Finding Text
Department of Housing and Urban Development
Finding No. 2023-001; Federal Assistance Listing Number 14.134, Mortgage Insurance - Rental
Housing.
Statement of Condition
During the years ended July 31, 2019, 2020, 2021, 2022 and 2023, management did not make the
required residual receipts reserve deposit in the amount of $81,489 that was required within 90
days of year ended July 31, 2018, as required by HUD. The residual receipts amount has not been
deposited as of the date of this report.
Criteria
According to 24 CFR 891.400(e), residual receipts reserve deposits should be made within 90 days
of year end.
Questioned Costs
None
Effect or Potential Effect
The Organization is not in compliance with the requirements of the regulatory agreement.
Context
The annual calculation was not prepared by the management agent, and accordingly, the required
deposit was not made. The auditor notes that the deposit requirement was calculated with the
inclusion of a subsidy receivable due from HUD that was not received until after the 90-day period.
However, we also note that at the time the subsidy was received, the delinquent deposit should
have been made and was not made.
Cause
Controls were not in place in 2019 to ensure that required residual receipts reserve deposits are
made timely.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2022-001).
Recommendation
Management should establish internal controls and procedures to ensure that required residual
receipts reserve deposits are made timely. Reporting Views of Responsible Officials
The amount due to the residual receipts has not been deposited. Until the property is in a positive
cash flow position, management is not able to commit to any type of repayment plan and
management is looking for forgiveness of the required deposit from HUD.
Auditor's Noncompliance Code: B - Failure to make required residual receipts deposits
Reporting Views of Responsible Officials
The amount due to the residual receipts has not been deposited. Until the property is in a positive
cash flow position, management is not able to commit to any type of repayment plan and
management is looking for forgiveness of the required deposit from HUD.