Finding 2026-001: Information on the Federal Program: Assistance Listing Number 14.157 – Supportive Housing for the Elderly (Section 202). HUD Contract #: PA26S911003. Compliance Requirements: Special Tests and Provisions. Type of Finding: Material Noncompliance. Criteria: Replacement Reserve – Owners shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally insured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund (Regulatory Agreement, item 5 A). All disbursements from the reserve must be approved by HUD (24 CFR sections 891.405 and 891.605). Condition: For the year ended June 30, 2026, only $26,333 of the required $27,696 for the year was deposited into the replacement reserve. Cause: There was a cash shortage for the project during the year. Effect or Potential Effect: As a result, Galilee Village Plus, Inc. was unable to meet the replacement reserve requirement for deposits during the year. Questioned Costs: $1,363 Context: Due to a cash shortage the Project was unable to fund all of the required monthly deposits for the year into replacement reserve. They have requested a budget increase and look to request disbursements from the replacement reserve to fund repairs and maintenance. Repeat Finding: No Recommendation: Galilee Village Plus, Inc. should continue to track the underfunding of the replacement reserve and make it whole once the cash flow increases. Views of Responsible Official: Due to a cash shortage at Galilee Village Plus, Inc. for which we requested a budget increase as well as a disbursement from the reserves, we were unable to make the cash payments. However, we are tracking the amount and booked the payable to be reimbursed. There are no findings to report in the Schedule of Prior Year Findings and Questioned costs.