Finding 396160 (2023-001)

2023-001 – Income Certifications Federal Program – U.S. Department of Housing and Urban Development Assistance Listing Number 14.134 – Insured Mortgage – Rental Housing Noncompliance and Significant Deficiency Category of Finding – Special Tests and Provisions Use of Surplus Cash Criteria – Under HUD’s Mark-to-Market (M2M) program, the HUD Audit Guide states that the incentive performance fee is provided to recognize owner equity and as an incentive for demonstrating operating efficiencies. The owner can collect this payment annually if certain conditions are met. One of the conditions to payment are that required HUD Restructuring Note payments are made by April 10 of each year. Condition – The required payments on the HUD Restructuring Note were not made by April 10, 2023. The Organization still paid an incentive performance fee even though the conditions to payment were not met. Context – The Organization paid an incentive performance fee to CommonBond of $37,387 when it was disallowed. Cause – Turnover and inexperience in the property accounting role caused the Restructuring Note payment to be late. Effect - The Organization was not in compliance with the M2M program. The incentive performance fee is not allowed. Identification of repeat finding - No Recommendation – CommonBond Communities should return the incentive performance fee to the organization. Employees should be reminded of the M2M program requirements and conditions for making incentive performance fee payments. Views of responsible officials and planned corrective actions - The Organization agrees with the finding, and CommonBond Communities has repaid the incentive performance fee to the Organization as of March 22, 2024.