Finding Text
Finding 2025-002: Failure to Maintain a Required Interest-Bearing Project Fund Account Federal Agency: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.181 Federal Program: Supportive Housing for Persons with Disabilities Type of Finding: Significant Deficiency in Internal Control Over Compliance; Noncompliance Compliance Requirement: Special Tests and Provisions Criteria: Pursuant to 24 CFR § 891.400(e), the Organization is required to maintain a separate interest-bearing deposit account and deposit all tenant payments, charges, income, and revenues arising from project operation or ownership. The interest-bearing project fund account should be in a federally insured depository that is a member of the Federal Deposit Insurance Corporation or National Credit Union Share Insurance Fund. Condition: During testing of cash accounts, we reviewed the project operating account and noted the account was maintained as a non-interest-bearing account rather than a separate interest-bearing project fund account as required. Cause: Management did not establish and maintain effective controls to ensure project funds were deposited and maintained in an account structure that complied with HUD requirements applicable to the Section 811 program. Effect: As a result, the Organization was not in compliance with HUD requirements governing project funds. In addition, the lack of appropriate controls over the establishment and monitoring of required project bank accounts increases the risk that project funds may not be administered in accordance with applicable HUD regulations, including the treatment of interest earnings and year-end residual amounts. Questioned Costs: None noted. Recommendation: We recommend that management establish and maintain a separate interest-bearing, federally insured project fund account in compliance with 24 CFR § 891.400(e) and implement review controls to verify that account terms remain compliant with HUD requirements.