STO-ROX PLAZA, INC.Local Government

FINDING: 2025-001 Eligibility Federal Agency: U.S. Department of Housing and Urban Development Program: Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, ALN 14.155. Condition: During our review of Form HUD-50059 completed by Sto-Rox Plaza, Inc. (Property), we noted a lack of functioning internal controls with regards to the process. The review found that for one tenant, the wrong amount of interest income was included, which then resulted in the tenant’s payment being overstated by $100 and the Housing Assistance Payment (HAP) payment to be understated by $100. Criteria: Management is responsible for establishing and maintaining internal controls over the completion of the Form HUD-50059 to ensure that tenant payments and the project rental assistance payments (24 CFR section 891.410) are properly calculated. Cause: The Property’s internal controls and procedures in place did not ensure the Form HUD-50059 was completed accurately. Effect: As a result of the lack of functioning internal controls, rent was improperly allocated between the tenant portion and the subsidy portion for one tenant, resulting in an overpayment of rent. Questioned Costs: None that meet the single audit reporting threshold. Recommendation: The Property should ensure that established procedures are followed to review the Form HUD-50059 ensuring all documentation used to calculate the tenant rent and assistance payment is supported and properly calculated. In addition, the Property should calculate the amount owed to the affected tenant as a result of the error and correct it through either a tenant credit or a reimbursement payment, in accordance with HUD requirements. Views of Responsible Official and Planned Corrective Action: Management agrees with finding; see separate corrective action plan.