Finding Text
Criteria
HUD regulatory agreement for Section 202 Supportive Housing for the Elderly requires that the project make timely monthly deposits to its replacement reserve.
Condition
During the year ended December 31, 2023, the project did not make the required monthly deposits to the replacement reserve in the amount of $66,000 as $5,500 was not made timely. The project is required to make timely monthly deposits to the reserve in the amount of $5,500 per month.
Cause
The project does not generate sufficient cash flow to make the required monthly deposits.
Effect or Potential Effect
Failure to make monthly payments resulted in underfunding the replacement reserve and a violation of the regulatory agreement.
Questioned Costs
None.
Context
During 2023, management resumed making deposits into the reserve for replacement; the deposits were not made timely and only eleven deposits were made as of December 31, 2023. The twelfth deposit was made in February 2024.
Identification as a Repeat Finding
This is a repeat finding (see prior year finding number 2022-001).
Recommendation
Management should review the project budget to ensure that the replacement reserve is funded timely and in accordance with the terms of the regulatory agreement.
Auditor Noncompliance Code: N - Reserve for replacement deposits.
Finding Resolution Status: Completed.
Views of Responsible Officials
The last amount of $5,500 of the reserve funding for 2023 was missed and then accounted for in February 2024 to fully fund for the 2023 year.