Finding Text
Finding No. 2022-003; Supportive Housing for the Elderly (Section 202), CFDA 14.157
Criteria
Loans are not permitted to be made from project cash without prior authorization from HUD.
Condition
During the year ended November 30, 2022, the project paid expenses in the amount of
$326,282 on behalf of other affiliates from project cash without HUD approval. The amount due
to the project as of November 30, 2022 is $326,282.
Cause
Procedures were not in place to ensure that cash disbursements of project funds were limited to
approved project operating costs.
Effect or Potential Effect
The payments of $326,282 were unauthorized loans and therefore considered to be questioned
costs.
Questioned Costs
$326,282.
Recommendation
Management should immediately reimburse the amount due to the project and establish
procedures to ensure payments of this nature are not made in the future.
Auditor Noncompliance Code: B - Allowable Costs/Cost Principles
Views of Responsible Officials and Planned Corrective Actions
Because the PRAC renewals were so delayed, therefore there was no money available to pay
back the project. Furthermore, the insurance costs are tremendous and had to be financed. In
order to ensure the payments are applied and paid timely it is best to have the entire amount
pulled from one bank account. If each entity were to pay its share it would cause confusion and
may result in possible cancellation. Upon finalizing the audits and submitting to HUD,
management intends to request funds from the replacement reserve to enable them to pay
down the due from affiliates.