Issue: The project spent $73,780 on affiliate expenses without getting necessary HUD approval.
Trend: This indicates a pattern of non-compliance with HUD regulations regarding fund usage.
Follow-up: Review and implement stricter controls to ensure all expenses receive proper approval before payment.
Finding Text
During the year ended September 30, 2024, the project paid expenses in the amount of $73,780 on behalf of an affiliate from project cash without HUD approval. The amount due to the project as of September 30, 2024 is $127,177.
Corrective Action Plan
Concord is making “unauthorized” loans only as it pertains to insurance payments. Until the rental increases are large enough to cover the ongoing increasing costs of insurance premiums, management has no choice but to allow the entity with the most stable cashflow to make the monthly insurance payments on behalf of the entities that are unable to cover their portion. The only available insurance coverage is via a policy that covers all three entities as the cost to cover the entities individually is astronomical. The only way to ensure the entities are insured and there is no lapse in coverage is to allow the entity with the stable cashflow to make the payments and for the other entities to reimburse for their portion. That is until the rental increases are substantial enough to actually cover the rising costs of insurance premiums.