Finding Text
Federal Agency: U.S. Department of Housing and Urban Development (HUD)
Federal Program Name: Supportive Housing for Persons with Disabilities (Section 811)
Assistance Listing Number: 14.181
Type of Finding: Significant Deficiency in Internal Control over Compliance
Criteria or Specific Requirement: Reserve for replacement funds were not maintained in a separate bank account.
Condition: During the 2024 audit, we noted that the reserve for replacement bank account was closed and deposited into the operating bank account.
Questioned Costs: None.
Context: Bank reconciliations tested identified no separate bank account for the reserve for replacement account.
Cause: Due to change in management company during 2024.
Effect: The Project did not properly segregate the reserve for replacement funds increasing the potential for funds to be spent without approval from HUD.
Repeat Finding: None.
Recommendation: We recommend withdrawing the reserve for replacement funds and opening a separate bank account.
Views of Responsible Officials: We agree with the above recommendation. During 2025, the funds were withdrawn from the operating account and deposited into a separate bank account.