Finding Text
Assistance Listing Number, Federal Agency, and Program Name - 14.129, U.S. Department of Housing and Urban Development (HUD): HUD-insured Mortgage (Section 232) Federal Award Identification Number and Year - N/A, 2022 Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - The Organization should have made monthly principal, interest, and various escrow payments, as required by the Regulatory Agreement. Condition - As of December 31, 2022, principal and interest payments on the mortgage are delinquent by $53,154. In addition, the various escrows are underfunded by $13,635. Questioned Costs - $66,789 Identification of How Questioned Costs Were Computed - Three months of mortgage principal, interest, and escrow payments for October, November, and December 2022 Context - During 2022, the Organization closed the Hilty Home facility, the facility with the HUD-insured mortgage subject to audit, and, in turn, ceased making the mortgage principal, interest, and various escrow payments beginning in October 2022. The Organization should have made three monthly principal and interest payments totaling $53,154 and various escrow payments totaling $13,635, as required by the Regulatory Agreement for the period from October 2022 through December 2022. Cause and Effect - The Organization is not in compliance with the requirements specified within the Regulatory Agreement, as the Organization failed to fund the mortgage and escrow accounts. Management stopped making payments for cash flow purposes and is working with HUD to come to a resolution. Recommendation - All required payments should be made in accordance with the Regulatory Agreement. Views of Responsible Officials and Corrective Action Plan - No further corrective action will be taken. The Section 232 HUD-insured mortgage is in default. The mortgage servicer made claim on the HUD insurance and has been paid. HUD is working through the process to bring the note/mortgage to sale later in 2023 or early 2024.