From Les Sparks:

In my opinion, those funds were never project funds and were not subject to surplus cash requirements. However, it is a bit of a grey area, so HUD May not agree. The worst case scenario would be to simply hold on to the funds until the next calculation and then take the surplus cash. However, if the client did not want to wait, I could see not giving them a finding. If it was never reported int he project, HUD would never know. What I mean by that is that if we determined that this was entity cash, there was never a need to place the money in the project’s operating account. That would avoid everything. After all, the payment was to the partners to agree to sell the project. The money was never defined to be project cash.

Les