts account within 90 days of the fiscal year end. Views of Responsible Officials and Planned Corrective Actions: Management concurs with the above finding. The Agency will ensure that surplus cash calculations are prepared and reviewed timely, and that all components that impact the calculation are accurate and in accordance with GAAP. In addition, for any resulting calculations that indicate surplus cash exists, the Agency will remit the funds to the residual receipts account within 90 days of fiscal year end.