Finding Text
Section II – Financial Statement Findings
Our audit did not disclose any matters required to be reported in accordance with Government Auditing Standards.
Section III – Findings and Questioned Costs – Major Federal Programs
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Section 223(d) Mortgage Insurance for the Purchase or Refinance of Existing Multifamily Housing Projects
Assistance Listing Number: 14.155
Federal Award Identification Number and Year: 41-0746749-2024
Award Period: June 12, 2014 through June 12, 2034
Type of Finding: Significant Deficiency in Internal Control over Compliance
Criteria or specific requirements: The Regulatory Agreement requires the Project to maintain and expend pre-funded monies on HUD pre-approved expenditures.
Condition: The Project expended HUD pre-approved monies on HUD related operational expenditures. This resulted in insufficient funds within the reserve account to expend on the specific HUD pre-approved project as of June 30, 2024.
Questioned Costs: $104,000
Context: During our testing, it was noted that the Project erroneously expended pre-funded replacement reserves on HUD operational related expenditures. The pre-funded replacement reserves were not within the reserves escrow as of year-end and the pre-approved capital project had not been started as of June 30, 2024.
Cause: Management oversight.
Effect: This resulted in insufficient funds within the replacement reserve escrow account to cover the HUD approved withdrawal application as of June 30, 2024.
Repeat Finding: This is not a repeat finding.
Recommendation: Recommend Project Management reviews its internal control policies over the recording of transactions to ensure that all transactions are used for their intended purpose.
Management’s Response: Management agreed that funds were erroneously used for HUD related operational expenditures and were replenished to the reserve account when the error was discovered by accounting staff. Procedures were changed to include all accounting personnel in communications regarding reserve funded projects.
Status: Resolved as of August 2024.