Finding Text
Criteria: The Regulatory Agreement for Multifamily Housing Projects dated May 20, 2008, states in section 2. (c), that the owners shall establish and maintain, in addition to the reserve fund for replacements, a residual receipts fund by depositing thereto, with the mortgagee, the residual receipts, as defined herein, within 60 days after the end of the semiannual or annual fiscal period within which such receipts are realized.
Condition: During our testing of the surplus cash calculation and residual receipts account, we noticed the surplus cash computed as of the September 30, 2022 fiscal year was not deposited in the residual receipts fund account held by the mortgagee.
Cause: During the fiscal year 2023, the majority of the Project’s sole member’s assets were sold to two other organizations. As such, several staff transferred to the new organization. The Project was left with only the current CFO and no accounting staff. Management did not have the appropriate controls or staff in place to ensure the surplus cash was deposited timely with the mortgagee.
Effect: The Project did not deposit the surplus cash amount of $22,818 calculated as of September 30, 2022, with the mortgagee within 60 days of the fiscal year end.
Questioned Costs: None noted.
Recommendation: We recommend that management implement controls to review the calculation of surplus cash as soon as possible after the fiscal year end and forward any surplus cash computed to the mortgagee
within 60 days of the fiscal year end.
Management views and Corrective Action Plan: Management agrees with this finding. Please refer to the Corrective Action Plan.