Finding Text
Criteria: Per HUD Handbook 4370.2 TEV-1, Financial Operations and Accounting Procedures for Insured Multifamily Projects: 2-7 Replacement Reserve D. “All requests, by the owner, for withdrawals from the Replacement Reserve account must be in writing and supported by invoices showing what was purchased and cost of the purchase. The request must list the items for which the withdrawal is requested, the number of each item and the dollar amount requested for each item.
Condition: During our testing of the Replacement Reserve, we noted that the Project did not provide support of the request in writing with support invoices and Form HUD-9250 Fund Authorization noting HUD’s approval of the withdrawal for the Replacement Reserve. The following are the unsupported Replacement Reserve withdrawals totaling $144,346.60
Cause: The Project did not follow the HUD directive regarding proper procedures for withdrawing funds from the Replacement Reserve account.
Effect: The Project ‘s Replacement Reserve is not in compliance with HUD’s directive.
Recommendation: For the Replacement Reserve withdrawals, we recommend that Project provide the supporting request in writing with support invoices attached to Form HUD-9250 Fund Authorization to obtain approval from HUD.
Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.