Finding Text
FINDING 2025-003: Untimely Return of Security Deposits Criteria – HUD requires owners of HUD assisted multifamily projects to refund security deposits no later than 30 days after the tenant vacates the unit, unless a shorter period is required by state or local law (21 days in Minnesota). Owners must also provide an itemized statement of any deductions and retain detailed records for three years. Failure to comply with these requirements constitutes a violation of the regulatory agreement and HUD regulations. Condition – During our review of tenant files of a project wholly-owned by the Corporation (the Project), we noted that the Project did not refund security deposits to one former tenant within the required time-frame after move-out. The refund was issued beyond the 21-day period specified by HUD requirements. Questioned costs and how they were computed – No questioned costs identified. Context – One of four move-outs tested did not receive their security deposit back within the timeframe required by HUD. Cause – The delay in refunding the security deposits was due to inadequate monitoring of moveout dates and insufficient internal controls over the security deposit refund process. Effect – Failure to refund security deposits in a timely manner exposes the Project to noncompliance with HUD regulations, potential client complaints, and possible enforcement action by HUD. Identification of Repeat Finding – No. Recommendation 2025-003 – We recommend that management implement and document procedures to monitor the move-out dates and ensure that security deposits are reviewed, processed, and returned within 21 days. Auditee’s comments and response – Management agrees with the finding and is in the process of implementing procedures to monitor tenant move-outs, document amounts due to former tenants, and issue refund checks in a timely manner. Responsible party for corrective action: Lisa Fischer – Chief Operating Officer