Finding 519556 (2024-002)

#2024-002 – Significant Deficiency – Management Fee Mortgage Insurance Rental Housing, ALN# 14.134 Criteria The U.S. Department of Housing and Urban Development (HUD) Chapter 3 HUD Multifamily Housing Program states the management agent fees paid should not exceed the amount listed on the management agent certification and should agree to the management agreement. Condition During the course of the audit, it was noted that while the management fee expensed during the year was below the management fee agreement of 6.04%, in total, the management fee expensed was above the PUPM rate of $49.00. PUPM stands for per unit per month, and is the unit of measurement for residential management fees. Cause The cause is due to overcharging monthly management fees from McSherrystown Interfaith Housing Corporation. Effect The effect was the total management fee charged per unit per month exceeded the approved PUPM rate. Questioned Costs None Perspective Information Management increased management fees due to not reaching the agreed upon percentage of 6.04% outlined in the management agreement, however, management did not factor in the capped PUPM rate of $49.00. Identification as a repeat finding There was no similar finding in the prior year. Recommendation We recommend that McSherrystown Interfaith Housing Corporation request a revised PUPM rate from HUD as the management fee expensed has not reached the maximum of 6.04% outlined in the management agreement with the management agent, but is capped below this level due to the original PUPM rate agreed upon. View of responsible officials and planned corrective action We agree that this compliance requirement is listed in the compliance supplement. We will work with HUD to increase the PUPM rate going forward and implement controls to ensure the management fees stay within the agreed upon limits.