Federal expenditures for the mortgage insurance program consist of loans outstanding from previous years for which the lender imposes continuing compliance requirements. The balance of the loan outstanding at February 28, 2026 was $10,596,392.
Significant Deficiency and Noncompliance – Supplemental Reimbursement for Replacement 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 HUD approval of all replacement reserve withdrawals. When replacement reserve funds are used for eligible expenditures and those expenditures are also reimbursed by a third party or supplemental source, the reimbursed amounts must be returned to the replacement reserve. Condition - The Cooperative withdrew $114,776 from its replacement reserve to pay for exterior painting and caulking costs. The cost of this expenditure was previously assessed directly to the Cooperative Members, and the Cooperative received reimbursement through member assessments totaling $114,764. Cause - The Cooperative did not return the reimbursed amount of $114,764 to the replacement reserve during the year ended February 28, 2026. Effect - The Cooperative was out of compliance with their HUD regulatory agreement at February 28, 2026. Recommendation - We recommend that the Cooperative implement a control process to ensure adherence to the regulatory agreement and return reimbursed funds to the replacement reserve. Auditee’s comment - The Cooperative returned the reimbursed funds to the replacement reserve. The management agent will implement a process to ensure that future reimbursed funds are returned to the replacement reserve as required by the regulatory agreement. Status - Resolved