Finding Text
Criteria
The Project funds may be used only for expenses that are reasonable and necessary to the
operation of the project as provided for in the Regulatory Agreement between HUD and the
project owner. Furthermore, internal controls over compliance should be in place and
operating effectively in order to deter federal funds being expended on activities that are not
allowed.
Condition
During our audit of the Supporting Housing for the Elderly (Section 202) program we noted
that the management fees charged exceeded the HUD approved allowable management fee of
6.38% of residential income collected.
Cause of Condition
The Project didn’t have adequate controls in place over management fee, which resulted in
noncompliance with allowable cost requirements.
Effect
Due to the weakness in internal controls and compliance finding noted above, there is a risk
federal funds being expended on activities that are not allowed.
Questioned Costs: None
Identification as a Repeat Finding, if applicable – No
Recommendation
We recommend that the management review their current policies and procedures and
establish adequate internal controls related to allowable expenses.
Management’s Response
Management’s corrective action plan is included at the end of this report after the Schedule
of Prior Year Findings.