Finding Text
Finding 2023-005 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ending June 30, 2023, supporting documentation was not available for some requested disbursements.
Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 Section 12 states a request for a check must have supporting documentation (i.e., invoice itemizing amount requested with an authorized signature) in order for approval to be obtained to make the disbursement. Checks must be approved by an individual authorized to approve checks.
Effect: Noncompliance with HUD regulations.
Cause: Prior management oversight and non-responsiveness.
Context: A sample of cash disbursements totaling $58,527 were tested to determine if the cash disbursements were in accordance with HUD Handbook 4370.2. A total of $25,781 of cash disbursements tested did not have supporting documentation and therefore unable to be tested for compliance with HUD Handbook 4370.2 and deemed noncompliant. By extrapolating our identified error rate on cash disbursements tested that were noncompliant (44%) over the total population of cash disbursements for the year ending June 30, 2023 of $455,836, $200,796 of cash disbursements could be noncompliant based on the above error rate.
Questioned Costs: $200,796 Recommendation: We recommend that management ensure supporting documentation is maintained for all disbursements from project operations.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledge the requested disbursements did not have supporting documentation available. During the change in management effective June 1, 2023, the prior management company did not provide new management company with all invoices or other supporting documents for some disbursements and did not provide the requested invoices to the auditor for testing. The new management will ensure supporting documentation is maintained for all disbursements from project operations during their management.