Finding Text
Item 2022-003 Material Weakness - Unauthorized Withdrawal from Residual Receipts Reserve
Condition: The Organization is required to obtain HUD approval before the release of funds from the residual receipts reserve. The Organization withdrew funds of $8,126 for repairs and renovations to the property without approval.
Criteria: Management of the Organization is responsible for complying with laws and regulations. This responsibility includes compliance with HUD regulations requiring the Organization to obtain approval for residual receipts reserve withdrawals.
Cause: The Organization did not review the residual receipts reserve transactions timely to ensure the transactions were in accordance with HUD regulations.
Effect: The Organization released funds without HUD approval, which was not in accordance with the regulatory agreement approved by HUD.
Recommendation: We recommend that management take the necessary steps to ensure that future withdrawals are made in accordance with HUD regulations.
Auditee Response
and Action Plan: Management of the Project was unaware funds were mistakenly withdrawn for repair and renovations to the project. We will deposit the funds to the reserve account immediately.