Finding Text
Criteria:
Per The Management Agent Handbook 4381.5, REV-2, CHG-2, Section 1: Management Fees and Review Requirements,” Fee derived from project income (residentials commercial, and miscellaneous) must be quoted and calculated as a percentage of the amount of income collected by the agent. Multiplying the fee percentage by the Income collected gives the actual amount of fee paid to the agent. This requirement serves two purposes:
1) It gives the agent an incentive to maximize collections.
2) It automatically increases the agent’s potential fee yield as project rents increase. These increases help offset increases in the agent’s cost due to inflation.
Condition: Management Agent fees are paid basis on the CAP Yield-$42,048.00 as opposed to 4% of residential income collected of ($810,525.34 total yearly collection X 4%) $32,421.01. The 4% of resident income collected fee is noted in the Project Owner’s Certification of Owner-Managed Multifamily Housing Projects dated May 25, 2016. The Yield CAP is established so the Management Fee basis on collections does not exceed the Yield CAP. The Management Agents do not attach to a monthly payment of the Management Fee a Schedule of Resident Income Collected to compute to the Management Fee to support the payment of the Management Fee. There is a question cost of $9,626.09.
Cause: The Project did not follow the HUD directive regarding the calculated Management Fee as a percentage of the amount of income collected by the agent.
Effect: Management Agent is overpaid by $9,626.99.
Recommendation: We recommend that the Management Agent reimburse the Project the Management Fee Overpayment of $9,626.09.
Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.