Finding 1148078 (2022-001)

Criteria: The Regulatory Agreement between the Entity and HUD requires the Entity to establish and maintain a residual receipts account. The agreement requires the owners to deposit surplus cash (residual receipts) into this account within 90 days after the end of the annual fiscal period within which is was generated. Condition: At December 31, 2015 the Entity was short on the required residual receipts deposit in the amount of $26,538. The Entity’s surplus cash at December 31, 2016 totaled $38,063. The total required deposits required to be made in the residual receipts was $64,601. The Entity deposited $31,999 on May 21, 2017. This left a shortage of required deposits totaling $32,602 at December 31, 2017. The Entity deposited $38,063 on January 26, 2018. Surplus cash at December 31, 2017 totaled $45,969. This left a shortage of required deposits totaling $40,508 on December 31, 2018. Surplus cash at December 31, 2018 totaled $32,699 and the Entity deposited $32,602. This left a shortage of required deposits totaling $40,605 on December 31, 2019. Surplus cash at December 31, 2019 totaled $19,660 and the Entity deposited $7,906. This left a shortage of required deposits totaling $52,359. Cause: This was an oversight by the management agent. Effect: The Entity is in direct violation of the HUD Regulatory Agreement. Recommendation: The management agent should compute an estimate of surplus cash (residual receipts) for the fiscal year upon completion of that period. In the event that surplus cash exists at the completion of the fiscal period, the management agent must further ensure that all required deposits are made to the residual receipts account within the required time frame and that the balance in that account meets the minimum required balance in accordance with the regulatory agreement between the Entity and HUD. Response: The management agent agrees with the finding and the auditors’ recommendations have been adopted. Surplus cash will be calculated upon the completion of an annual fiscal period. If it is concluded that surplus cash exists at the end of the annual fiscal period, and further determined that the surplus cash was received within that fiscal period, that amount of surplus cash will be deposited into the Residual Receipts Account within ninety days of the close of that fiscal period. Other Information: This has been a repeat finding since the December 31, 2012 audit. Prior year finding number was #2021-001.