Finding Text
2023-4 Reserve for Replacement Deposits Not Made Timely or Not at All
Condition: The Project did not make the required deposit into the bank account on a monthly basis.
Deposits made from January 2023 through May 2023 were underfunded; however, were caught up in
June 2023. Additionally, deposits for the month of September 2023 and November 2023 were not made;
however, were caught up in December 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 HAP Contract, the Mortgagor will deposit an amount…per month unless a
different date or amount is approved in writing by HUD”.
Cause: The cause is undeterminable.
Effect: The Project is not in compliance with the Regulatory Agreement. The cash balance was overstated
by $1,073 related to deposits that were never made to this account. The balance was corrected during the
audit.
Recommendation: I recommend the Property make the required monthly deposits at the correct amount
according to the Regulatory Agreement.