Finding Text
Finding reference number: #2025-004 Assistance Listing (federal award identification number and year): Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, CFDA No. 14.155 (Project identification number 047-11056, 2007) Auditor non-compliance code: J – Unauthorized management fees Finding resolution status: Cleared Universe population size: The universe population size is not applicable to the finding. Statistically valid sample: Not applicable Name of federal agency: Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $14,487 Was the sampling statistically valid: N/A Statement of condition of #2025-004: Management fees of $14,487 were prepaid at December 31, 2025. Criteria: The HUD-approved management certification (form HUD-9839-B) provides for the payment of management fees equal to 4.39% capped at a residential fee yield per unit per month of $48. Effect or potential effect: The Corporation is not in compliance with the HUD approved management agent certification and Regulatory Agreement. As a result, the Property's cash position at December 31, 2025 is understated by $14,487. Cause: The management agent did not update the adjusted management fee percentage for the rent increase effective August 2, 2025. Recommendation: Management should ensure the management fee percentage is being updated each time a rent increase is received. Management should reimburse the Property $14,487 for the fees prepaid. Reporting response: Management concurs. Following the HUD-approved rent adjustment effective August 2, 2025, the management fee percentage was not recalculated to hold the fee yield at the approved $48 per unit per month, and fees collected during 2025 exceeded fees earned by $14,487. The excess was recorded as a prepaid management fee, and the Agent reimbursed the Corporation $14,487 in full on September 17, 2026. The Agent recalculated the fee percentage effective September 2026, and its procedure now requires the percentage to be recalculated and documented each time HUD approves a rent adjustment, with the resulting yield reviewed against the approved cap at each month-end close.