Finding Text
Federal Agency: United States Department of Housing and Urban Development Federal Program Title: Section 223(f) Capital Advance Assistance Listing Number(s): 14.155 Award Periods: October 1, 2024, through September 30, 2025 Type of Finding: - Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or Specific Requirement: All disbursements from the replacement reserve must be approved by HUD (24 CFR sections 891.405 and 891.605). Condition: The Project withdrew $51,448.72 from the replacement reserve account in May 2025 to reimburse the Project's parent company for operating expenses without HUD approval. Questioned Costs: $51,448.72 Context: The Project withdrew replacement reserve funds without HUD approval to reimburse St. John Lutheran Home and Subsidiaries, of which the Project is a subsidiary, for payables for operating expenses that had gone unpaid for multiple years. Cause: While the Project has internal controls to mitigate the risk of noncompliance, an unapproved withdrawal was identified. Effect: An unapproved withdrawal was made from the replacement reserve account. Recommendation: We recommend that processes and procedures be evaluated to strengthen internal control over compliance relating to HUD accounts. Views of Responsible Officials and Planned Corrective Actions: Management will review compliance requirements for HUD programs related to replacement reserve withdrawals to ensure they are followed in the future.