FAC Explorer

Finding 523601 (2023-001)

-
Requirement
N
Questioned Costs
-
Year
2023
Accepted
2025-02-19
Audit: 342991
Organization: Iha, INC (CT)
Auditor: Visconti & Associates PC

AI Summary

  • Core Issue: Timely deposits to the replacement reserve were missed, totaling $7,927 for seven months.
  • Impacted Requirements: Failure to maintain the replacement reserve as mandated by HUD could delay necessary capital improvements and repairs.
  • Recommended Follow-Up: Enhance the HUD invoicing process and provide staff training on timely deposit requirements to prevent future issues.

Finding Text

2023-001 SPECIAL TESTS AND PROVISIONS – REPLACEMENT RESERVE Grantor: U. S. Department of Housing and Urban Development – HUD Federal Program Name: Supportive Housing for Persons with Disabilities (Section 811) FALN Number: 14.181 Pass-through Entities: N/A HUD Project Number: 017-HD015 Criteria: Owners shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally insured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund (Regulatory Agreement item 5(a)). All disbursements from the reserve must be approved by HUD (24 CFR section 891.405). Condition: The required deposits were not made timely during the year and, as of year-end, deposits for seven months, totaling $7,927, had not yet been made to the reserve account. Questioned Costs: None. Effect: Certain necessary purchases for capital improvements and major repairs could be delayed or foregone because the funds were not deposited in the reserve as required. Cause: The property manager appears to have had some cash flow issues during the year as a result of delayed invoicing to HUD that was in part due to the use of a third-party vendor in the billing process. This, in turn, resulted in a longer wait for receipt of the related HUD subsidy funds that constitute the bulk of the rental income generated by the property. Recommendation: Improvements to the HUD invoicing process should be considered to ensure that adequate cash flow is maintained. Additional training of relevant staff regarding the timely deposit requirements should also be considered. Views of Responsible Officials: A new in-house billing process that does not rely on a third party has been implemented since year-end, which should correct the cash flow issue. Additionally, all delinquent deposits that were due at December 31, 2023, were deposited in March 2024.

Corrective Action Plan

U.S. Department of Housing and Urban Development AUDIT FINDINGS: Finding Reference Number: 2023-001 Description of Finding: Homes with Hope, Inc. and Affiliate provides supportive housing via HUD Project Number 017-HD015, which requires the establishment and maintenance of a replacement reserve fund in accordance with its HUD Regulatory Agreement. The Project did not make the monthly deposits in a timely manner during the year ended December 31, 2023 as specified in the agreement, and seven months’ worth of deposits were delinquent as of December 31, 2023. This was due, at least in part, to cash flow issues that resulted from delays in the process that the Project’s property manager utilized during the period for invoicing HUD via a third-party vendor for the related rental subsidy funds. Statement of Concurrence or Nonconcurrence: Homes with Hope, Inc. and Affiliate concurs with this audit finding. Corrective Action: A new in-house billing process that does not rely on a third-party vendor has been implemented since year-end, which should eliminate the cash-flow issue, Additionally, all delinquent deposits that were due as of December 31, 2023, were deposited in March 2024. Name of Contact Person: Helen McAlinden President & Chief Executive Director 203-226-3426x14 hmcalinden@hwhct.org Projected Completion Date: Immediately

Categories

HUD Housing Programs Procurement, Suspension & Debarment Special Tests & Provisions Program Income

Other Findings in this Audit

Programs in Audit

ALN Program Name Expenditures
14.181 Supportive Housing for Persons with Disabilities $956,671
93.667 Social Services Block Grant $182,563
14.276 Youth Homelessness Demonstration Program $129,400
14.871 Section 8 Housing Choice Vouchers $81,966
14.218 Community Development Block Grants/entitlement Grants $60,500
97.024 Emergency Food and Shelter National Board Program $12,951
21.027 Coronavirus State and Local Fiscal Recovery Funds $7,019
14.238 Shelter Plus Care $5,230
21.019 Coronavirus Relief Fund $2,353