Finding Text
Findings reference number: 2026-001 - Title and AL Number of Federal Program: Section 223(f) Mortgage Insurance for Purchase or Refinancing of Existing Multifamily Housing Projects (AL 14.155) - Type of finding: Federal Award. - Resolution Status: In process - Population size: N/A - Sample size: N/A - Repeat finding: No. - Criteria: Controls should be in place so that the balance in the bank account maintained for tenant security deposits is sufficient to cover the liability for tenant security deposits payable. - Statement of Condition: During our testing of tenant security deposits, it was discovered that the balance in the bank account maintained for tenant security deposits was insufficient to cover the liability for tenant security deposits payable. - Cause: This happened because of a temporary transfer of funds from the tenant security deposit account to the operating account to cover payroll. - Effect: The Project is not in compliance with the requirements of the Regulatory Agreement. - Noncompliance code: M - Questioned costs: None. - Reporting views of officials: Management agrees with the finding and has transferred funds from the operating account to the tenant security deposit account to ensure the balance is enough to cover the liability for tenant security deposits payable. - Contract number: 114-11440. - Context: The balance in the tenant security deposit account as of May 31, 2026, was lower than the liability for tenant security deposits payable. - Recommendation: Management should regularly monitor the balance in the tenant security deposit account and make sure it is sufficient to cover the liability for tenant security deposits payable. - Auditors' summary of auditee's comments: They are in agreement, but have pointed out that the funds in the operating account were depleted due to payments to a vendor for urgent water damage remediation after the apartment fire at the property. Management will make sure to keep sufficient funds in the tenant security deposit account to cover the liability for tenant security deposits payable in the future. - Completion date: 5/31/2027. - Response: Per Management, there was a temporary depletion of funds in the operating account, since they paid the amount of their insurance deductible to a vendor for urgent water damage remediation after an apartment fire on the property. This resulted in the operating account not having sufficient funds to cover the next payroll. Hence a temporary transfer of funds was made from the tenant security deposits account. Management is aware that the Regulatory Agreement stipulates maintaining sufficient funds in a separate tenant security deposit account to cover the liability for tenant security deposits payable and have since replenished the balance in the tenant security deposit account.