Finding Text
Finding 2023-006 - 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 of the requested deposits.
Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 Section 12 states that all cash receipts must deposited in the name of the project, numbered rent receipts shall be used and reconciled to actual collections, an adequate recording system shall be employed to note all checks received and deposited and all collections shall be promptly deposited on the day received.
Effect: Noncompliance with HUD regulations.
Cause: Prior management oversight and non-responsiveness.
Context: A sample of cash receipts totaling $48,454 were tested to determine if the cash receipts were in accordance with HUD Handbook 4370.2. A total of $10,397 of cash receipts 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 receipts tested that were noncompliant (21%) over the total population of cash receipts for the year ending June 30, 2023 of $462,780, $99,296 of cash receipts could be noncompliant based on the above error rate.
Questioned Costs: N/A
Recommendation: We recommend that management ensure supporting documentation is maintained for all cash receipts of the project.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledge the requested cash receipts noted 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 supporting documentation for cash all cash receipts and did not provide the requested cash receipts supporting documents to the auditor for testing. The new management will ensure supporting documentation is maintained for all cash receipts from project operations during their management.