Finding Text
Finding No. 2024-002; Federal Assistance Listing Number 14.134, Mortgage Insurance - Rental
Housing.
Criteria
According to the HUD Handbook 4350.1, Appendix 2, the terms of the loan from the reserve for
replacement required repayment from the proceeds of the Section 8 subsidy.
Condition
During the years ended July 31, 2019, 2020, 2021, 2022, 2023 and 2024, management did not fully
repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy
that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an
unauthorized distribution. As of July 31, 2024, the amount due to the reserve for replacement has
been partially repaid. The remaining amount due as of July 31, 2024 is $9,669.
Cause
Management did not maintain adequate controls in 2019 over the reserve for replacement
requirements established with the loan advance to ensure the timely repayment of the loan upon
receipt of the delayed Section 8 subsidy.
Effect or Potential Effect
The Organization is not in compliance with the requirements of the regulatory agreement.
Questioned Costs
None
Context
HUD approved a loan from the reserve for replacement with the stipulation that the loan be repaid
when the delinquent Section 8 subsidy was paid by HUD.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2023-002).
Recommendation
Management should establish internal controls and procedures to ensure that required payments
are made timely.
Auditor's Noncompliance Code: N - Reserve for replacements deposits
Finding Resolution Status: In process
Views of Responsible Officials - The updated loan agreement was signed on March 14, 2024 to repay the $9,669 balance of the loan borrowed to the Lender, with a payment of $100 each month until the loan is repaid in full.