Finding Text
U.S. Department of Housing and Urban Development – CFDA #14.155
Mortgage Insurance for the Purchase or Refinance of Existing Multifamily Housing Projects
Applicable Federal Award Number and Year – HUD loan under Section 207/223(f), HUD Project
No. 101-11316
Allowable Costs/Allowable Activities
Significant Deficiency in Internal Control over Compliance and Immaterial Instance of
Noncompliance
Criteria: As required by the HUD regulatory agreement, expenses charged to the project
operations, whether for management agent services or other expenses, must be reasonable,
typical, necessary and show a clear benefit to the tenants of the property.
Condition: During our testing of cash disbursements, we identified unallowable expenditures
charged to the project for staff treats and staff bonus pay.
Cause: The Authority’s internal controls related to reviewing charges allocated to the project
were not operating as designed and was an oversight by staff.
Effect: The project was charged for and paid unallowable expenses.
Questioned Costs: $344
Context/Sampling: A non-statistical sample of 60 disbursements were selected for testing, which
accounted for $103,023 out of the total $2,889,933 disbursement population.
Repeat Finding from Prior Year: No.
Recommendation: We recommend that the Authority establish controls to ensure that all costs
charged to the project are for allowable costs.
View of Responsible Officials: Management agrees with the finding.