Finding 1079620 (2024-001)

SECTION II - FINANCIAL STATEMENT FINDINGS Finding 2024-1 Insufficient Internal Controls Over Monthly Replacement Reserve Funding Finding Resolution Status: Resolved Information on Universal Population Size: One Instance Sample Size: 12 Identification of Repeat Finding and Finding Reference Number: Not Applicable Questioned Costs: $0 Criteria: Monthly deposits to the Replacement Reserve account must be made monthly in accordance with HUD required amounts and all withdrawals must be approved by HUD. Condition: In accordance with the HUD requirements, the Project was required to make monthly deposits to the Replacement Reserve account in the amount of $1,171 for the year ended June 30, 2024. In February 2024, the Project withdrew the approved withdrawal amount of $34,996 twice in error. In May 2024, the Project deposited it back into the Replacement Reserve. The internal controls in place to the Replacement Reserve account were not sufficient enough to prevent this withdrawal from the Replacement Reserve. Cause: Unknown Effect: The Project is not in compliance with HUD’s regulations. If a significant replacement need were to arise, there may not be adequate funds in Replacement Reserve to cover the cost. Auditors’ Recommendation: Management should implement internal controls suitable to detect and prevent withdrawals without HUD approval. Auditor Non-Compliance Code: N – Reserve for Replacement Requirements FHA/Contract Number: 064-EH150 Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: We have noted that the mortgage company was responsible for withdrawing the funds in error. We have also noted that management did detect the error and corrected the error in a subsequent month. Reporting Views of Responsible Officials: Replacement Reserves are held in escrow by the mortgage company. When we receive approval for withdrawal from HUD, that approval is forwarded to the mortgage company by email. Only one email was sent requesting funds of $34,996. The mortgage company processed this request twice. Ouachita Grand Plaza remitted a check back to the mortgage company for the duplicate disbursement. Response Indicator: Agree Completion Date: 05/10/2024 Response: Replacement Reserves are held in escrow by the mortgage company. When we receive approval for withdrawal from HUD, that approval is forwarded to the mortgage company by email. Only one email was sent requesting funds of $34,996. The mortgage company processed this request twice. Ouachita Grand Plaza remitted a check back to the mortgage company for the duplicate disbursement. Contact Person: Janet Sanderford SECTION III - FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Projects Assistance Listing Number 14.155 See Finding 2024-1 under Section II – Financial Statement Findings.