Audit 44874

Finding 2022-003: Replacement Reserves Section 202 Capital Advance Program, Assistance Listing 14.157 Material Weakness/Noncompliance Special Tests and Provisions Repeat Finding ? Finding 2021-002 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: During our prior audit we noted the Project had not deposited $4,000 it was required to deposit into the replacement reserves. During the current year, the total required deposits were $24,000 on only $14,000 was deposited leaving a cumulative deficiency of $14,000. Cause: The Project did not deposit the required monthly amount of $2,000 for the entire year due to cash flow issues and was unable to deposit the $4,000 deficiency from the prior year for the same reason. Effect or Potential Effect: The Project was deficient in the amount of deposits required to be deposited in the replacement reserve by $14,000. Recommendation: The Project should make the required contributions monthly and fund the prior year deficiency of $5,544. 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 2022-003: Replacement Reserves Section 202 Capital Advance Program, Assistance Listing 14.157 Material Weakness/Noncompliance Special Tests and Provisions Repeat Finding ? Finding 2021-002 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: During our prior audit we noted the Project had not deposited $4,000 it was required to deposit into the replacement reserves. During the current year, the total required deposits were $24,000 on only $14,000 was deposited leaving a cumulative deficiency of $14,000. Cause: The Project did not deposit the required monthly amount of $2,000 for the entire year due to cash flow issues and was unable to deposit the $4,000 deficiency from the prior year for the same reason. Effect or Potential Effect: The Project was deficient in the amount of deposits required to be deposited in the replacement reserve by $14,000. Recommendation: The Project should make the required contributions monthly and fund the prior year deficiency of $5,544. 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.