Finding 1180669 (2024-006)

Finding 2024-006 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135 Statement of Condition: During the year ending December 31, 2024, supporting documentation did not reconcile to the deposits for some of the requested deposits. Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 Section 12 states that all cash receipts must deposited in the name of the project, numbered rent receipts shall be used and reconciled to actual collections, an adequate recording system shall be employed to note all checks received and deposited and all collections shall be promptly deposited on the day received. Effect: Noncompliance with Regulatory Agreement. Cause: Prior management oversight Context: A sample of two months of cash receipts totaling $94,317 were tested to determine if the cash receipts were in accordance with HUD Handbook 4370.2. A total of $11,481 of cash receipts tested had supporting documentation that did not reconcile to the actual deposits and therefore deemed noncompliant. By extrapolating our identified error rate on cash receipts tested that were noncompliant (12%) over the total population of cash receipts for the year ending December 31, 2024 of $1,024,846, $124,752 of cash receipts could be noncompliant based on the above error rate. Questioned Costs: N/A Recommendation: We recommend that management ensure supporting documentation is maintained and reconciled for all cash receipts of the project. Views of Responsible Officials and Corrective Action Plan: Management acknowledges the requested disbursements did not have supporting documentation available. The Corporation has executed a new management agreement with Remnant Management Inc. effective October 1, 2024. Remnant Management Inc. will ensure supporting documentation is maintained for all disbursements from project operations beginning October 1, 2024 and going forward.