Finding 1208290 (2024-005)

Criteria: Internal controls are required to be in place to ensure proper procedures are being followed and the Project is in compliance with HUD requirements regarding funding of and disbursements from the replacement reserve. Condition: During the testing of the replacement reserve, it was noted the Project did not increase the monthly deposit amount during the fiscal year as instructed by HUD. We consider this finding to be a significant deficiency with the Special Tests and Provisions Compliance Requirement. Effect: The Project is not in compliance with HUD requirements regarding special tests and provisions which could result in inadequate reserves being held for the required replacement reserve. Questioned Costs: $780 Cause: The Project experienced turnover resulting in inconsistent file management practices and ineffective internal review procedures to ensure that all required eligibility documentation is obtained and retained. Recommendation: The Project should consider reevaluating their established procedures and controls currently in place to ensure full compliance regarding eligibility and documentation retained in tenant files. The Project needs to correct the deficiencies noted in the tested files. Views of Responsible Officials: Management agrees with the findings and a response is included in the Corrective Action Plan.