Finding Text
Finding 2025-003 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Projects Assistance Listing Numbers: 14.155 Non Compliance: H – Unauthorized distributions of project assets Non Compliance Material to the Financial Statements: No Significant deficiency in Internal Control over Compliance for Allowable Activities Criteria: The Authority must receive HUD approval prior to making distributions to related party except for distributions made with surplus cash. Condition: Based on review of the distributions made by the Authority, there were distributions made that were not authorized by HUD and were greater than the surplus cash balance calculated. Context: During 2025, the Authority made distributions to a related party in the amount of $82,797 without HUD approval. Known Questioned Costs: $82,797* 2024 Surplus Cash = $148,203 (Less) 2025 Distributions = $181,000 (Less) 2025 Advances to partners = $50,000 Total Known Questioned Costs = $82,797. Cause: Controls and actions were not taken to ensure that HUD approval is obtained prior to making distributions to related parties. Effect: The Authority is in non-compliance with specific requirements of a major federal program. Recommendation: Management should establish internal controls and procedures to ensure that HUD approval is obtained prior to making distributions to related parties. Authority response: Management will ensure that HUD approval is obtained prior to making distributions to related parties.