Finding Text
Finding # 2024-002
Federal Grantor: U.S. Department of Housing and Urban Development
AL # / Program: 14.181 - Supportive Housing for Persons with Disabilities
Type of Finding: Federal Award Finding - Activities Allowed or Unallowed and Special Tests and Provisions
Finding Resolution Status: In Process
Information on Universe Population Size: N/A
Sample size information: N/A
Criteria: Capital Advance Program Regulatory Agreement on form HUD-92466-CA paragraph 7. (d) prohibits the 'distribution of income or project assets'.
Statement of Condition / Context: The project made interest payments using project funds from the operating account to the California Department of Housing and Community Development (HCD) totaling $4,034. The project made payments using project funds from the operating account for legal services of the Owner/Agent totaling $9,818. Owner/Agent should use funds in the Debt Service Reserve to pay the HCD annual payment. Legal services not directly benefiting the project should be paid by Owner/Agent funds.
Cause: A lack of processes and controls over the use of project funds from the operating account allowed for project funds to pay Owner/Agent expenses.
Effect or Potential Effect: The project is out of compliance with the Capital Advance Program Regulatory Agreement on form HUD-92466-CA.
Auditor Non-Compliance Code: H - Unauthorized distribution of project assets
Questioned Costs: $13,852
Recommendations: We recommend the Owner/Agent refund the project operating account the questioned costs and review its processes and controls over the use of project funds.
Response Indicator: Agree
Completion Date: 3/7/2025
Reporting Views of Responsible Officials: By March 7, 2025, HCEB will request HCD approval to refund the project operating account from the project debt service reserve account. Once HCD approval is received, the transfer will occur. Going forward, approval requests, payments, and transfers from the debt service reserve account will occur in Q4 of each fiscal year.