Finding Text
Finding No. 2025-003 - Special Tests and Provisions U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Supportive Housing for the Elderly Assistance Listing Number: 14.157 Criteria: Any withdrawal from the replacement reserve account requires evidence of HUD approval, generally documented through a HUD-signed Form 9250 authorizing the release of funds. Condition: During the year ended September 30, 2025, management processed a withdrawal of $3,970 from the replacement reserve account to the operating account. Management did not provide a HUD-approved Form HUD-9250 supporting this withdrawal. A correcting transaction to return the $3,970 to the replacement reserve account was dated September 30, 2025, but the repayment did not clear the bank until October 2025, which is subsequent to the audit period. Additionally, management has still not repaid or obtained HUD approval of the prior year withdrawals missing HUD approval of $39,292. Cause: Management initiated the withdrawal without securing or retaining HUD-approved Form HUD-9250 documentation. The error in the original transfer was identified after the fact, resulting in a correcting entry dated at year-end. However, the repayment of the $3,970 occurred after the close of the fiscal year. The prior year withdrawal without HUD approval remains unaddressed. Effect or Potential Effect: Without evidence of HUD approval, the withdrawal is considered unauthorized under HUD requirements. Additionally, because the return of funds occurred after the fiscal year-end, the project remained out of compliance with HUD reserve withdrawal procedures during the audit period. Questioned Costs: $3,970 Context: Management reported that the $3,970 replacement reserve withdrawal was initiated at the direction of the EBGA Director. Upon further review, management determined the transfer amount was incorrect and processed a reversal dated September 30, 2025. However, the repayment cleared the bank in October 2025, outside the audit period. Documentation supporting HUD approval for the original withdrawal was not available for audit. The prior year withdrawal of $39,282 remains unaddressed. Identification as a Repeat Finding: Yes Recommendation: Management should implement procedures to ensure all replacement reserve withdrawals are supported with a HUD-signed Form HUD-9250 prior to releasing funds. Management should repay the $3,970 withdrawal. Management should obtain HUD approval for the 2024 unauthorized withdrawals of $39,282 or pay the amounts back to the reserve. Auditor Noncompliance Code: A - Unauthorized withdrawals from the replacement reserve account Finding Resolution Status: Unresolved Views of Responsible Officials: Management stated that a correction was processed to return the $3,970 to the replacement reserve account, with the repayment clearing in October 2025. The prior year unauthorized withdrawal remains unresolved, as management does not have the funds to repay the $39,282. Management will also strengthen internal controls to ensure all future withdrawals are fully supported with HUD-signed Form HUD-9250 approvals.