Finding Text
FINDING NO. 2024-001: Section 811, CFDA 14.181 - Special Tests and Provisions Criteria: The balance of the tenant security deposits held in trust should be equal to or greater than the balance of the tenant security deposit liability. Condition: The balance of the tenant security deposits held in trust is less than the balance of the tenant security deposit liability. Cause: Management made transfers from the security deposit cash account to the operating cash account totaling $2,900 in December 2024. Effect: The tenant security deposits held in trust were underfunded. Context: According to the regulatory agreement, the amount of the security deposit cash account must at all times equal the total amount collected from the families currently in occupancy plus any accrued interest. There are no questioned costs. Recommendation: Management should immediately transfer enough funds from the operating cash account to increase the tenant security deposits held in trust to a balance equal to the security deposit liability account. In the future, management should make transfers from the tenant security deposits held in trust only for forfeited security deposits or to return the security deposit to tenants moving out of the Project. Further, management should ensure the balance of the security deposit cash account is never less than the balance of the security deposit liability account. Views of Responsible Officials and Planned Corrective Actions: Management of Kan-Do Apartments, Inc. agrees with the finding, and the auditors’ recommendations have been adopted. The error is the result of two transfers, one of which was made to the wrong bank account and the other to the wrong client account. Both were corrected immediately upon discovery, on January 2, 2025 and February 3, 2025, respectively. Going forward, all transfers will be reviewed against the tenant list and confirmed with the Director, Residential Services, prior to being executed.