Finding 396260 (2023-001)

FEDERAL AWARD FINDINGS: 2023-001 Replacement Reserve Withdrawal CONDITION: Disbursements from HUD approved withdrawal were not made for the approved purpose. CRITERIA: Disbursements from Replacement Reserve must be for only HUD approved purposes. EFFECT: The Project is not in compliance with award requirements. CONTEXT: Audit procedures for the year ended September 30, 2023 revealed there were withdrawals made from the Replacement Reserve totaling $10,806 for the year ended September 30, 2022 that were not used for HUD approved purposes. CAUSE: The original items were ordered and subsequently had malfunctions that needed to be repaired or replaced. As a result, the Project used the funds for other purposes and had not returned the funds back to the Replacement Reserve as of September 30, 2023. RECOMMENDATION: The Project has not had any prior compliance issues with the Replacement Reserve. However, we recommend that the Project monitor their spending of Replacement Reserve withdrawals closely and only use the funds for the HUD approved purposes. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: Management acknowledges and agrees with the finding. The Project paid back the approved monies withdrawn from the Replacement Reserve on April 19, 2024. Management concludes that additional corrective action is not necessary and does not expect this situation to arise again in the future.