Finding Text
Criteria: All disbursements from the replacement reserve account must be approved by HUD (24 CFR section 891.405). Condition: During fiscal year 2023, the management company without approval from HUD
withdrew $278,005 from the replacement reserve account. The management company returned the total amount of $278,000 to the replacement reserve account during the fiscal year. Questioned Costs: $278,005 Cause: Management company failed to comply with the replacement reserve disbursement requirement. Effect: The unauthorized withdrawal of funds from the replacement reserve account by the
management company resulted in the Project not to be in full compliance with its Regulatory Agreement. Recommendation: Management should enhance its internal controls to ensure management company’s compliance with replacement reserve account. Management Response: See Management's Corrective Action Plan on page 33.