Finding Text
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Section 202 Capital Advances, Section 202 - Project Rental Assistance and Section 202 Demonstration Pre-Development Planning Grant.
Assistance Listing Number: 14.157
Federal Award Identification Number and Year: N/A, 2023
Award Period: 01/01/2023-12/31/2023
Type of Finding:
Significant Deficiency in Internal Control over Compliance
Criteria or specific requirement: Management of the Project is responsible for complying with laws and regulations. This responsibility includes compliance with HUD regulations requiring the Project to obtain approval for replacement reserve withdrawals and to make all required deposits timely.
Condition: The Project is required by its regulatory agreement with HUD to make monthly deposits into the reserve for replacement account. The reserve was underfunded by one monthly deposit for the year ended December 31, 2023.
Cause: The Project did not review the replacement reserve transactions timely to ensure the transactions were in accordance with HUD regulations.
Effect: The Project underfunded the required replacement reserve deposits for the year ended December 31, 2023, by $3,658, which was not in accordance with the regulatory agreement approved by HUD.
Repeat Finding: N/A
Recommendation: We recommend that management take the necessary steps to ensure that future deposits are made in accordance with HUD regulations. Payments should be made monthly into the replacement reserve.
Views of responsible officials: There is no disagreement with the audit finding. Management is aware of the underfunding and will make the required deposit after year-end.