Audit 3215

Finding 2023-004: Replacement Reserves Section 202 Capital Advance Program, Assistance Listing 14.157 Material Weakness/Noncompliance Special Tests and Provisions Repeat Finding – Finding 2022-003 Criteria: The Project is required to establish and maintain a replacement reserve to aid in the funding extraordinary maintenance, repair and replacement of capital items. An amount as required by HUD will be deposited monthly in the reserve fund. All disbursements from the reserve must be approved by HUD (24 CFR§891.405 and 891.605). Condition: The prior audit noted the Project had deposited a total of $12,456 for the year ended March 31, 2022, however the Project is required to deposit $18,000 annually. During the year ending March 31, 2023, the Project was required to deposit the $5,544 deficiency from the prior year plus the $18,000 for the current year. The Project had a cumulative deficiency of $1,386 at March 31, 2023. Cause: The Project did not deposit the required monthly amount of $1,500 for the entire year due to cash flow issues. Effect or Potential Effect: The Project was deficient in the amount of deposits required to be deposited in the replacement reserve by $1,386. Recommendation: The Project should make the required contributions monthly and fund the prior year deficiency of $1,386. In the future, if cash flow does not allow enough funds to make the deposit, the Project can request from HUD the monthly deposits be suspended. View of the Responsible Officials of the Auditee: Management agrees with the finding.

Finding 2023-004: Replacement Reserves Section 202 Capital Advance Program, Assistance Listing 14.157 Material Weakness/Noncompliance Special Tests and Provisions Repeat Finding – Finding 2022-003 Criteria: The Project is required to establish and maintain a replacement reserve to aid in the funding extraordinary maintenance, repair and replacement of capital items. An amount as required by HUD will be deposited monthly in the reserve fund. All disbursements from the reserve must be approved by HUD (24 CFR§891.405 and 891.605). Condition: The prior audit noted the Project had deposited a total of $12,456 for the year ended March 31, 2022, however the Project is required to deposit $18,000 annually. During the year ending March 31, 2023, the Project was required to deposit the $5,544 deficiency from the prior year plus the $18,000 for the current year. The Project had a cumulative deficiency of $1,386 at March 31, 2023. Cause: The Project did not deposit the required monthly amount of $1,500 for the entire year due to cash flow issues. Effect or Potential Effect: The Project was deficient in the amount of deposits required to be deposited in the replacement reserve by $1,386. Recommendation: The Project should make the required contributions monthly and fund the prior year deficiency of $1,386. In the future, if cash flow does not allow enough funds to make the deposit, the Project can request from HUD the monthly deposits be suspended. View of the Responsible Officials of the Auditee: Management agrees with the finding.