Audit 404495

Criteria HUD regulatory agreements and related HUD requirements require residual receipts deposits to be made within 90 days after the Project's fiscal year-end unless otherwise approved by HUD. Perspective This matter appeared to be an isolated instance noted in the items tested and was not identified as a systemic pattern of noncompliance based on the audit procedures performed. Cause Management indicated that the Project experienced cash flow constraints during 2025 and elected to defer a portion of the required residual receipts deposit in order to maintain sufficient operating cash balance. Management further stated that reimbursement funds related to a replacement reserve request were received in January 2026, which allowed the remaining balance to be deposited thereafter. No documentation of HUD approval permitting the delayed deposits was provided during the audit. Effect Failure to remit residual receipts deposits within the required timeframe results in noncompliance with HUD requirements and may subject the project to additional HUD review, monitoring, or other follow-up actions. Questioned Costs No questioned costs were identified for this finding. The finding relates to the timing of required residual receipts remittances rather than unsupported, unallowable, or inadequately documented expenditures charged to the federal award. Recommendation We recommend management establish procedures to monitor HUD-required deposit deadlines and ensure residual receipts deposits are remitted timely in accordance with HUD requirements. If operating or cash flow circumstances prevent timely remittance, management should communicate with HUD in advance and retain documentation supporting any approvals or exceptions granted. Management's Views and Corrective Action Plan Management stated that the property experienced ongoing cash flow challenges during 2025 and sought to preserve operating liquidity to support project operations. After receiving reimbursement funds related to a replacement reserve request in January 2026, management completed the remaining deposit. Management also indicated that the delayed remittance was not intentional and had been overlooked until the audit process. Management plans to strengthen its monitoring procedures over HUD-required deposits, including implementing a year-end compliance checklist and assigning responsibility for tracking residual receipts deadlines. Management also stated it will communicate with HUD in advance and retain written documentation if future operating conditions affect its ability to remit required deposits within the prescribed timeframe.