Finding 2022-001: 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 accounting fees of $2,000. 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 $2,000 for the accounting fees paid. Questioned Costs: $2,000 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 $2,000 for the accounting fees paid and ensure that the Project funds are only used for expenses of the Project.
Finding 2022-002: 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 2022-003: 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: At December 31, 2022, the Project had $20,273 of funds maintained in an institution that were in excess of FDIC insured limits. Criteria: The HUD Handbook 4370.2, Chapter 2, requires that the cash accounts of the Project be deposited in a bank or banks whose deposits are federally insured. Effect: Noncompliance with HUD regulations. Cause: Management did not transfer funds to separate financial institutions in a timely manner to provide for continuous FDIC insurance coverage. Context: A test was performed to compare the total funds held at each institution to the $250,000 federally insured limit. At December 31, 2022, the total funds held at one bank was $270,273, which was $20,273 in excess of the $250,000 federally insured limit. Recommendation: We recommend that the Project continuously monitor cash balances to ensure that funds are always covered by FDIC insurance limits, collateral agreements are obtained, or funds are invested in government securities. Questioned Costs: N/A Views of Responsible Officials and Corrective Action Plan: Management acknowledges the Project funds were in excess of FDIC insured limits and will transfer funds to provide adequate FDIC insurance coverage for all cash accounts.
Finding 2022-001: 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 accounting fees of $2,000. 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 $2,000 for the accounting fees paid. Questioned Costs: $2,000 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 $2,000 for the accounting fees paid and ensure that the Project funds are only used for expenses of the Project.
Finding 2022-002: 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 2022-003: 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: At December 31, 2022, the Project had $20,273 of funds maintained in an institution that were in excess of FDIC insured limits. Criteria: The HUD Handbook 4370.2, Chapter 2, requires that the cash accounts of the Project be deposited in a bank or banks whose deposits are federally insured. Effect: Noncompliance with HUD regulations. Cause: Management did not transfer funds to separate financial institutions in a timely manner to provide for continuous FDIC insurance coverage. Context: A test was performed to compare the total funds held at each institution to the $250,000 federally insured limit. At December 31, 2022, the total funds held at one bank was $270,273, which was $20,273 in excess of the $250,000 federally insured limit. Recommendation: We recommend that the Project continuously monitor cash balances to ensure that funds are always covered by FDIC insurance limits, collateral agreements are obtained, or funds are invested in government securities. Questioned Costs: N/A Views of Responsible Officials and Corrective Action Plan: Management acknowledges the Project funds were in excess of FDIC insured limits and will transfer funds to provide adequate FDIC insurance coverage for all cash accounts.