Finding Text
Finding 2025-003: Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Federal Assistance Listing Number 14.155 Criteria: Non Federal entities must establish and maintain effective internal control over Federal programs to provide reasonable assurance of compliance with statutes, regulations, and the terms and conditions of Federal awards. This includes: • Inspections (Repeat Finding): HUD assisted units must undergo regular annual inspections to ensure decent, safe, and sanitary conditions. • Documentation: Tenant files must contain executed (signed and dated) HUD 50059s and supporting documentation to substantiate eligibility and the amounts vouchered. Condition: During our testing of 3 tenant files for compliance with HUD requirements, we noted the following exceptions: • Missed annual unit inspections: Required annual unit inspections were not performed for any units during the audit period. • Missing HUD-50059 form: For one selection, the signed form HUD-50059 file could not be located. Cause: These conditions occurred because of insufficient oversight of the apartment manager, who lacked adequate knowledge of HUD program requirements and internal review procedures were not in place to ensure that files were completed accurately and timely. As a result, key compliance activities were not monitored, reviewed, or corrected as needed. Effect: These conditions resulted in noncompliance with HUD program requirements, increasing the risk that tenants were not properly certified, that assistance payments were inaccurate or unsupported, and that HUD funds were not administered in accordance with applicable regulations and program guidance. The lack of complete, timely, and accurate compliance activities also elevates the risk of repayment obligations, enforcement actions, and reduced assurance over the integrity of program operations. Questioned costs: We had the following questioned costs: • Missed annual unit inspections: None. Relates to inspections and does not impact amounts vouchered. • Missing signed form HUD-50059 file: $4,000 (estimated). Form could not be located to support vouchering for the year. Context: We reviewed 3 tenant files during our audit. Unit inspections were not performed for any units during the fiscal year. For one selection, the form HUD-50059 could not be located. Recommendation: We recommend that Rogers Senior Apartments strengthen its overall internal controls surrounding HUD program compliance, including improvements to supervisory oversight, tenant file documentation practices, and monitoring procedures to ensure that required certifications, inspections, and voucher submissions are completed accurately, timely, and in accordance with HUD regulations. Views of management and planned corrective action: Management agrees with the finding. Rogers Senior Apartments has taken corrective action by replacing the apartment manager and hiring a new regional property manager with significant HUD program experience. The new regional property manager is now providing enhanced oversight, including regular review of tenant files, recertification documentation, and HUD voucher submissions to ensure that all required activities are completed timely, accurately, and in accordance with HUD regulations. Management will continue to monitor compliance and strengthen internal processes to prevent recurrence of these issues.