Finding Text
2024-002 HUD Approval Process for Residual Receipts Withdrawal
Program Name/Assistance Listing Title: Supportive Elderly Housing Section 202
Federal Assistance Listing No: 14.157
Federal Agency: U.S. Department of Housing and Urban Development
Type of Finding: Federal Award Finding
Compliance Requirements: Special Tests and Provisions - Residual Receipts
Finding Resolution Status: In Process
Information on Universe Population Size: 1
Sample Size Information: 1
Criteria: In accordance with the 2024 Compliance Supplement and 24 CFR sections 891.400(e)
and 891.600(e), any surplus cash in the project funds account (including earned interest) at the
end of the fiscal year must be deposited in a federally insured account within 90 days following
the end of the fiscal year. Withdrawals from this account may only be made for project purposes
and must receive prior approval from HUD.
Condition: As part of the 2024 Compliance Supplement procedures, it was noted that a
withdrawal of $12,195 was made from the residual receipts account in February 2024 however,
no approval from HUD was obtained prior to the said withdrawal.
Cause: The Project withdrew funds to cover financial obligations, unaware that prior HUD
approval was required. They sought guidance, but due to a staff transition at HUD in April 2024,
they were unable to get timely clarification.
Potential Effect of Condition: Withdrawals from the residual receipts account without prior
HUD approval may be considered noncompliant with federal regulations. HUD may require
further review, guidance, or corrective action, such as replenishment of funds if necessary.
Questioned Costs: $12,195
Reporting Views of Responsible Officials: The Project agrees with the findings and
recommendations and will adhere to the corrective action plan.
Context: During the audit review of compliance with HUD regulations, it was noted that the
Project withdrew funds from the residual receipts account to meet financial obligations. At the
time of the withdrawal, the Project was not aware that prior HUD approval was required. Efforts
were made to seek guidance from HUD’s Account Executive; however, due to a transition in
personnel following the official’s resignation in April 2024, the Project did not receive timely
clarification regarding the approval process. As a result, the withdrawal was made without
obtaining the necessary authorization.
Recommendation:
1. Communicate with HUD: Notify HUD of the withdrawal, provide supporting
documentation, and request guidance on next steps.
2. Replenish Funds (If required): If HUD requires repayment, explore available funding
sources to restore the withdrawn amount.
3. Enhance Documentation: Maintain a clear record of all communications with HUD
regarding residual receipts approvals.
4. Strengthen Internal Procedures: Implement a policy ensuring HUD approval is obtained
before processing any withdrawals.
5. Designate a Compliance Contact: Identify and establish a new HUD point of contact to
facilitate future approval requests.
6. Improve Monitoring Controls: Develop a tracking system to oversee fund withdrawals
and prevent similar occurrences in the future.
Management Response: Following the advice of the previous accountant, we withdrew funds
from the residual receipts account to cover financial obligations, as the account had remained
stagnant. Due to cash flow issues, we made the withdrawal in good faith but were not aware that
prior HUD approval was required. Additionally, the assigned HUD executive had already
resigned, which delayed our ability to obtain proper guidance.
We acknowledge the findings and recommendations. To prevent future noncompliance, we will
ensure that all residual receipts withdrawals receive prior HUD approval, maintain proper
documentation, designate a compliance contact for HUD communications, and strengthen
monitoring controls to track fund withdrawals.