Finding 571805 (2025-002)

-
Requirement
N
Questioned Costs
-
Year
2025
Accepted
2025-07-23
Audit: 362823
Organization: Dima Ix, Inc. (DE)

AI Summary

  • Core Issue: The Project failed to make three out of twelve required monthly deposits to the replacement reserve, resulting in a shortfall of $663.
  • Impacted Requirements: This noncompliance with HUD regulations highlights a lack of effective internal controls for monitoring compliance.
  • Recommended Follow-Up: Implement a monthly compliance checklist, assign responsibility for monitoring, and conduct regular supervisory reviews to ensure timely deposits and adherence to HUD requirements.

Finding Text

Criteria: The Project is required to make monthly deposits to the replacement reserve in the amount specified by HUD. These deposits must be made timely and consistently to ensure funds are available for future capital needs and to remain in compliance with the Project’s regulatory agreement and other applicable HUD program requirements. Condition: During the year, only nine of the twelve required monthly deposits to the replacement reserve were made. As a result, the reserve was underfunded in the amount of $663. Effect: Failure to make the required deposits constitutes noncompliance with HUD requirements. Additionally, in the absence of effective internal controls to monitor and confirm compliance on an ongoing basis, similar issues may go undetected in the future. Cause: The missed deposits appear to have resulted from a lack of monitoring and formal oversight, consistent with the internal control deficiency described in Finding 2025-001. Recommendations: We recommend that management implement a monthly compliance checklist to monitor HUD requirements, including replacement reserve deposits. Responsibility for verifying and documenting compliance should be clearly assigned. Periodic supervisory reviews should be conducted, documented, and retained to ensure programmatic requirements are consistently met. Management Comments: We concur with this finding. The missed deposits were an oversight in part due to employee turnover, and we have since reimbursed the replacement reserve. Moving forward, we will adopt a monthly compliance checklist and assign staff to verify that all regulatory requirements, including reserve deposits, are completed timely and documented.

Corrective Action Plan

1. Reimbursed the Replacement Reserve Account: The missed deposits totaling $663 were reimbursed to the replacement reserve on May 30, 2025. 2. Implemented Monthly Oversight Meetings: Beginning in January 2025, we instituted monthly meetings to review financial statements, budgets, forecasts, and compliance-related data. These meetings include key stakeholders and team members to ensure timely discussions of financial status, variances, and compliance matters. This structure enhances accountability and provides regular managerial oversight.

Categories

Internal Control / Segregation of Duties Subrecipient Monitoring

Other Findings in this Audit

Programs in Audit

ALN Program Name Expenditures
14.181 Supportive Housing for Persons with Disabilities $864,700
14.195 Project-Based Rental Assistance (pbra) $28,545