Finding Text
Condition: For one of two disbursements made from the replacement reserve account during the year, HUD approved a loan from the replacement reserve while other HUD receivables remained outstanding. As a condition, Alliance Apartment Housing Development Fund Co., Inc. was required to repay the loan once the receivables were collected. The receivables were collected from HUD in late June 2023, but the loan was not repaid.
Criteria: Disbursements from the replacement reserve account must be approved by HUD and used for the approved purpose.
Questioned Costs: None
Cause: Management did not deposit the loan proceeds back into the replacement reserve on a timely basis after HUD receivables were collected.
Effect: The replacement reserve was not replenished as intended by HUD.
Recommendation: We recommend that management restore the replacement reserve to the correct balance and implement controls to ensure that HUD conditions on reserve disbursements are complied with.
Views of Responsible Officials: We have requested HUD approval to delay reimbursement of the reserves pending receipt of Budget Based Rent increase. We anticipate that this will be approved.