Finding Text
Finding 2025-001 — Unauthorized Reserve for Replacement withdrawals (HUD Handbook noncompliance) Project: Richmond Urban Senior Housing - HUD Project No. 051-EE073 Criteria: The HUD Handbook requires that withdrawals from the project’s Reserve for Replacement account be made only when HUD has approved the release of the funds. Condition: During the year ended December 31, 2025 the property had unauthorized withdrawals as a result of malicious and successful access from its Reserve for Replacement account totaling $100,000. Cause: Controls were not effectively implemented to ensure Reserve for Replacement disbursements are not withdrawn without proper approval. Effect: $100,000 of withdrawal out of the replacement reserve during the year are still considered unauthorized distributions in accordance with HUD. Questioned Costs: $100,000 Repeat Finding: No Recommendation: We recommend management to ensure all withdrawals out of the replacement reserve have controls in place for proper approval from outside parties.