Finding 560359 (2024-002)

- Repeat Finding
Requirement
N
Questioned Costs
-
Year
2024
Accepted
2025-05-14

AI Summary

  • Core Issue: The organization failed to fully repay a $19,337 loan from the reserve for replacements, violating HUD guidelines.
  • Impacted Requirements: Non-compliance with the regulatory agreement due to inadequate controls over loan repayment processes.
  • Recommended Follow-Up: Implement stronger internal controls to ensure timely repayments and monitor compliance with loan agreements.

Finding Text

Finding No. 2024-002; Federal Assistance Listing Number 14.134, Mortgage Insurance - Rental Housing. Criteria According to the HUD Handbook 4350.1, Appendix 2, the terms of the loan from the reserve for replacement required repayment from the proceeds of the Section 8 subsidy. Condition During the years ended July 31, 2019, 2020, 2021, 2022, 2023 and 2024, management did not fully repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an unauthorized distribution. As of July 31, 2024, the amount due to the reserve for replacement has been partially repaid. The remaining amount due as of July 31, 2024 is $9,669. Cause Management did not maintain adequate controls in 2019 over the reserve for replacement requirements established with the loan advance to ensure the timely repayment of the loan upon receipt of the delayed Section 8 subsidy. Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Questioned Costs None Context HUD approved a loan from the reserve for replacement with the stipulation that the loan be repaid when the delinquent Section 8 subsidy was paid by HUD. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2023-002). Recommendation Management should establish internal controls and procedures to ensure that required payments are made timely. Auditor's Noncompliance Code: N - Reserve for replacements deposits Finding Resolution Status: In process Views of Responsible Officials - The updated loan agreement was signed on March 14, 2024 to repay the $9,669 balance of the loan borrowed to the Lender, with a payment of $100 each month until the loan is repaid in full.

Corrective Action Plan

We concur with the auditors finding as follows: During the years ended July 31, 2019, 2020, 2021, 2022, 2023 and 2024, management did not fully repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an unauthorized distribution. As of July 31, 2024, the amount due to the reserve for replacement has been partially repaid. The remaining amount due as of July 31, 2024 is $9,669. b. Action(s) Taken or Planned on the Finding As of July 31, 2024, two installments were made in the amount of $4,834 for a total of $9,668. This has been deposited by the lender Walker & Dunlop to the repairs for reserve escrow account. The balance now owed on the repayment comes to $9,669. The updated loan agreement signed was signed on 3/14/24 to repay the balance of the loan borrowed to the Lender a payment of $100 each month until the loan is repaid in full.

Categories

HUD Housing Programs Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties

Other Findings in this Audit

Programs in Audit

ALN Program Name Expenditures
14.134 Mortgage Insurance_rental Housing $3.48M
14.195 Section 8 Housing Assistance Payments Program $826,573
14.870 Resident Opportunity and Supportive Services - Service Coordinators $42,351