Finding Text
Federal Agency: U.S. Department of Housing and Urban Development Federal Programs: Supportive Housing for Persons with Disabilities Federal Assistance Listing Number: 14.181 Federal Award Year: 2025 Criteria or Specific Requirement – Special test – residual receipts – (24 CFR 891.400(e)) Management is responsible for establishing and maintaining effective internal control over financial reporting and compliance with special tests and provisions of its federal awards. Under HUD requirements, when a Project Rental Assistance Contract (PRAC) is renewed, residual receipts in excess of $250 per unit must be remitted to HUD. Condition – The Project did not remit residual receipts in excess of $250 per unit to HUD upon renewal of its PRAC on January 1, 2025, as required by HUD guidance. Management had not recorded a liability for the recapture and was not aware of the requirements. Cause – Internal controls over monitoring, reviewing and implementing guidance issued by HUD or other applicable oversight agencies were not effective. As a result, relevant regulatory updates were not communicated to appropriate personnel responsible for compliance. Effect or Potential Effect – The Project did not remit the required residual receipts to HUD, resulting in understated liabilities of $6,880 at June 30, 2025. Failure to remit required amounts also places the Project at risk of noncompliance with federal program requirements. Questioned Costs – None Context – The Project’s management was not aware of the requirement to remit excess residual receipts. Based on discussions with Management, HUD did not notify the Project during the PRAC renewal process that excess residual receipts had not been remitted. Identification as a Repeat Finding – No Recommendation – We recommend that the Project contact its HUD representative promptly for instructions regarding the required remittance. We further recommend that management implement internal controls to ensure ongoing monitoring of HUD communications, including updates to program requirements, and to ensure that such information is disseminated to the appropriate individuals responsible for compliance. Views of Responsible Officials and Planned Corrective Actions – Management has contacted Willaim Stokes at HUD and has been advised to use the funds on an upcoming remodel. The money will be spent by June 30, 2026. Moving forward the Residual Account will be monitored to ensure prompt repayment of funds. Management concurs with findings and plans to implement recommendations above.