Finding Text
Finding 2025-004 - Cash Management and Special Tests and Provisions - Material Weakness Name of Federal Agency: Department of Housing and Urban Development Federal Program Name: Supportive Housing for Persons with Disabilities Assistance Listing Number: 14.181 Federal Award Identification Number and Year: 023-HH-018, 023-EH-343, 023-HD-154, 023-HD-025. Program year is 2025. Name of Pass-through Entity (if applicable): Not applicable Criteria: In accordance with §891.400(e), Use of Project Funds, the owner shall maintain a separate interest bearing project fund account in a depository or depositories which are members of the Federal Deposit Insurance Corporation or National Credit Union Share Insurance Fund and shall deposit all tenant payments, charges, income and revenues arising from project operation or ownership to this account. All project funds are to be deposited in Federally insured accounts. Additionally in accordance with §891.405, Replacement Reserve, the owner shall make monthly deposits to the replacement reserve in an amount determined by HUD. Condition: During our testing, we noticed that the Agency did not have proper internal controls in place to review bank reconciliations timely. Additionally, during our testing, we noticed that the Agency did not deposit tenant payments into their separate interest bearing project fund account from the management agents account in a timely manner. Lastly, during our testing, we noticed that there were 7 months of replacement reserve deposits that were not made timely. Cause: The Agency did not have adequate internal controls to ensure that they complied with federal requirements. Effect or Potential Effect: Failure to deposit tenant payments and replacement reserve deposits into the designated bank account in a timely manner resulted in noncompliance with cash management and special tests and provisions requirements under Uniform Guidance. Questioned Costs: Not applicable. Context: 14 out of 25 of the population had deposits of tenant payments that were not timely. Additionally, 7 out of 12 months had replacement reserve deposits that were not timely. Lastly, 100% of the population did not have appropriate controls over bank reconciliations. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Agency establish proper internal controls around timely deposits and bank reconciliations. Views of Responsible Officials: Management acknowledges that certain internal controls did not operate effectively during the year ended June 30, 2025. Management is in the process of implementing additional controls to ensure a stable control environment that supports compliance with cash management and special tests and provisions requirements.