Finding 947236 (2021-003)

Condition: The project deposited surplus cash in excess of allowable amounts and failed to deposit current year’s surplus cash into its residual receipts account within 90 days of year-end. Criteria: The Company is required to follow HUD’s guidelines and procedures for depositing surplus cash into a residual receipts account in an amount which is equal to allowable amount per surplus cash computation within 90 days after the end of the fiscal period. Cause: Internal controls at the Company are not properly designed to ensure timely calculation and deposit of surplus cash amounts. Effect: The Company was not in compliance with their Regulatory Agreement. Context: During our recalculation of management’s computation of surplus cash, we noted the residual receipts deposit was based on a preliminary calculation which resulted in excess payment to the residual receipts account of $126,207. Recommendation: The Company should design their internal controls to ensure that calculation of surplus cash is reviewed and performed timely, to ensure they will comply with HUD guidelines, as stated above. Reporting Views of Responsible Officials: Management has acknowledged a breach in protocol and deposited the current year’s surplus cash on October 1, 2021.