Finding Text
Finding 2024-003
Type of Finding: Material weakness in internal control over compliance and material noncompliance.
Federal program: HUD Supportive Housing for Persons with Disabilities (Assistance Listing #14.181)
Compliance Requirement: Special Tests and Provisions – Residual Receipts and Replacement Reserve
Accounts
Criteria: Afiya Apartments, Inc.’s regulatory agreement with HUD requires disbursements from residual
receipts be made only at the discretion of and with the approval of HUD, and disbursements from
replacement reserves are to be made only after consent in writing from HUD.
Condition: Withdrawals totaling $45,000 from residual receipts and $135,000 from replacement reserves
were made without authorization and/or consent from HUD during the year ending June 30, 2024. The
funds were deposited back into the respective reserve accounts prior to year end.
Cause: Management was aware of the regulatory agreement that requires prior HUD authorization to
make withdrawals; however, due to a cash flow shortage, management made the temporary withdrawals
with the intention to replace the funds.
Effect: The effect is material non-compliance with the terms of the regulatory agreement as such
withdrawals are not allowed to be made without prior HUD approval.
Questioned Costs: None.
Repeat Finding: No.
Context: We noted the deposited were made into the accounts within one month of the withdrawal date
to replace the amount of funds withdrawn and the residual receipts and replacement reserve accounts
were properly funded as of June 30, 2024.
Recommendation: We recommend management ensures the internal controls over compliance in place
that do not allow withdrawals from the reserves without prior HUD approval are followed.
Views of Responsible Officials: Management agrees with the finding. See Corrective Action Plan.