Finding Text
Criteria The compliance supplement states the following: “Any Surplus Funds in the project funds account (including earned interest) at the end of the fiscal year shall be deposited in a federally insured account within 60 days following the end of the fiscal year.” Surplus funds are required to be calculated and returned to HUD within 60 days of the end of the period. Condition During Special Tests and Provision Residual Receipts, the auditor identified that the Arc did not complete the preliminary audited financial statements that require a calculation of surplus funds as of December 31, 2024 unaudited information. This was the key control identified to ensure that excess funds were remitted, and as it was not completed until after 60 days of year end, the Arc was not able to remit the funds timely, if a return existed. Additionally, the Arc calculated that a return was required for one of their projects however this was related to issues related to the allocation of intercompany payables and receivables, and the Arc did have sufficient current obligations that they were not required to remit funds despite the calculation. Effect The Arc was not in compliance with the Special Tests and Provisions Residual Receipts requirement. Cause Due to lack of internal controls surrounding timely review of project level accounting and reporting, specifically with respect to surplus fund calculations. In addition, no reconciliations of intercompany payables and receivables were completed. Questioned Costs There are no questioned costs related to this finding. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Arc enhance its policies and procedures to ensure responsible program personnel timely completes preliminary assessment of the requirements to calculate surplus funds to ensure no funds are required to be remitted in the 60 day window of year end. Views of Responsible Officials We agree with the finding and have established additional internal controls to ensure future compliance as outlined in our corrective action plan.