Finding Text
Federal Agency: Department of Housing and Urban Development Federal Program Name: Supportive Housing for Persons with Disabilities Assistance Listing Number: 14.181 Award Period: April 1995 – April 2035 Type of Finding: • Material Weakness in Internal Control over Compliance and Other Matters Criteria or specific requirement: HUD regulations and the Project’s Regulatory Agreement require that, for nonprofit HUD‑assisted projects, all surplus cash at year‑end be either used to pay down debts subject to surplus cash or deposited into the residual receipts reserve within the timeframe specified in the Regulatory Agreement. Condition: During the audit year, the Project did not make a specific payments on debts subject to surplus cash limitations, nor were any deposits made to the residual receipts reserve in the amount of prior year’s surplus cash amount of $46,906. Payments were made on amounts due to related party subject to surplus cash throughout the year for expenses related to operations, but there was no specific identifiable payment related to 2024 surplus cash. Questioned costs: N/A Context: The absence of debt payments subject to surplus cash and the lack of residual receipts deposit occurred during the year under audit and relate to the Project’s year‑end cash position and compliance with HUD financial requirements. Cause: Management did not have sufficiently detailed policies and procedures to ensure that surplus cash was either used to pay down debts subject to surplus cash or deposited into residual receipts reserve within the time frame set by the regulatory agreement. Effect: Failure to make the required deposit increases the risk that HUD‑restricted funds could be improperly retained or used, and that loan repayment provisions tied to surplus cash may not be properly enforced. Repeat Finding: No Recommendation: We recommend that management establish and implement formal written policies and procedures to ensure surplus cash is either used to pay down debts subject to surplus cash or deposited in the residual receipts reserve in a timely manner in accordance with HUD requirements and the project’s Regulatory Agreement. Views of responsible officials: There is no disagreement with the audit findings. Management Response: We have strengthened our internal controls by implementing a documented audit trail and a formal monthly reconciliation process for all intercompany activity between Home Share and Accord. Each month, the Contract Accountant prepares and submits to the Vice President of Finance a summary of the year to date activity along with the full outstanding intercompany balance, including prior year amounts. The Vice President of Finance reviews this reconciliation against the Home Share account balances to determine the amount that can be transferred to reduce the intercompany liability in accordance with HUD surplus cash requirements. Once the transfer is approved and completed, the Contract Accountant receives confirmation along with a copy of the ACH transaction to document the transaction. This process is performed and documented as part of each month end close to ensure timely, accurate, and compliant surplus cash transfers.