Section 232 Excess Distributions

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ID Status Date Public/Private Industry AHACPA Contact
#11086 Closed public Multifamily _General Support
Customer Reply

We have a client with multiple 232 projects where the 12/31/17 and 6/30/18 surplus cash calculations were done incorrectly (replacement reserves and escrow deposits were left out).  Distributions were made based on the incorrect calculation so now we have distributions in excess of surplus cash.  The projects under the 11/2002, 3/2013, and 6/2014 regulatory agreements.  All projects had positive surplus cash at 12/31/18.

  1.  Is this a finding or management comment?
    1. If this is a finding, is it a different finding for each calculation (i.e. 2 excess distributions, 2 findings)?
    2. If this is a finding, what is the dollar amount?   Is it the amount of the finding the excess distribution or the replacement reserve/escrow deposits that were omitted from the calculation?
  2. Do they need to repay the excess distribution since there is positive surplus cash at 12/31/2018?

I’ve attached the corrected surplus cash calculations so you can see the numbers.  Thank you very for your assistance.
Les Sparks

Hallie, a 232 project’s Regulatory Agreement never requires the owner to include principal, R4R or escrows in the calculation. All that it requires is mortgage interest.  Only non-232 Reg Agreements require that particular withholding.  Their calculations may be correct.

 

Les Sparks

AHACPA

(801) 547-0809

 

From: AHACPA Support <support@ahacpa.org>
Sent: Thursday, March 21, 2019 10:09 AM
To: les@ahacpa.org
Subject: Section 232 Excess Distributions [NEW]
Customer Reply

Thank you very much for your quick response. 

 

Now I have more questions.  I’m attaching the 11/2002 and 6/2014 regulatory agreements (the 3/2013 has the same wording as the 2014).  We have always interpreted the highlighted sections to mean principle, interest, replacement reserve
deposits and escrow deposits for the newer projects.  Is there consultation somewhere that contradicts these regulatory agreements that we are missing?

 

Thank you again for your help,

Hallie

 

From: AHACPA Support <support@ahacpa.org>
Sent: Thursday, March 21, 2019 1:03 PM
To: Hallie Markel <hmarkel@schmoyercpa.com>
Subject: [JUNK]Reply to: Section 232 Excess Distributions
Les Sparks

Hallie, I think I have answered this, but it has not closed.  If this is not correct, let me know.

 

Les Sparks

AHACPA

(801) 547-0809

 

From: AHACPA Support <support@ahacpa.org>
Sent: Wednesday, April 3, 2019 6:02 PM
To: les@ahacpa.org
Subject: Section 232 Excess Distributions

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