Federal expenditures for the mortgage insurance program represent the principal balance of the insured loan as of July 31, 2024. The loan is outstanding from a previous period. The federal government imposes continuing compliance requirements on this loan. The loan balance at July 31, 2025 was $4,987,683.
Significant Deficiency and Noncompliance – Unapproved General Operating Reserve Withdrawal Department of Housing and Urban Development Assistance Listing Number 14.126 – Mortgage Insurance - Cooperative Projects Significant Deficiency and Noncompliance Category of Finding – Special Tests and Provisions Criteria - The HUD regulatory agreement requires the Cooperative to establish and maintain a general operating reserve. Withdrawals from the reserve in excess of 20% of the balance of the previous year-end require prior written approval by HUD. Condition - Excess withdrawals of $52,850 were taken from the general operating reserve without obtaining the proper HUD approval. Cause - The Cooperative did not obtain the proper HUD approval to withdraw the general operating reserve funds in excess of 20% of the balance of the previous year-end. Effect - The Cooperative was out of compliance with their HUD regulatory agreement at July 31, 2025. Recommendation - We recommend that the Cooperative implement a control process to ensure adherence to the regulatory agreement and obtain the proper HUD approval to withdrawal general operating reserve funds. Auditee’s comment - The Cooperative will make deposits to the general operating reserve to meet the HUD regulatory agreement. The management agent will implement a process to ensure withdrawals are made as required by the regulatory agreement. Status - Unresolved
Significant Deficiency and Noncompliance – Required Payments to General Operating Reserve Department of Housing and Urban Development Assistance Listing Number 14.126 – Mortgage Insurance - Cooperative Projects Significant Deficiency and Noncompliance Category of Finding – Special Tests and Provisions Criteria - The HUD regulatory agreement requires the Cooperative to deposit monthly payments at 3% of annual member carrying charges until the balance of the reserve exceeds 15% of current annual member carrying charges. The required deposit may be reduced to 2% of annual member carrying charges until the balance of the reserve exceeds 25% of annual member carrying charges. Condition - Due to withdrawals from the general operating reserve in 2025, the reserve balance fell below 25% of annual member carrying charges and deposits were not continued. Cause - The Cooperative did not make monthly deposits to the general operating reserve in accordance with the HUD regulatory agreement. Effect - The Cooperative was out of compliance with their HUD regulatory agreement at July 31, 2025, because the general operating reserve was underfunded. Recommendation - We recommend that the Cooperative implement a control process to ensure adherence to the regulatory agreement and make the required monthly deposits to the general operating reserve. Auditee’s comment - The Cooperative will make deposits to the general operating reserve to meet the HUD regulatory agreement. The management agent will implement a process to ensure deposits are made as required by the regulatory agreement. Status - Unresolved