Finding 498739 (2023-001)

Significant Deficiency
Requirement
A
Questioned Costs
-
Year
2023
Accepted
2024-09-26

AI Summary

  • Core Issue: One replacement reserve withdrawal of $10,500 was made without proper HUD approval, leading to underfunding of the reserve by $10,000.
  • Impacted Requirements: Compliance with 24 CFR § 981.405 and 891.605, which mandates HUD approval for all disbursements from the reserve.
  • Recommended Follow-Up: Management should return the unapproved $10,000 withdrawal to the replacement reserve and ensure all future withdrawals have HUD approval.

Finding Text

Finding Reference Number: 2023-001; Title and CFDA Number of Federal Program: 14.157 Supportive Housing for the Elderly (Section 202); Type of Finding: Federal Award Finding;Finding Resolution Status: In process; Information on Universe and Population Size: 2 Replacement reserve withdrawals; Sample Size Information: 2 reserve withdrawals; Identification of Repeat Finding and Finding Reference Number: Not a repeat finding; Criteria: In accordance with Tile 24 CFR § 981.405 and 891.605 All disbursements from the reserve must be approved by HUD.; Statement of Condition: During our review of replacement reserve withdrawals we noted one withdrawal occurred which did not receive proper approval from HUD.; Cause: The management company failed to receive proper approval from HUD for one withdrawal during the year. A portion of the funds, totaling $10,000, previously considered as part of the operating reserve were released to the replacement reserve account in April 2, 2019, as approved by HUD. The management company withdrew $10,500 from the account during 2023 without obtaining HUD approval, $500 of the withdrawal is not restricted.; Effect or Potential Effect and Perspective: The replacement reserve was underfunded by $10,000 as of December 31, 2023.; Auditor Non-Compliance Code: A - Unauthorized withdrawals from replacement reserve account; Questioned Costs: No questioned costs.; Reporting Views of Responsible Officials: Management agreed with the finding and has implemented a corrective action plan.; Please identify the property(s) and associated questioned costs this finding applies to: White River Senior Housing; FHA/Contract Number: 127-EE055; Context: Based on the review replacement reserve documentation, management did not obtain HUD approval as part of the reserve withdrawal process for all withdrawals.; Recommendation: We encourage management to transfer the unapproved withdrawal totaling $10,000 back to the replacement reserve and transfer the remaining bank account balance, previously considered the operating reserve to the replacement reserve account and ensure the fund restriction is clear and that no replacement reserve funds are withdrawn without HUD approval.; Auditor's Summary of Auditee's Comments on the Findings and Recommendations: Management agrees with the auditor.; Response Indicator: Agree; Response: Management agreed with the finding and has implemented a corrective action plan.

Corrective Action Plan

Management will restore funds to replacement reserve account when project funds become available. Management will review reserve withdrawals prior of release of funds from the reserve account to verify the release is approved by the HUD account executive and the release is not a duplicate. The approval will be reviewed by the person initiating the request and verified by the project bookkeeper.

Categories

HUD Housing Programs Reporting

Other Findings in this Audit

  • 1075181 2023-001
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
14.157 Supportive Housing for the Elderly $2.78M