Carbondale Senior Housing Phase IVNon-Profit

Finding: Special Tests and Provisions Federal Assistance Listing 14.157 Supportive Housing for the Elderly ? Section 202 Capital Advance Program Department of Housing and Urban Development Criteria: The Capital Advance Program Regulatory Agreement (?Regulatory Agreement?) entered into August 27, 1996 between CSHC Phase IV and HUD requires CSHC Phase IV to establish and maintain a residual receipts account, if CSHC Phase IV has residual receipts realized from the operation of the mortgaged property available for distribution at the end of the fiscal year. The agreement requires the owners to deposit surplus cash (residual receipts) into this account within 60 days after the end of the annual fiscal period within which it was generated. These deposits are in the entity?s name, but under the control of HUD, and shall only be disbursed at the discretion of HUD with prior authorization. Condition: Management did not make the required residual receipts reserve deposit in the amount of $9,173 within 60 days of year end, as required by HUD, based on the June 30, 2021 surplus cash calculation. At June 30, 2022, $9,173 was still required to be deposited. Questioned Costs: None. Context: We reviewed CSHC Phase IV?s cash accounts and balances as part of compliance procedures to verify the June 30, 2021 surplus cash (residual receipts) deposit had been made. Effect: CSHC Phase IV is liable to transfer these funds to another bank account, regardless of the current cash balances available, and is currently in violation of the Regulatory Agreement. Cause: The unexpected transition of financial statement and compliance auditors led to a delay in the release of CSHC Phase IV?s 2021 financial statements beyond the typical 60-day period after year-end, preventing CSHC Phase IV from making the required deposit in time. Additionally, certain cash balances held by CSHC Phase IV had previously been treated as statutorily restricted, when in fact, no such restrictions were determined to be in place, leading to an internal miscalculation of surplus cash that was not resolved until completion of the 2021 audit. Identification as a repeat finding: Not applicable. Recommendation: Management should transfer the funds of $9,173 from the available cash in the operating or insurance reserve unrestricted cash accounts to bring the residual receipts account to current. All future withdrawals of these funds are required to be approved by HUD. Additionally, immediately at the end of each fiscal year, management should compute an estimate of the surplus cash (residual receipts) available at the end of the period and make such deposits within the 60-day required period. Views of Responsible Officials and Planned Corrective Action: CSHC Phase IV agrees with the finding. See separate auditee document for planned corrective action.