Finding Text
Schedule reference number 2025-001 - Title and AL Number of Federal Program: Section 8 Housing Assistance (AL 14.195) - Type of finding: Federal Award - Resolution Status: Resolved. - Population size: N/A - Sample size: N/A - Repeat finding: Yes. - Criteria: The regulatory agreement stipulates that all withdrawals exceeding $2,500 from the Reserve for Replacement Account need prior written consent of the lender. - Statement of Condition: Several withdrawals totaling $108,111 for emergency repairs and improvements, to cover payroll, pay audit fees and for other operating expenses were made from the Reserve for Replacement account without prior approval from the lender. - Cause: The Project had several major equipment failures and was short of cash to cover its monthly operating expenses. - Effect or Potential Effect: The Project is not in conformity with the terms of the regulatory agreement. - Auditor Non-Compliance Code: A. - Questioned costs: N/A. - Reporting views of responsible officials: Management was forced to draw funds from the Reserve for Replacement Account to cover the urgent repairs and other operating expenses. - Contract Number: 114-44098. - Context: The lack of prior approval for withdrawals was noticed at the time of performing the audit. - Recommendation: Management should obtain prior consent from lender for all withdrawals from the Reserve for Replacement Account exceeding $2,500. - Auditors' summary of auditee's comment: They are in agreement. Management has tried to rectify the deficiency by obtaining retroactive approval from the lender for the total amount withdrawn from the Reserve for Replacement Account, on April 30, 2025. - Proposed completion date: Completed. - Response: Management agrees with the finding, was aware of the requirement for prior approval and on April 30, 2025, and has obtained retroactive approval from the lender for the withdrawal of 108,111.