Criteria: Project funds must be used for the operation of the project, including required insurance coverage, and to make required deposits to replacement reserve and residual receipts accounts (24 CFR section 891.400(e)). Condition: During fiscal year 2023, the management company used operating funds in the amount of $114,300 for purposes unrelated to the Project. The management company returned the total amount of $103,000 to the operating cash account during the fiscal year. Remaining $11,300 is included in prepaid expenses as of October 31, 2023. Questioned Costs: $114,300 Cause: Management company’s oversight of Project funds did not ensure compliance with requirements related to the use of Project funds. Effect: The unauthorized use of Project funds by the management company resulted in the
Project not to be in full compliance with its Regulatory Agreement regarding use of project funds. Recommendation: Management should enhance its internal controls to ensure Project funds are only
used for Project activities and expenses necessary for the ongoing operation and maintenance of the Project. Management Response: See Management's Corrective Action Plan on page 33.
Criteria: Pursuant to the Regulatory Agreement, the Project was required to deposit $5,836 into the replacement reserve account on a monthly basis. Condition: The management company did not deposit three monthly replacement reserve deposits totaling $17,508 during the current fiscal year. Questioned Costs: $17,508 Cause: Management company failed to comply with the replacement reserve funding
requirement. Effect: The underfunding of replacement reserve account by the management company resulted in the Project not to be in full compliance with its Regulatory Agreement. Recommendation: Management should enhance its internal controls to ensure management company’s compliance with replacement reserve account. Management Response: See Management's Corrective Action Plan on page 33.
Criteria: All disbursements from the replacement reserve account must be approved by HUD (24 CFR section 891.405). Condition: During fiscal year 2023, the management company without approval from HUD
withdrew $278,005 from the replacement reserve account. The management company returned the total amount of $278,000 to the replacement reserve account during the fiscal year. Questioned Costs: $278,005 Cause: Management company failed to comply with the replacement reserve disbursement requirement. Effect: The unauthorized withdrawal of funds from the replacement reserve account by the
management company resulted in the Project not to be in full compliance with its Regulatory Agreement. Recommendation: Management should enhance its internal controls to ensure management company’s compliance with replacement reserve account. Management Response: See Management's Corrective Action Plan on page 33.
Criteria:Surplus cash calculated as of the end of the fiscal year is required to be deposited into the residual receipts account within 90 days following the end of the fiscal year. Condition: Surplus cash calculated in the amount of $5,966 as of October 31, 2022 was required to deposited by the management company within 90 days of the fiscal year end. Questioned Costs: $5,966 Cause: Management company failed to comply with the required surplus cash deposit during the fiscal year. Effect: The Project was not in full compliance with its Regulatory Agreement regarding surplus cash deposit into residual receipts account. Recommendation: Management should enhance its internal controls to ensure management company’s compliance with residual receipts account. Management Response: See Management's Corrective Action Plan on page 33.
Criteria: Project funds must be used for the operation of the project, including required insurance coverage, and to make required deposits to replacement reserve and residual receipts accounts (24 CFR section 891.400(e)). Condition: During fiscal year 2023, the management company used operating funds in the amount of $114,300 for purposes unrelated to the Project. The management company returned the total amount of $103,000 to the operating cash account during the fiscal year. Remaining $11,300 is included in prepaid expenses as of October 31, 2023. Questioned Costs: $114,300 Cause: Management company’s oversight of Project funds did not ensure compliance with requirements related to the use of Project funds. Effect: The unauthorized use of Project funds by the management company resulted in the
Project not to be in full compliance with its Regulatory Agreement regarding use of project funds. Recommendation: Management should enhance its internal controls to ensure Project funds are only
used for Project activities and expenses necessary for the ongoing operation and maintenance of the Project. Management Response: See Management's Corrective Action Plan on page 33.
Criteria: Pursuant to the Regulatory Agreement, the Project was required to deposit $5,836 into the replacement reserve account on a monthly basis. Condition: The management company did not deposit three monthly replacement reserve deposits totaling $17,508 during the current fiscal year. Questioned Costs: $17,508 Cause: Management company failed to comply with the replacement reserve funding
requirement. Effect: The underfunding of replacement reserve account by the management company resulted in the Project not to be in full compliance with its Regulatory Agreement. Recommendation: Management should enhance its internal controls to ensure management company’s compliance with replacement reserve account. Management Response: See Management's Corrective Action Plan on page 33.
Criteria: All disbursements from the replacement reserve account must be approved by HUD (24 CFR section 891.405). Condition: During fiscal year 2023, the management company without approval from HUD
withdrew $278,005 from the replacement reserve account. The management company returned the total amount of $278,000 to the replacement reserve account during the fiscal year. Questioned Costs: $278,005 Cause: Management company failed to comply with the replacement reserve disbursement requirement. Effect: The unauthorized withdrawal of funds from the replacement reserve account by the
management company resulted in the Project not to be in full compliance with its Regulatory Agreement. Recommendation: Management should enhance its internal controls to ensure management company’s compliance with replacement reserve account. Management Response: See Management's Corrective Action Plan on page 33.
Criteria:Surplus cash calculated as of the end of the fiscal year is required to be deposited into the residual receipts account within 90 days following the end of the fiscal year. Condition: Surplus cash calculated in the amount of $5,966 as of October 31, 2022 was required to deposited by the management company within 90 days of the fiscal year end. Questioned Costs: $5,966 Cause: Management company failed to comply with the required surplus cash deposit during the fiscal year. Effect: The Project was not in full compliance with its Regulatory Agreement regarding surplus cash deposit into residual receipts account. Recommendation: Management should enhance its internal controls to ensure management company’s compliance with residual receipts account. Management Response: See Management's Corrective Action Plan on page 33.