Finding 7099 (2023-001)

Finding # 2023-001 Federal Grantor: U.S. Department of Housing and Urban Development AL # / Program : 14.157 - Supportive Housing for Elderly Type of Finding: Federal Award Finding Finding Resolution Status: Resolved 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' to loans from other entities. Statement of Condition: The project made interest payments using project funds from the operating account to the City of Walnut Creek $23,666 and the County of Contra Costa $19,363. Cause: The Owner used project assets from the operating account to make interest payments when HUD approved on form HUD-9250 the use of funds from the Residual Receipts Fund. 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: $43,029 Reporting Views of Responsible Officials: Agree with finding. Context: Note Payable to County of Contra Costa - Annual payments of principal and interest equal to 45% of 75% of available residual receipts, subject to approval from HUD. Note payable to the City of Walnut Creek - Annual payments of principal and interest equal to 55% of 75% of available residual receipts, subject to approval from HUD. Recommendations: We recommend the Owner review controls over the use of project funds. We recommend that the project make approved distributions of residual receipts from the Residual Receipts Fund. Auditor's Summary of the Auditee's Comments on the Findings and Recommendations: The operating account was refunded the $43,029 on 12/7/2023 with funds from the Residual Receipts Funds. Controls have been put in place to prevent the unauthorized distribution of income or project assets. Response Indicator Agree Completion Date 12/7/2023 Response The operating account was refunded the $43,029 on 12/7/2023 with funds from the Residual Receipts Funds. Controls have been put in place to prevent the unauthorized distribution of income or project assets.