Finding Text
Finding 2025-001: Reportable Finding Considered a Significant Deficiency - Activities Allowed or Unallowed Program name: Supportive Housing for Persons with Disabilities Section 811 Assistance Listing: 14.181 Federal award Identification number: 121-HD089-NP-WDD Federal award year: 2025 Federal awarding agency: U.S. Department of Housing and Urban Development ("HUD") Criteria: HUD Handbook 4370.2 Rev. 1 Chg-1, Paragraph 2-6A: The Regular Operating account is a general operating account…to pay operating expenses of general administration including mortgage payments, management fees, utilities and maintenance. Condition: Funds from the Regular Operating account were used to make payments on residual receipt notes. Cause: Internal controls over the distribution of project funds failed to identify unauthorized distribution of project funds. Effect or Potential Effect: The project is not in compliance with HUD Handbooks and Regulations. Known Questioned Costs: $13,442 Context: HUD approval to pay residual receipts notes payable was not obtained on form HUD-9250. Repeat finding: N/A Recommendation: We recommend that management implement controls to prevent the unauthorized distribution of project funds. Management’s response and corrective action plan (unaudited): Management will discontinue the use of the Regular Operating account for payments on residual receipt notes and instead will use the Capitalized MHP Debt Service Reserve to fund annual interest payments, consistent with applicable regulatory requirements. Additionally, management will: Implement procedures to ensure all disbursements are reviewed for allowability prior to payment Require documented verification of the required agency approval, when applicable, before payments are made from restricted accounts.