Finding Text
Finding 2024-007 - 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 months January through August 2024, the tenant security deposit account for the Corporation was underfunded. The account balance ranged from $18,270 to $17, 874, while total tenant security deposits per the tenant ledger totaled $20,037 to $21,656, resulting in an average monthly underfunded amount $3,278. Criteria: Title 24 CFR § 891.435(b)(1) requires owners of HUD‑insured multifamily housing to maintain tenant security deposits in a segregated account and to ensure that the account balance equals the total amount of tenant security deposits held at all times. In addition, HUD Handbook 4370.2 REV‑1, Financial Operations and Accounting Procedures for Insured Multifamily Projects, Chapter 2, Paragraph 2‑8, requires tenant security deposits to be recorded as a liability and maintained in a segregated bank account equal to the related tenant security deposit balances, separate from operating funds. Effect: Noncompliance with Uniform Guidance and HUD requirements. Cause: Prior management oversight Context: A test was performed to compare the monthly ending balances per the bank statements to recorded security deposit liabilities for the project at each month-end to determine if at the end of the reporting period and throughout the period under review the amount on deposit was at least equal to the outstanding obligations. Questioned Costs: N/A Recommendation: We recommend that management ensures the tenant security deposit bank account equals the tenant deposit liability at all times. Views of Responsible Officials and Corrective Action Plan: Management stated that the underfunding of the tenant security deposit account occurred prior to the transition to the current management company. Upon assuming management responsibilities on October 1, 2024, Remnant Management Inc. reviewed the tenant security deposit records and funded the tenant security deposit account in full at year‑end to ensure that the account balance equaled the total tenant security deposit liability.