FAC Explorer

Finding 513867 (2023-002)

Material Weakness
Requirement
A
Questioned Costs
$1
Year
2023
Accepted
2024-12-11
Audit: 331885
Organization: Ministerial Alliance Retirement Center 042-Eh127 (OH)
Auditor: Clark Schaefer Hackett & CO

AI Summary

  • Core Issue: The management company withdrew $186,005 from the replacement reserve account without HUD approval.
  • Impacted Requirements: This action violates HUD regulations (24 CFR section 891.405) and jeopardizes compliance with the Regulatory Agreement.
  • Recommended Follow-Up: Management should strengthen internal controls to ensure future compliance with replacement reserve disbursement rules.

Finding Text

Criteria: All disbursements from the replacement reserve account must be approved by HUD (24 CFR section 891.405). Condition: During 2023, the management company without approval from HUD withdrew $186,005 from the replacement reserve account. Funds were used by the management company for purposes unrelated to the Project. Remaining $186,005 is included in accounts receivable, other. Questioned Costs: $186,005 Cause: Management company failed to comply with the replacement reserve disbursement requirement. Effect: The unauthorized withdrawal of funds from the replacement reserve account by the management company resulted in the Project not to be in full compliance with its Regulatory Agreement. Recommendation: Management should enhance its internal controls to ensure management company’s compliance with replacement reserve account.

Corrective Action Plan

Comments on Findings and Recommendations: Management concurs with the findings and auditors’ recommendations to enhance internal controls to ensure compliance with the HUD Regulatory Agreement. Action(s) Taken or Planned for amounts due back to the Project: The management company previously advised HUD that it is in the process of marketing and selling its affordable property portfolio. The management company has reached an agreement in principle with a buyer for the sale of a significant portion of its affordable property portfolio. The buyer has significant experience in the affordable housing industry and is well-positioned to own and manage these properties. The parties are in the process of drafting all necessary documents and will work with HUD on all necessary documentation and approvals promptly once the underlying documents are fully negotiated. The management company is confident that there will be sufficient funds at the conclusion of the collective transactions with the buyer for the (re)payment of amounts to address the Findings identified herein. The management company anticipates closings by the end of 2024.

Categories

Questioned Costs HUD Housing Programs Internal Control / Segregation of Duties

Other Findings in this Audit

  • 513866 2023-001
    Material Weakness
  • 513868 2023-003
    Material Weakness
  • 1090308 2023-001
    Material Weakness
  • 1090309 2023-002
    Material Weakness
  • 1090310 2023-003
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
14.195 Section 8 Housing Assistance Payments Program $675,856
14.157 Supportive Housing for the Elderly $622,755
14.191 Multifamily Housing Service Coordinators $31,132