Take immediate action to remove project bank accounts as security for the owner’s line of credit and, thereby put up to $100,000 to better use.
Publication Report
2018-PH-1006 | September 21, 2018
The Owner of Luther Towers II, Wilmington, DE, Did Not Manage Its HUD-Insured Project in Accordance With Its Regulatory Agreement and HUD Requirements
We audited Luther Towers II because it was a high-risk multifamily project that received low inspection and financial assessment scores on our multifamily risk assessment for projects within our region and we had never audited it. Our audit… moreRelated Recommendations
Housing
- Status2018-PH-1006-001-AOpenClosedClosed on August 22, 2023$2,136,849.00Questioned Costs
Recommendations with questioned costs identify costs: (A] resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B] that are not supported by adequate documentation (also known as an unsupported cost]; or (C] that appear unnecessary or unreasonable.
Provide documentation to show that disbursements totaling $2,136,849 and any bank transfers to the owner’s non-project accounts that occurred outside of our audit period were reasonable and necessary expenses for the operation of the project or repay the project from non-project funds for any amount that it cannot support.
Provide documentation to show that project funds are segregated in the project’s name, in accordance with the regulatory agreement and HUD requirements.
Submit a project owner’s or management agent’s certification, management entity profile, current budget and other required documentation to HUD for review and approval.
Develop and implement controls to ensure that the project complies with the regulatory agreement and applicable HUD requirements, including but not limited to policies and procedures for maintaining project funds in separate bank accounts in the project’s name, using project funds only for necessary expenses of the project, and reconciling bank accounts to the project’s computerized accounting records.
Provide training and technical assistance to the owner’s executive director and staff to ensure compliance with the terms of its regulatory agreement and applicable HUD requirements.