Finding 35948 (2022-002)

Finding: 2022-002 Program: U.S. Department of Housing and Urban Development Supportive Housing for Persons with Disabilities (Section 811) and Capital Advance Criteria or specific requirement: In accordance with the HUD regulatory agreement, the Organization shall establish a replacement reserve account to aid in funding extraordinary maintenance and repair and replacement of capital items. All disbursements and transfers from the reserve account must be approved by HUD. Condition: The Organization made a transfer out of the replacement reserve account, totaling $7,940, without receiving proper approval from HUD. Cause: Due to operating cash flow shortages, the Organization made transfers as needed without obtaining proper HUD fund authorization. Effect: The transfer of funds out of the replacement reserve account require prior approval from HUD, therefore, the Organization is in violation of the HUD regulatory agreement. Recommendation: We recommend that the Organization obtain proper approval from HUD for all transfers or disbursements being made out of the replacement reserve account prior to the transfer of any funds. Views of responsible officials and planned corrective actions: Management is in agreement with the finding. See Corrective Action Plan.