Finding 516700 (2024-003)

Material Weakness

Requirement

Questioned Costs

Year

2024

Accepted

2024-12-23

Audit: 334688

Organization: Verdugo Tower, Inc. (CA)

Auditor: Kkaj LLP

AI Summary

Core Issue: The Company withdrew $196,334 from the Replacement Reserve without prior approval from HUD using Form HUD-9250.
Impacted Requirements: Non-compliance with HUD regulations regarding fund withdrawals from the Replacement Reserve.
Recommended Follow-up: Transfer the $196,334 back to the Replacement Reserve to rectify the unauthorized withdrawal.

Finding Text

Statement of Condition: HUD requires that the Company receive HUD’s approval on Form HUD-9250 prior to withdrawing money from the Replacement Reserve. During the year the Company withdrew $196,334 from the Replacement Reserve and transferred the cash to the Company’s operating bank account. Criteria: The Company did not obtain Form HUD-9250 prior to withdrawing the funds from the Replacement Reserve. Effect: The Company has more cash in its operating account and less cash in the Replacement Reserve than it should. Cause: The Company erroneously transferred the money from a Replacement Reserve account to the operating account. Recommendation: The Company should transfer $196,334 from the operating account back to the Replacement Reserve account. Non-compliance code: A – Unauthorized withdrawal form replacement reserve account.

Corrective Action Plan

Reporting views of responsible officials: The Company will repay the erroneous withdrawal from the Replacement Reserve. Auditors' summary of auditee's comments on the findings and recommendations: The Company repaid the erroneous withdrawal from the Replacement Reserve. On August 13, 2024 the Company transferred $196,334 to the Replacement Reserve. Response indicator: Agree. Response: The Company repaid the erroneous withdrawal from the Replacement Reserve on August 13, 2024. Completion date: August 13, 2024

Other Findings in this Audit

516698 2024-001

Material Weakness
516699 2024-002

Material Weakness
1093140 2024-001

Material Weakness
1093141 2024-002

Material Weakness
1093142 2024-003

Material Weakness

Programs in Audit

ALN	Program Name	Expenditures
14.157	Supportive Housing for the Elderly	$550,143