Finding Text
Federal agency: U.S. Department of Housing and Urban Development
Federal program title: Section 223(f) HUD Insured Mortgage Note
Listing Number: 14.155
Pass-Through Agency: N/A
Pass-Through Number(s): N/A
Award Period: N/A
FAIN number and year: 708752 / 800235016 - 2020
Type of Finding: Material Weakness in Internal Control over Compliance
Criteria or specific requirement: The Project cannot, without the prior written consent of HUD, distribute any funds except for reasonable operating expenses and necessary repairs that are repaid within 30 days.
Condition: Management distributed more than the amount available for distribution and therefore unauthorized distributions were paid out.
Questioned costs: None
Context: The project is allowed to take mid year and annual distributions as long as there is sufficient surplus cash.
Cause: The surplus cash calculation did not properly calculate surplus cash resulting in an overdistribution of the funds.
Effect: Unauthorized 12/31/23 and 6/30/24 distributions resulting in an overdistribution of $124,109 and $477,792, respectively. No funds need to be paid back as there was surplus cash available at 12/31/24.
Repeat Finding: N/A
Recommendation: We recommend management ensure they are properly calculating surplus cash and distributing in accordance with the calculation.
Views of the responsible official and planned corrective actions: No disagreements with the finding.