Finding Text
Finding 2022-006 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135
Statement of Condition: During the year ending December 31, 2022 a reserve for replacements request included an estimate of repairs for $18,925.89 which was approved by HUD. No expense for the related amount was recorded or paid by the Project for the amount approved by HUD, therefore, the funds received from the reserve for replacements were expended for purposes other than approved by HUD.
Criteria: The Regulatory Agreement requires disbursements from the reserve for replacements to be expended for HUD approved purposes.
Effect: Noncompliance with the Regulatory Agreement.
Cause: Management override of controls.
Context: A test was performed to verify withdrawals from the reserve for replacements were expended for the HUD approved expenditure. A HUD approved reserve for replacements withdrawal included an amount for $18,925.89 for estimated repairs and no expense was recorded or paid in the amount of $18,925.89. The operating cash account had a balance of $10,665 as of December 31, 2022, therefore, $8,260.89 of the reserve for replacement funds were expended for purposes other than approved by HUD.
Questioned Costs: $8,261
Recommendation: We recommend that management refund any reserve for replacements withdrawals that are not expended for the HUD approved purpose.
Views of Responsible Officials and Corrective Action Plan: Management acknowledges that no expense was recorded for the $18,925.89. Management will monitor HUD approved reserve for replacements withdrawals and that they are expended for approved items.