Finding Text
Criteria: Per the Compliance Requirement, “Owner shall not, without the prior written consent of HUD, convey, assign, transfer, dispose of, or encumber any of the mortgaged property or permit the conveyance, transfer, or encumbrance of such property.
Condition: The Corporation entered into two Paycheck Protection Program Loans (‘PPP”) for $49,775 and $44,235, respectively. Both PPP loans were not forgiven due to not applying for forgiveness and/or not providing the banks' documentation needed to complete the forgiveness applications. Due to the PPP loans not being approved by HUD, payment of principal and interest of the PPPs cannot be paid with current Project funds. Therefore, PPP loans are Unauthorized Acquisitions of Liabilities
Cause: Due to the turnover of the Management Agent-Owner, there were no procedures in place to monitor and/or apply for the PPP Loan Forgiveness Applicant.
Effect: As of December 31, 2021, the PPP Loans totaling $94,010 are not unforgiven and must be repaid by the Corporation and not out of the Project’s contract rents.
Recommendation: We recommend that the Corporation contact banks, which are PNC-$44,235 and Cross River Bank-$49,775 requesting PPP loan forgiveness due to financial hardship and/or submit the PPP Loan Forgiveness Application for both loans.
Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.