Finding 394813 (2023-001)

Section III - Federal Award Findings and Questioned Costs Finding 2023-001: Significant Deficiency in Internal Control Federal Program: Section 811 Capital Advance and Project Rental Assistance Contract Assistance Listing Number: 14.181 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Agency: N/A Award Number: 033-HH015 Award Year: 2023 Compliance Requirement: Special Tests and Provisions Questioned Costs: Not Determinable Criteria: The regulatory agreement that the Corporation maintains with HUD requires monthly deposits to the reserve for replacement account in an amount agreed to with HUD. This amount periodically increases and is documented on a HUD Form 9250. Condition and Context: The Corporation received a Form 9250 in 2022 requiring an increase to the reserve for replacement deposit effective 9/1/22. The increase was not put in place until February 2023, which resulted in five months of a deficient deposit, totaling $4,750. Cause: The Corporation lacks a review process for these deposits to ensure all increases are implemented in a timely manner. Effect or Potential Effect: As a result of the review process, noncompliance due to error or fraud could occur without being detected and corrected, timely. Recommendation: Management should implement a review process for these increases to ensure they are implemented in a timely manner. Management's Response: The Corporation will implement a standard review process over these increases to prevent and detect errors on a timely basis.