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Section 3
MBE/WBE

 

Program Compliance Accounting

 

Annual Financials

 

Common Financial Statement Errors & Findings

Listed below were the most common issues noted during MHDC’s financial statement review process:

 

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The project’s MHDC #, LIHTC #, and/or AHTC # were not included on the face of the financial statements.
 

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Required supplemental schedules were not included within the financial statements.  Please click here for a listing of required supplemental schedules.
 

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Financial Statements were not prepared using MHDC’s required Chart of Accounts. MHDC will not accept any financial statement not prepared accordingly.  Financial statements will be returned, and the property will be placed in noncompliance until the financial statements are corrected.

 

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The following accounts shall not be netted – rent & vacancy; interest subsidy & interest expense; insurance claims & operating & maintenance expense.

 

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Accrued interest was not included on the balance sheet and computation of surplus cash.  Interest should be accrued for if January’s mortgage payment is paid in January instead of December.  This amount should be booked regardless of materiality because of potential surplus cash implications.  The interest portion of January’s payment is for interest earned from December 1 to December 31st.

 

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Management fees should be paid in accordance with MHDC’s PROJECT OWNER’S/MANAGEMENT AGENT’S CERTIFICATION Form. Projects that have PROJECT OWNER’S/MANAGEMENT AGENT’S CERTIFICATION Forms with the language “per occupied unit” cannot pay the maximum management fee unless there was 100% occupancy during the year. Overpaid management fees will be required to be refunded.

 

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Tenant security deposits were under funded. The tenant security deposit cash account should be greater than, or equal to, the tenant security deposit liability account. Any under funded tenant security deposit cash account will be required to be funded back to its appropriate level.
 

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Amounts per the Schedule of Funds did not equal the amounts reported on the Balance Sheet.


Surplus Cash Schedule (Not Required for Tax Credit Only Properties)

 

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Distributions of surplus cash must receive prior MHDC approval, and any partnership expenses paid from project operations are considered a distribution.
 

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The principal portion of the current month’s mortgage payment should not be included in the current obligation calculation. Only the current month interest portion is reported.
 

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To be consistent with HUD’s definition of cash, as delineated by HUD’s electronic AFS submission instructions, only operations cash (which includes petty cash), short-term investments, and tenant security deposits should be used to determine the Line 1 cash amount for your property’s surplus cash calculation.