Finding Text
2023-2 Reserve for Replacement Deposits Not Made or Not Made Timely
Condition: The Project did not make the required deposits into the bank account for September 2023 and October 2023. There were only 10 deposits made for the entire year of 2023.
Criteria: According to the Regulatory Agreement, “mortgagor will establish and maintain a reserve fund for replacements in a separate account in a bank…Concurrently with the effective commencement of rental assistance payments under the Project Rental Assistance Contract, the Mortgagor will deposit an amount…per month unless a different date or amount is approved in writing by HUD”.
Cause: The cause was undeterminable.
Effect: The cash balance was overstated by $4,000 related to deposits that were never made to this
account. The balance was corrected during the audit.
Recommendation: I recommend the Property make required monthly deposits according to the Regulatory Agreement each month