Finding Text
Unauthorized Change in Management Agent and Unauthorized Distribution Federal Agency Program Title Assistance Listing Number Award Number Award Period All awards reported on the schedule of expenditures of federal awards Identification as a Repeat Finding: Elements of this finding are a repeat of Finding 2023-003 Finding: The Organization’s management agent in 2024 is not approved by HUD. Management fees paid to unauthorized management agents are considered unauthorized distributions of project funds. Criteria: HUD requires that a management agent assumes management responsibility only after HUD approval. Condition and context: During 2023, the Organization hired and transitioned the operational management to a management agent which is not approved by HUD. Subsequent to year end, the Organization has changed to a new property management company during 2025 which is approved by HUD. Cause: During 2023, the Organization hired and transitioned the operational management to a management agent which is not approved by HUD. The management agent charged the Organization $132,087 for management fees for the year ended December 31, 2024 of which $57,800 was unpaid and outstanding as of December 31, 2024. Sample size and population: Sampling was not applicable to this finding. Effect: Noncompliance with the HUD requirements could reduce access to future funding from Federal sources. Recommendation: The Organization should immediately consider the need to change management agents to one that is HUD approved. Subsequent to year end, we have been informed that the Organization has changed to a new HUD approved property management company during 2025 which should resolve this matter in future years. Question Costs: $132,087 of management fees charged during the year ended December 31, 2024 Views of Management and Corrective Action Plan: Management’s response is reported in the “Corrective Action Plan” Contact Person: Jerry Groesz