Finding 1214699 (2025-001)

Finding 2025-001 -Considered to be immaterial noncompliance Condition: Based on the prior year surplus cash computation, the Project was required to deposit $10,582 to the residual receipts account. As of December 31, 2025, this required deposit had not been made to the residual receipts account. Criteria: Per the Regulatory Agreement and HUD requirements, surplus cash remaining after allowable distributions must be deposited into the residual receipts account. Residual receipts deposits are required to be made in the amount determined by the surplus cash calculation and must be maintained in the residual receipts account for project purposes in accordance with HUD regulations. Effect: Failure to deposit the required amount into the residual receipts account resulted in noncompliance with HUD requirements related to the proper handling and restriction of project funds. Cause: The required residual receipts deposit was not made because management did not properly identify the amount due from the prior year surplus cash calculation and did not complete the required transfer to the residual receipts account. Questioned Costs: $10,582, representing the required residual receipts deposit that had not been made as of December 31, 2025. Recommendation: We recommend that management implement procedures to review the surplus cash computation each year and ensure that all required residual receipts deposits are made timely in accordance with HUD requirements. Management Comments: We agree with the facts and circumstances described above. Subsequent to year end, the Project deposited the required amount of $10,582 to the residual receipts account, and the account is now in compliance with HUD requirements. Management has implemented procedures to review the surplus cash computation annually and ensure that all required residual receipts deposits are made on a timely basis going forward. Auditor Noncompliance Code: B – Failure to make required residual receipts deposits