Finding 1137619 (2024-003)

Finding number: 2024-003 Finding type: Federal award finding Federal Assistance Listing No: 14.139 Program name: Mortgage Insurance Rental Housing in Urban Renewal Areas Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: n/a Grant number: n/a Federal award year: 2024 Control deficiency type: Significant deficiency over compliance Instance of noncompliance: Yes Compliance requirement: Special Tests and Provisions Questioned costs: n/a Repeat finding: No Criteria: In accordance with the Regulatory Agreement with HUD, the organization is required to make monthly deposits of $1,686 to the replacement reserve account. Condition: The organization did not make the required deposits in December of 2023, and January and February of 2024. Cause: The required deposit was not made. Effect: The organization was not in compliance with the Regulatory Agreement and the replacement reserve is unfunded for the year ended June 30, 2024. Audit Recommendation: We recommend that the replacement reserve account deposit be made monthly as required by the Regulatory Agreement. Controls should be implemented to ensure compliance with this requirement. Management Response: Due to a transition of management in the property accounting department during the fiscal year, the funding of the replacement reserve account did not happen due to a lapse in process during the transition. Processes and controls have since been reestablished to ensure that the funding of the replacement reserve occurs once again on a monthly basis.