Finding 519700 (2024-002)

Criteria In accordance with 24 CFR 891.400(e), a separate interest-bearing project fund account shall be maintained in a depository or depositories which are members of the Federal Deposit Insurance Corporation or National Credit Union Share Insurance Fund and all tenant payments, charges, income and revenues arising from project operation or ownership shall be deposited to this account. Condition The project fund account used by the non-profit Organization was not an interest-bearing account. Cause Subsequent to the initial rental assistance contract, changes to HUD regulations resulted in the requirement that the project fund account be an interest-bearing account. This change was an oversight by the non-profit Organization’s management. Questioned Costs None noted. Context When performing our audit, we noted that the project fund account used by the non-profit Organization was not an interest-bearing account. Effect Project funds would not earn interest in accordance with HUD requirements. Recommendation We recommend that the non-profit Organization utilize an interest-bearing account for project funds in accordance with HUD requirements. Views of Responsible Official and Planned Corrective Action Management concurs with the audit finding. Although the non-profit Organization does not currently use an interest-bearing account for project funds, due to the ongoing operation of the program and continuous activity within the project funds account, any interest earned in such an account would be negligible. Management is in the process of evaluating this recommendation to determine the appropriate course of action.