Finding Text
Finding 2023-004: Underfunded Resident Security Deposit Account
Department of Agriculture
Federal Program: Section 538 Rural Rental Housing Guaranteed Loans
FALN: 10.438
Significant Deficiency
Criteria: The RD loan agreement for Spicewood Garden Apartments requires the Partnership to
maintain a segregated resident security deposit account that, at all times, remains at least equal to
or greater than the resident security liability account.
Condition: The Partnership’s resident security deposit account is under-funded by $2,442 during
the year ended December 31, 2023.
Cause: The Corporation and third-party management did not have a policy and procedures to
comply with the compliance requirement above.
Effect: The Partnership is in violation of the RD loan agreement.
Recommendation: Management should immediately fully fund the resident security deposit
account to its required amount. Policy and procedures need to be developed to ensure the security
deposits are fully funded.
Views of Responsible Officials and Corrective Actions: Management has since fully funded the
security deposit account and established procedures to ensure that the account is properly funded
moving forward.