Finding 47600 (2022-001)

Material Weakness Repeat Finding
Requirement
N
Questioned Costs
-
Year
2022
Accepted
2023-09-24
Audit: 41372
Organization: True Love Manor (LA)
Auditor: Wharton CPA LLC

AI Summary

  • Core Issue: Monthly deposits into the reserve for replacement account were not made from January 2020 to December 2022.
  • Impacted Requirements: Management failed to comply with the Regulatory Agreement, which mandates regular deposits into a separate reserve fund.
  • Recommended Follow-Up: Management should ensure compliance with the Regulatory Agreement and make the necessary monthly deposits to address the $41,472 shortfall.

Finding Text

2022?1 Reserve for Replacement Monthly Deposits Not Made Condition: Management failed to make the required monthly deposit into the reserve for replacement bank account from January 2020 through December 2022. Criteria: According to the Regulatory Agreement, ?mortgagor will establish and maintain a reserve fund for replacements in a separate account in a bank?Concurrently with the effective commencement of rental assistance payments under the Housing Assistance Payment Contract, the Mortgagor will deposit an amount?per month unless a different date or amount is approved in writing by HUD?. Cause: Per management, the Property does not have enough operating funds to make the required deposit and requested a suspension from HUD but was denied. Effect: The reserve for replacement account is underfunded by $41,472, related to deposits that were never made to this account. A memo entry reflecting the outstanding payments due to the account was made during the audit. Recommendation: I recommend management adhere to the Regulatory Agreement as it relates to required monthly deposits into the reserve for replacement account.

Corrective Action Plan

2022-1 ? Reserve for Replacement Deposit Monthly Deposit Not Made Condition: Management fail to make the required monthly deposit into the reserve for replacement bank account from January 2020 through December 2022. Response: Management has reported to HUD repeatedly that the property is not generating enough cash flow to meet the financial demands for the property. Management is not failing to make the required deposits as we definitely desire to meet this requirement, but there is not enough operating funds. We do not even have operating funds to purchase the necessary supplies and materials needed to get vacant units reconditioned to move-in prospective applicants to generate more revenue. We have asked HUD several times to suspend the reserve for replacement monthly deposits due to lack of revenue. This is not something that this management company created. This is something that we inherited, being that when the change in management took place, True Love Manor had payables in excess of over $100,000 which has caused an enormous, continued hardship on the property. Once again, we are requesting the monthly reserve for replacement deposits to be suspended and approval to use approximately $25,000 in the reserve for replacement account to rehab vacant units. We renew our plea for HUD?s assistance.

Categories

HUD Housing Programs Procurement, Suspension & Debarment

Other Findings in this Audit

  • 624042 2022-001
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
14.157 Supportive Housing for the Elderly $593,156
14.195 Section 8 Housing Assistance Payments Program $167,773