I have two properties that hold a partnership cash account on the balance sheet of the project under HUD account 1125.
My first question is regarding surplus cash. Would the balance held in account 1125 be included in the cash available for surplus cash calculations? Per the HUD chart of accounts S1300-010 (CASH) is the sum of 1120, 1170 and 1191 so I am assuming it is not included here. The description for S1300-030 (OTHER), however, includes the wording “… and the amount of funds segregated and held in a restricted asset account in excess of the amount required or approved by HUD (excluding any excess funds retained in Account
1191).” My initial thought is that this also does not include account 1125, but would like your input.
As an additional question regarding entity cash accounts, the property has received notice in prior years regarding surplus cash because the HUD representative is including increases in the entity cash account as a decrease in the available surplus cash, and decreases in the account as increases thereof. Is this practice something that you have encountered in the past? Our understanding is that the distributions consist of amounts segregated from the project (into the entity cash account in this case) and that the entity cash represents prior distributions from the project awaiting withdrawal.
That being said, the client is wanting to effectively “remove” the account from the project balance sheet and avoid future issues but is concerned that this will be treated as a distribution by HUD, rather than a complete withdrawal of prior distributions by the owners.
Thank you in advance for your guidance in this matter.