Finding 1141799 (2024-001)

Material Weakness
Requirement
N
Questioned Costs
-
Year
2024
Accepted
2025-06-18

AI Summary

  • Core Issue: Management made unauthorized fund distributions exceeding allowable limits due to incorrect surplus cash calculations.
  • Impacted Requirements: Funds can only be distributed for reasonable operating expenses and necessary repairs with prior HUD consent.
  • Recommended Follow-Up: Management should improve surplus cash calculations to ensure compliance with distribution guidelines.

Finding Text

Federal agency: U.S. Department of Housing and Urban Development Federal program title: Section 223(f) HUD Insured Mortgage Note Listing Number: 14.155 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Period: N/A FAIN number and year: 708752 / 800235016 - 2020 Type of Finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: The Project cannot, without the prior written consent of HUD, distribute any funds except for reasonable operating expenses and necessary repairs that are repaid within 30 days. Condition: Management distributed more than the amount available for distribution and therefore unauthorized distributions were paid out. Questioned costs: None Context: The project is allowed to take mid year and annual distributions as long as there is sufficient surplus cash. Cause: The surplus cash calculation did not properly calculate surplus cash resulting in an overdistribution of the funds. Effect: Unauthorized 12/31/23 and 6/30/24 distributions resulting in an overdistribution of $124,109 and $477,792, respectively. No funds need to be paid back as there was surplus cash available at 12/31/24. Repeat Finding: N/A Recommendation: We recommend management ensure they are properly calculating surplus cash and distributing in accordance with the calculation. Views of the responsible official and planned corrective actions: No disagreements with the finding.

Categories

HUD Housing Programs Material Weakness Internal Control / Segregation of Duties

Other Findings in this Audit

  • 565357 2024-001
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
14.155 Mortgage Insurance for the Purchase Or Refinancing of Existing Multifamily Housing Projects $15.40M