Finding Text
Criteria - The project is required to obtain HUD approval for all withdrawals from the replacement reserve.
Statement of Condition - In February 2023, the project withdrew a total of $35,248 from the replacement reserve without obtaining HUD approval.
Cause - During 2023, the project experienced an operating cash shortfall and in order to timely pay the operating payables, the total of $35,248 was withdrawn from the replacement reserve without HUD's approval and transferred to the project's operating account. The project intended to repay $35,248 back to the replacement reserve but was prevented from doing so as a result of not receiving full payment from HUD for one of the monthly vouchers. Management is awaiting response from HUD regarding receiving the balance due for the voucher which was not paid in full.
Questioned Costs - None noted.
Effect of Condition - Unauthorized uses of the replacement reserve funds result in decrease in funds available for future withdrawals.
Recommendation - Supervisory management should always obtain HUD approval for all withdrawals from the replacement reserve.