Finding 1240646 (2025-001)

Statement of Condition: During the audit, we noted that the projects withdrew reserve funds in excess of $2,000 without obtaining prior lender approval, as required by the City of Greensboro HOME loan agreement. Criteria: The City of Greensboro HOME loan agreement requires lender approval for reserve withdrawals in excess of $2,000. Effect: Noncompliance with lender regulations. Cause: The projects did not maintain effective controls over reserve disbursements to ensure withdrawals requiring lender approval were identified, submitted for review, and approved before funds were disbursed. Specifically, oversight of the management agent was insufficient to ensure compliance with the reserve withdrawal provisions of the loan agreement. Context: A test was performed over reserve activity and related controls. We noted that one or more reserve withdrawals in excess of $2,000 were made during the period without documented lender approval as required by the loan agreement. Questioned Costs: N/A Recommendation: We recommend that the owner and management agent strengthen controls over reserve account activity by implementing procedures to review all reserve withdrawal requests before disbursement, verify whether lender approval is required under the loan agreement, obtain and retain evidence of approval before funds are released, and perform periodic supervisory review of reserve activity for compliance with loan agreement restrictions. Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding. Management indicated that the withdrawal occurred under the prior management agent and that corrective actions are being implemented. Management has replaced the management agent and will require all future reserve withdrawals in excess of $2,000 to be reviewed for lender approval requirements and supported by written approval before disbursement.