Finding 1132007 (2024-002)

Material Weakness
Requirement
A
Questioned Costs
$1
Year
2024
Accepted
2025-04-21
Audit: 354066
Organization: Lincoln Street Housing, Inc. (CA)
Auditor: Snd Partners LLP

AI Summary

  • Core Issue: Project funds were improperly used for interest payments and legal services, violating the Capital Advance Program Regulatory Agreement.
  • Impacted Requirements: The use of project funds must comply with regulations prohibiting unauthorized distribution of income or project assets.
  • Recommended Follow-Up: Owner/Agent should refund $13,852 to the operating account and enhance controls over project fund usage.

Finding Text

Finding # 2024-002 Federal Grantor: U.S. Department of Housing and Urban Development AL # / Program: 14.181 - Supportive Housing for Persons with Disabilities Type of Finding: Federal Award Finding - Activities Allowed or Unallowed and Special Tests and Provisions Finding Resolution Status: In Process Information on Universe Population Size: N/A Sample size information: N/A Criteria: Capital Advance Program Regulatory Agreement on form HUD-92466-CA paragraph 7. (d) prohibits the 'distribution of income or project assets'. Statement of Condition / Context: The project made interest payments using project funds from the operating account to the California Department of Housing and Community Development (HCD) totaling $4,034. The project made payments using project funds from the operating account for legal services of the Owner/Agent totaling $9,818. Owner/Agent should use funds in the Debt Service Reserve to pay the HCD annual payment. Legal services not directly benefiting the project should be paid by Owner/Agent funds. Cause: A lack of processes and controls over the use of project funds from the operating account allowed for project funds to pay Owner/Agent expenses. Effect or Potential Effect: The project is out of compliance with the Capital Advance Program Regulatory Agreement on form HUD-92466-CA. Auditor Non-Compliance Code: H - Unauthorized distribution of project assets Questioned Costs: $13,852 Recommendations: We recommend the Owner/Agent refund the project operating account the questioned costs and review its processes and controls over the use of project funds. Response Indicator: Agree Completion Date: 3/7/2025 Reporting Views of Responsible Officials: By March 7, 2025, HCEB will request HCD approval to refund the project operating account from the project debt service reserve account. Once HCD approval is received, the transfer will occur. Going forward, approval requests, payments, and transfers from the debt service reserve account will occur in Q4 of each fiscal year.

Categories

Questioned Costs Special Tests & Provisions HUD Housing Programs Reporting

Other Findings in this Audit

  • 555564 2024-001
    Material Weakness
  • 555565 2024-002
    Material Weakness
  • 555566 2024-003
    Material Weakness
  • 555567 2024-004
    Material Weakness
  • 555568 2024-005
    Material Weakness
  • 555569 2024-006
    Material Weakness
  • 555570 2024-007
    Material Weakness
  • 555571 2024-008
    Material Weakness
  • 555572 2024-009
    Material Weakness
  • 555573 2024-010
    Material Weakness
  • 555574 2024-011
    Material Weakness Repeat
  • 1132006 2024-001
    Material Weakness
  • 1132008 2024-003
    Material Weakness
  • 1132009 2024-004
    Material Weakness
  • 1132010 2024-005
    Material Weakness
  • 1132011 2024-006
    Material Weakness
  • 1132012 2024-007
    Material Weakness
  • 1132013 2024-008
    Material Weakness
  • 1132014 2024-009
    Material Weakness
  • 1132015 2024-010
    Material Weakness
  • 1132016 2024-011
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
14.218 Community Development Block Grants/entitlement Grants $760,000
14.239 Home Investment Partnerships Program $693,650
14.181 Supportive Housing for Persons with Disabilities $117,960