Finding 500104 (2023-001)

- Repeat Finding
Requirement
N
Questioned Costs
-
Year
2023
Accepted
2024-09-30
Audit: 322940
Organization: Shiloh Manor, Inc. (CT)
Auditor: Cohnreznick LLP

AI Summary

  • Core Issue: Shiloh Manor, Inc. has not complied with HUD funding requirements, failing to repay $40,239 and transferring $9,000 from reserve funds without reimbursement.
  • Impacted Requirements: Non-compliance with HUD Handbook 4571.3 regarding the use of reserve for replacement funds.
  • Recommended Follow-Up: Begin monthly repayments of $1,500 for the $9,000 loan and finalize the loan waiver for the $40,239 with HUD.

Finding Text

Criteria In accordance with HUD Handbook 4571.3, Section 202 Supportive Housing for the Elderly, funds may only be used with the approval of HUD. Condition As of December 31, 2023, management had not repaid $40,239 due to reserve for replacement. Additionally, during 2022, the property transferred $9,000 of reserve for replacement funds to operations to fund payroll and operating payables which was not reimbursed as of December 31, 2023. Cause Inadequate cash flow to fund operations and return of funds to reserve for replacement. Effect or Potential Effect Shiloh Manor, Inc. is not in compliance with the funding requirement of the reserve for replacement. Questioned Costs None. Context On December 31, 2017, HUD had approved a loan to operations from the reserve for replacement of $40,239 to be repaid upon receipt of the past due subsidy. When the past due subsidy was received the property was unable to repay the loan because of an unexpected increase in vacancies as a result of tenant turnover. During 2022, the property transferred $9,000 of reserve for replacement funds to operations to fund payroll and operating payables; the funds have not been reimbursed as of December 31, 2023. Identification as a Repeat Finding This is a repeat finding (see prior year finding number 2022-001). Recommendation Management should start making monthly repayments on the $9,000 loan as established by HUD. Management should work with HUD to execute the loan waiver for the delinquent amount of $40,239. Auditor Noncompliance Code: N - Reserve for replacement deposits. Finding Resolution Status: In process. Views of Responsible Officials The transfer from reserve of $9,000 was not returned as of 2023. A conversation with HUD on May 29, 2024, lead to a decision being made with a payment plan of $1,500 per month to start on June 1, 2024. As of December 31, 2023, there was a meeting with HUD representatives on March 23, 2023, which resulted in the decision for the waiver of the balance owed to the reserve of the $40,239. We are awaiting documentation from HUD on this decision.

Corrective Action Plan

a. Comments on the Finding and Recommendation We concur with the auditors finding as follows: In 2017, HUD had approved a loan to operations from the reserve for replacement to be repaid upon receipt of the past due subsidy. When the subsidy was received, the property was unable to repay the loan because of an unexpected increase in vacancies as a result of tenant turnover. The loan has not yet been repaid. During 2022, property transferred $9,000 of reserve for replacement funds to operations to fund payroll and operating payables; the funds have not been reimbursed as of December 31, 2023. b. Action(s) Taken or Planned on the Finding The 2022 transfer from reserve of $9,000 was not returned as of 2023. A conversation with HUD on May 29, 2024, lead to a decision being made with a payment plan of $1,500 per month to start on June 1, 2024. As of December 31, 2023, there was a meeting with HUD representatives on March 23, 2023, resulted in the decision for the waiver of the balance owed to the reserve of the $40,239. We are awaiting documentation from HUD on this decision.

Categories

HUD Housing Programs Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 500105 2023-002
    Material Weakness Repeat
  • 500106 2023-003
    Significant Deficiency Repeat
  • 500107 2023-004
    Material Weakness
  • 1076546 2023-001
    - Repeat
  • 1076547 2023-002
    Material Weakness Repeat
  • 1076548 2023-003
    Significant Deficiency Repeat
  • 1076549 2023-004
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
14.157 Supportive Housing for the Elderly $3.29M