Finding Text
Finding No. 2024-001 - Distributions to Owners - Material Weakness Name of Federal Agency: Department of Housing and Urban Development Federal Program Name: Supportive Housing for the Elderly (Section 202) Assistance Listing Number: 14.157 Federal Award Identification Number and Year: 2024-001 Criteria The terms of the regulatory agreement require payments/repayments of related party loans to be limited to available surplus cash computed on an annual basis unless approved by HUD. Condition In March 2024, the Sponsor provided a loan to the Organization in the amount of $15,000. On December 31, 2024, the Organization repaid the loan totaling $15,000 in excess of surplus cash available for distribution without HUD approval. Cause Procedures were not in place to ensure that distributions of cash were limited to available surplus cash computed in accordance with HUD regulations. Effect or Potential Effect The payment of $15,000 was an unauthorized distribution and therefore considered to be a questioned cost. Questioned Costs Unauthorized distributions of $15,000 Context Isolated instance which was not part of a statistical sample. Identification as a Repeat Finding This finding is not a repeat finding. Recommendation Management should implement procedures to limit distributions of project cash to the annual surplus cash calculation amount required by the regulatory agreement. In addition, management should immediately reimburse the project's cash account for the unauthorized distribution. Auditor Noncompliance Code: H. Unauthorized distribution of project assets Finding Resolution Status: In process Views of Responsible Officials Management will immediately reimburse the property’s operating account for the unauthorized distribution and procedures will be implemented to ensure that all future loan repayments and cash distributions comply with HUD surplus cash requirements and the regulatory agreement. Department of Housing and Urban Development