Finding Text
Finding 2022-002 Type of Finding: Significant deficiency in internal control over compliance and noncompliance. Federal program: HUD Supportive Housing for Persons with Disabilities (Assistance Listing #14.181) Compliance Requirement: Special tests and provisions Criteria: In accordance with River Kourt Apartments? regulatory agreement with HUD, surplus cash should be deposited to the residual receipts account within 60 days of year end. Also, in accordance with River Kourt Apartments? regulatory agreement with HUD, monthly deposits of $400 are required to be made to the replacement reserve. It is the responsibility of management to design and implement internal controls to ensure timely deposit of surplus funds to residual receipts and monthly replacement reserves in accordance with the regulatory agreement. Condition and Context: Surplus cash for the year ended December 31, 2020 in the amount of $5,830 was not deposited to the residual receipts within 60 days of year end; nor was it deposited by June 30, 2022. The replacement reserve deposits for the year ended June 30, 2022 totaled $4,400 so the reserve deposits were underfunded by $400. Cause: Surplus cash was used to pay down advances from affiliate so it was not available to be deposited to the residual receipts account in accordance with regulatory agreement. There were deposits to the replacement reserve missed during the transition to a new property management agent. Effect: The effect is underfunding of the residual receipts reserve by $5,830 at June 30, 2022 and underfunding of the replacement reserve by $400 at June 30, 2022. The effect is non-compliance with the terms of the HUD program listed above. Questioned Costs: None. Repeat Finding: Yes, see Finding 2021-002. Recommendation: We recommend management design and implement internal controls over compliance to ensure surplus cash is deposited to residual receipts within 60 days of year end as required by HUD. We recommend management either make the required deposit of $5,830 which was due from 2020 surplus cash or obtain a waiver from HUD. We recommend management made additional deposit of $400 to the replacement reserve to remedy the deficit. Views of Responsible Officials: Management agrees with the finding. See Corrective Action Plan.