Finding Text
Criteria
In accordance with HUD Handbook 4571.3, Section 202 Supportive Housing for the Elderly, funds may only be used with the approval of HUD.
Condition
As of December 31, 2023, management had not repaid $40,239 due to reserve for replacement. Additionally, during 2022, the property transferred $9,000 of reserve for replacement funds to operations to fund payroll and operating payables which was not reimbursed as of December 31, 2023.
Cause
Inadequate cash flow to fund operations and return of funds to reserve for replacement.
Effect or Potential Effect
Shiloh Manor, Inc. is not in compliance with the funding requirement of the reserve for replacement.
Questioned Costs
None.
Context
On December 31, 2017, HUD had approved a loan to operations from the reserve for replacement of $40,239 to be repaid upon receipt of the past due subsidy. When the past due subsidy was received the property was unable to repay the loan because of an unexpected increase in vacancies as a result of tenant turnover. During 2022, the property transferred
$9,000 of reserve for replacement funds to operations to fund payroll and operating payables; the funds have not been reimbursed as of December 31, 2023.
Identification as a Repeat Finding
This is a repeat finding (see prior year finding number 2022-001).
Recommendation
Management should start making monthly repayments on the $9,000 loan as established by HUD. Management should work with HUD to execute the loan waiver for the delinquent amount of $40,239.
Auditor Noncompliance Code: N - Reserve for replacement deposits.
Finding Resolution Status: In process.
Views of Responsible Officials
The transfer from reserve of $9,000 was not returned as of 2023. A conversation with HUD on May 29, 2024, lead to a decision being made with a payment plan of $1,500 per month to start on June 1, 2024.
As of December 31, 2023, there was a meeting with HUD representatives on March 23, 2023, which resulted in the decision for the waiver of the balance owed to the reserve of the $40,239. We are awaiting documentation from HUD on this decision.