Finding 396163 (2023-001)

2023-001 – Distributions of Surplus Cash 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 – Distributions from operating cash may only be paid from surplus cash, determined as of and after the semiannual fiscal period (June 30 and December 31). Condition – A distribution of $232,092 was paid to CommonBond Communities in 2023. The Company only had surplus cash of $129,602 as of December 31, 2022 and did not have any surplus cash at June 30, 2023 for distributions. Context – The Company made a distribution to CommonBond Communities in excess of surplus cash in 2023. Cause – Procedures in place to ensure that payment amounts are limited to the available surplus cash were not followed. Effect – Distributions exceeded surplus cash by $102,490. Identification of repeat finding - No Recommendation – The responsible employee should be reminded of the procedures in place to ensure there is sufficient surplus cash to make distributions. CommonBond Communities should return the excess distributions to the Company as soon as possible. Views of responsible officials and planned corrective actions - Management agrees with the finding. The responsible employee will receive additional training, and CommonBond will return the excess distributions in 2024.