Finding Text
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Section 202 Supportive Housing for the Elderly
Assistance Listing Number: 14.157
Award Period: January 1, 2023 through December 31, 2023
Type of Finding:
- Significant Deficiency in Internal Control over Compliance
- Other Matters
Criteria or specific requirement: HUD requires that loan advances from the Reserve for Replacement escrow be repaid within three months of the advance of funds.
Condition: Loan advances of $30,000 from February 2023 and $38,500 from June 2023 were not repaid to the Reserve for Replacement escrow within three months and approval was not obtained from HUD to delay the repayment period.
Questioned costs: None
Context: The Organization made seven withdrawals from the Reserve for Replacement escrow during the period under audit. Two of these withdrawals were loan advances to cover cash shortfalls from operations while the Project awaited the increase in rental rates effective February 1, 2023 which was not paid by HUD until the third quarter of 2023.
Cause: The Organization did not have appropriate controls in place to monitor the timely repayment of loan advances from the Reserve for Replacement escrow.
Effect: There were no negative effects to the Project.
Repeat Finding: No.
Recommendation: We recommend that the Organization obtain approval from HUD to repay the loan advances after the initial due date and to establish internal controls to monitor the repayment of loan advances to ensure compliance with HUD requirements.
Views of responsible officials: There is no disagreement with the audit finding. We have improved our controls to avoid this from happening again.