Finding Text
Finding No. 2025-003 - Material Weakness - Mortgage/Reserves: Delinquent deposits to the residual receipts reserve Name of Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Project-Based Rental Assistance Assistance Listing Number: 14.195 Criteria Residual receipts reserve deposits should be made within 90 days of year end. Additionally, residual account balances in excess of the retained balance must be applied on a monthly basis to offset Section 8 HAP payments. Condition During the year ended June 30, 2025, management did not make the required residual receipts reserve deposit in the amount of $117,570, within 90 days of year end as required by HUD. The residual receipts amount was deposited in June 2025. Additionally, residual receipt offsets for balances in excess of the retained balance are not being offset on a monthly basis. Cause Controls are not in place to ensure that required residual receipts reserve deposits are made timely and residual receipt offsets are requested on a monthly basis. Effect or Potential Effect The Corporation is not in compliance with the requirements of the Regulatory Agreement. Questioned Costs Not applicable. Context N/A Identification as a Repeat Finding This is not a repeat finding from 2024. Recommendation Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely and residual receipt offsets are requested on a monthly basis. Views of Responsible Officials Management acknowledges that certain internal controls did not operate effectively during year ended June 30, 2025. This is attributed to an unusually high level of staff turnover within the finance team during the year which delayed financial reporting. We have since supplemented our team with new senior leadership and experienced resources to ensure the residual receipts required deposits are timely made within 90 days of year end.