Finding 1142449 (2024-001)

FINDING No. 2024-001: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: All replacement reserve deposits for the year ended September 30, 2024. Sample Size Information: All replacement reserve deposits for the year ended September 30, 2024. Identification of Repeat Finding and Finding Reference Number: Yes, 2023-002. Criteria: In accordance with HUD, timely monthly deposits must be made to the Project’s reserve for replacement account. Statement of Condition: As a result of not requesting a timely increase to the reserve for replacement account, the funding increase effective January 1, 2024 was not approved by HUD until subsequent to year end and the Project incorrectly made an unauthorized deposit in anticipation of HUD’s approval. Cause: The Project implemented the increase to the reserve for replacement account during the current fiscal year ahead of obtaining HUD approval, which was obtained subsequent to year end on October 29, 2024. Effect or Potential Effect: The Project did not correctly fund the reserve for replacement account on a monthly basis. Auditor Non-Compliance Code: N – Reserve for Replacements Deposits Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted.Recommendation: Management should implement procedures to ensure that the increase to the reserve for replacement account is properly applied with timely HUD authorization via form HUD-9250. Response Indicator: Agree. Completion Date: 9/30/2025 Response: New procedures have been implemented to review the deposits each month to ensure amounts are correct and updated timely.