Finding 401295 (2023-001)

FINDING No. 2023-001: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status:Unresolved. Information on Universe Population Size: All insurance and tax escrow deposits. Sample Size Information: All insurance and tax escrow deposits. Identification of Repeat Finding and Finding Reference Number: No. Criteria: Per HUD guidelines, the Project may not excessively fund its escrow accounts. Statement of Condition: The Project lost property tax exemption in the prior period. As such, the Project’s lender required the monthly funding of a tax escrow account to satisfy future property tax obligations, however, the Project’s tax exemption was reinstated shortly after funding commenced. The account continues to be funded even though the Project remains tax exempt which resulted in excess funding of the insurance and tax escrow accounts totaling $81,849. Cause: The Project maintained excessive deposits in the insurance and tax escrow accounts totaling $81,849. Effect or Potential Effect: The Project is unable to utilize excess funding to satisfy current operating obligations. Auditor Non-Compliance Code: S – Internal Control Deficiencies. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should make the appropriate transfers out of the insurance escrow account to remedy the overfunding and perform regular analysis to ensure that funding is adequate but not excessive. Response Indicator: Agree. Completion Date: 12/31/2024 Response: New procedures have been implemented to ensure appropriate amounts are reserved in escrow.