Finding Text
Criteria: All disbursements from the replacement reserve account must be approved by HUD (24 CFR section 891.405). Condition: During 2023, the management company without approval from HUD withdrew
$186,005 from the replacement reserve account. Funds were used by the management company for purposes unrelated to the Project. Remaining $186,005 is
included in accounts receivable, other. Questioned Costs: $186,005 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.