Finding 1335 (2022-001)

Item 2022-001 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 $5,955 for repairs and renovations to the property. 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Response and Action Plan: There were staff changes in the accounting department which contributed funds mistakenly withdrawn from residual receipts reserve. We will deposit the funds to the reserve account immediately.