Finding Text
2023-002 – Special Tests and Provisions - Noncompliance
Information on Federal Program:
U.S. Department of Housing and Urban Development, Award Listing Numbers 14.181.
Criteria:
24 CFR section 891.435(a) requires “At the time of the initial execution of the lease, the Owner (or Borrower, as applicable) will require each household (or family, as applicable) occupying an assisted unit or residential space in a group home to pay a security deposit in an amount equal to one month’s tenant rent or $50, whichever is greater. The household (or family) is expected to pay the security deposit from its own resources or other available public or private resources. The Owner (or Borrower) may collect the security deposit on an installment basis.”
Conditions:
During our review of the chart of accounts for MRCS V, we noted that a separate tenant security deposit account did not exist. Per discussion with management, tenant security deposits were never remitted by tenants to MRCS V.
Questioned Costs:
None identified.
Cause:
Security deposits were not requested from tenants by management.
Effect:
A tenant security deposit account has not been established.
Context:
At inception, MRCS V submitted for approval to HUD a request to waive the tenant security deposit requirement. Due to the length of time which has passed, MRCS V has been unable to locate within its records any approval or denial from HUD. As a result, MRCS V has not requested for tenants to remit a security deposit upon being admitted as a tenant.
Recommendation:
We recommend management implements a process to obtain tenant security deposits from all current tenants and to ensure proper procedures are in place to collect tenant security deposits from all new tenants at the time of initial lease and to refund deposits to tenants upon vacating their unit.
Views of Responsible Official and Planned Corrective Action:
MRCS V agrees with the finding identified. MRCS V’s response to the finding is described in the accompanying management’s corrective action plan.