FAC Explorer

Finding 512385 (2023-004)

Material Weakness Repeat Finding
Requirement
N
Questioned Costs
$1
Year
2023
Accepted
2024-11-27
Audit: 330118
Organization: Benet Place South (MN)
Auditor: Cliftonlarsonallen LLP

AI Summary

  • Core Issue: The project failed to make the correct monthly deposits into the Replacement Reserve account, resulting in an underfunded balance of $61,461.
  • Impacted Requirements: Compliance with HUD-9250 for monthly deposits was not met due to a rent increase that was not reflected in the deposits.
  • Recommended Follow-Up: Management should establish a reliable process to ensure timely and accurate monthly deposits into the Replacement Reserve as per HUD guidelines.

Finding Text

Federal Agency: U.S. Department of Housing and Urban Federal Program Title: Section 202 Capital Advance Federal Assistance Listing Number: 14.157 Federal Award Identification Number and Year: MN46S971002 - 1997 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Period: July 1, 2023 through December 31, 2023 Type of Finding: Material Weakness in Internal Control over Major Federal Programs N - Replacement Reserve Deposits Criteria or Specific Requirement: Management is responsible for maintaining required monthly deposits into the Replacement Reserve account in accordance with form HUD-9250. Condition: The project did not make the correct monthly deposit that was required in order to be in compliance with HUD for the year under audit. Questioned Costs: $ 61,461 Cause: There was a significant increase to the required monthly deposits to the replacement reserve when the rent increased in July 2023. The monthly deposits were not increased as required. Effect: The Replacement Reserve escrow balance was underfunded by $61,461 at December 31, 2023. Repeat Finding: Yes Recommendation: Management should implement a process to ensure the required monthly deposit into the Replacement Reserve is in accordance with form HUD-9250. Views of Management: There is no disagreement with the audit finding. The Project made a deposit to correct the deficiency in the replacement reserve as follows: $11,321 on 1/1/24; $40,740 on 1/16/24; $10,000 on 2/11/24.

Corrective Action Plan

HUD Capital Advance Recommendation: Management should implement a process to ensure the required monthly deposit into the Replacement Reserve is in accordance with form HUD-9250. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: The Project made a deposit to correct the deficiency in the replacement reserve as follows: $11,321 on 1/1/24; $40,740 on 1/16/24; $10,000 on 2/11/24. Management was aware of the requirements but due to the delays in getting the budget approved and fully executed contract renewals received from HUD not happening until 9/22/2023 and the HAP payment for gross rent changes not being received until 11/6/2023, the Project was not able to make the requirement replacement reserve deposits until, $11,321 on 1/1/24; $40,740 on 1/16/24; $10,000 on 2/11/24. Now that monthly HAP is received and cash is available to make the replacement reserve payments, no further issues are anticipated. Names of the contact persons responsible for corrective action: Chuck Armstrong Planned completion date for corrective action plan: December 31, 2024

Categories

Questioned Costs HUD Housing Programs Material Weakness Internal Control / Segregation of Duties

Other Findings in this Audit

  • 1088827 2023-004
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
14.157 Supportive Housing for the Elderly $2.80M
14.182 Section 8 Housing Assistance Payments $178,518