Finding 555567 (2024-004)

Material Weakness
Requirement
A
Questioned Costs
$1
Year
2024
Accepted
2025-04-21
Audit: 354066
Organization: Lincoln Street Housing, Inc. (CA)
Auditor: Snd Partners LLP

AI Summary

  • Core Issue: Management fees paid exceed allowed limits, violating HUD guidelines.
  • Impacted Requirements: Non-compliance with HUD Handbook 4381.5_Rev.2 regarding management and bookkeeping fees.
  • Recommended Follow-Up: Refund overpayments and implement procedures to ensure compliance with HUD fee limits by March 7, 2025.

Finding Text

Finding # 2024-004 Federal Grantor: U.S. Department of Housing and Urban Development AL# / Program: 14.181 - Supportive Housing for Persons with Disabilities Type of Finding: Federal Award Finding - Activates Allowed and Unallowed and Special Tests and Provisions Finding Resolution Status: In Process Information on Universe Population Size: N/A Sample size information: N/A Criteria: HUD Handbook 4381.5_Rev.2 - Chapter 3 identifies allowed management fees and special fees allowed to be paid. Management Agent has a HUD-9839-B that was for a fixed-term ending 8/31/2010. The allowed management percentage fee is 9.30% with a yield of $51.90 PUPM. In addition expenses for bookkeeping attributable to the Agent's company are paid out of the fee. HUD Multifamily West Region maximum fee per unit per month is $13. Statement of Condition / Context: Management fees paid to the management agent exceed the yield of $51.90 PUPM. Management has not obtained a renewed HUD-9839-B to support a yield of greater than $51.90 PUPM. Bookkeeping fee paid to agent exceeded the maximum fee per unit per month of $13. Cause: Internal controls over compliance are insufficient to maintain compliance with HUD Handbook 4.81.5_Rev.2 The design or operation of controls over the calculation and payment of allowed management fees are not sufficient to prevent or detect or correct unallowed payments. Effect or Potential Effect: The Project is not in compliance with the Housing for Persons with Disabilities Section 811 of the Housing Act of 1959 Regulatory Agreement. Auditor Non-Compliance Code: J - Unauthorized Management Fees. Questioned Costs: $17,616 Recommendations: We recommend that Management refund the overpayments and establish procedures to ensure that the management fees and bookkeeping fees do not exceed the maximum PUPM fee allowed by HUD. Response Indicator Agree Completion Date 3/7/2025 Reporting Views of Responsible Officials and Planned Corrective Action: HCEB will submit annual Management Agent Certifications reflecting the approved Property Management Fee annually once the PRAC budget is approved by HUD. For the current fiscal year, HCEB will submit the Management Agent Certification to HUD for approval by March 7, 2025.

Corrective Action Plan

Finding 2024-004 HCEB will submit annual Management Agent Certifications reflecting the approved Property Management Fee annually once the PRAC budget is approved by HUD. For the current fiscal year, HCEB will submit the Managment Agent Certification to HUD for approval by March 7, 2025.

Categories

Questioned Costs HUD Housing Programs Reporting Internal Control / Segregation of Duties Special Tests & Provisions

Other Findings in this Audit

  • 555564 2024-001
    Material Weakness
  • 555565 2024-002
    Material Weakness
  • 555566 2024-003
    Material Weakness
  • 555568 2024-005
    Material Weakness
  • 555569 2024-006
    Material Weakness
  • 555570 2024-007
    Material Weakness
  • 555571 2024-008
    Material Weakness
  • 555572 2024-009
    Material Weakness
  • 555573 2024-010
    Material Weakness
  • 555574 2024-011
    Material Weakness Repeat
  • 1132006 2024-001
    Material Weakness
  • 1132007 2024-002
    Material Weakness
  • 1132008 2024-003
    Material Weakness
  • 1132009 2024-004
    Material Weakness
  • 1132010 2024-005
    Material Weakness
  • 1132011 2024-006
    Material Weakness
  • 1132012 2024-007
    Material Weakness
  • 1132013 2024-008
    Material Weakness
  • 1132014 2024-009
    Material Weakness
  • 1132015 2024-010
    Material Weakness
  • 1132016 2024-011
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
14.218 Community Development Block Grants/entitlement Grants $760,000
14.239 Home Investment Partnerships Program $693,650
14.181 Supportive Housing for Persons with Disabilities $117,960