Finding Text
Department of Housing and Urban Development Finding 2025-003 Section 223(f) Mortgage Insurance Program AL 14.155 Criteria Residual receipts reserve deposits should be made within 90 days of year end and in the full amount required by HUD. Statement of Condition During the year ended September 30, 2025, management did not make the full required residual receipts reserve deposit in the amount of $268,771 within 90 days of year end, as required by HUD. The deposit made was based on draft financial statements, resulting in a shortage of $21,305. Management plans to deposit the shortage during the year ended September 30, 2026. Cause Controls were not in place to ensure that the final audited amount was used for the residual receipts reserve deposit. Effect or Potential Effect The Company is not in compliance with the requirements of the regulatory agreement. Questioned costs: $21,305 Context: Management deposited the full amount based on draft financial statements within a timely manner, however, the final financial statements included an increase in the required deposit amount which was not noted by management. Identification as a repeat finding: Yes. See 2024-003 Recommendation Management should establish internal controls and procedures to ensure that residual receipts reserve deposits are made both timely and in the correct amount based on final audited financial statements. Auditor’s Noncompliance Code: B – Failure to make required residual receipts deposits Finding Resolution Status: In process Views of Responsible Officials Management agrees with the finding and will deposit the shortage of $21,305 during fiscal year end September 30, 2026.