| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
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| #7240 | Closed | public | Multifamily | Les Sparks |
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We have a nonprofit, subsidized HUD project (section 202) that requested some funds from the replacement reserve in October 2017 for roof repairs based on an estimate. It appears that the repairs may have been started before year-end but they were not billed and had not paid anything out from that reimbursement. The issue is that what they have in their operating cash account as of 12/31/17 is less than what the reimbursement is. Thus, they essentially “borrowed” from this reimbursement to cover other operating expenses. They “reimbursed” this deficit in January 2018 with money received from their HUD voucher. So they will have enough to pay the bill from the roofing company when it comes due. Obviously, this is an issue but we are trying to figure out how to report it. Is it a compliance finding in the major program report or would it be better suited as a control finding in the Yellow Book report (similar to using restricted resources for unrestricted purposes)? If the former, the only support for the compliance finding I can see is in HUD Handbook 4350.1 REV-1, Chapter 4, 4-28. In other words, they probably should’ve gotten approval from “borrowing” from the fund but I’m sure they weren’t monitoring their cash account enough to know that they had actually done this (and should’ve sought approval). Thoughts? |
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From Les Sparks: Let me restate this slightly. Client requested the R4R funds upfront. Then begins the process of purchasing these services. As it nears year end, the client has all this money in the operating account and has not segregated the the cash, so it uses this money in operations. Then after year end they refund they get whole again with all the money being replaced. If these are the facts, I do not have any real problem with what happened as long as they can pay for the services the R4R money was requested for. Monies that were from R4R still in operations should also have been included as payables in the surplus cash calculation. To me it is not really that big of an issue for a finding as long as they actually purchased the items they requested the R4R money for. |