Finding Text
S3800-010 Finding Reference Number: 2025-003 S3800-011 Title and CFDA Number of Federal Program: Project-Based Rental Assistance (PBRA) 14.195, Mortgage Insurance Rental Housing 14.134 S3800-015 Type of Finding: Federal Award Finding S3800-016 Finding Resolution Status Unresolved S3800-017 Information on Universe Population Size: N/A S3800-018 Sample Size Information: N/A S3800-019 Identification of Repeat Finding and Finding Reference Number: N/A S3800-020 Criteria: Per HUD guidance, management must implement approved increases of the required monthly deposits of replacement reserves on the effective date approved by HUD or the Contract Administrator. S3800-030 Statement of Condition: The Project received correspondence approving an increase in the required monthly deposit for replacement reserves effective September 1, 2024 and then September 1, 2025. The Project failed to implement the deposit increase approved by the Contract Administrator on the effective approval dates. As of December 31, 2025, the Project was in arrears by $12,452. S3800-032 Cause: Oversite was due to staff changes. S3800-033 Effect or Potential Effect: The failure to implement the increase may result in an understatement of the reserve for replacement deposits and restricted funds. This non-compliance may result in administrative actions by HUD, including potential sanctions, future funding or renewal of contracts. S3800-035 Auditor Non-Compliance Code: N – Reserve for replacement deposits S3800-037 FHA/Contract Number: 085-11073 S3800-040 Questioned Costs: $-- S3800-045 Reporting Views of Responsible Officials: The Project's Accounts Payable has been paying what was stated on the mortgage statement, which includes the required replacement reserve deposits. The lender was not notified of the increase, so the deposit amount was not increased. Management will need to make sure to look out for the notifications from HUD and notify the lender if the deposits change, in case the lender doesn’t get the HUD notification. S3800-050 Context: For the years ended December 31, 2025 and December 31, 2024, the Project did not implement the approved increase to the required monthly replacement reserve deposits as of the designated effective date. S3800-080 Recommendation: The auditor recommend that the Project implement enhanced internal controls and procedures to ensure HUD approved rate changes of the required monthly deposits of replacement reserves are timely identified and implemented.