Finding Text
Criteria - Replacement Reserves: Compliance Requirement - Owners shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally insured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund (Regulatory Agreement, item 5 A). All disbursements from the reserve must be approved by HUD (24 CFR sections 891.405 and 891.605). Condition: The Project did not make five of the required deposits to the replacement reserve account. Effect: The Project is not in compliance with the Regulatory Agreement. Context: The population included the 12 monthly cash disbursements from the operating account. Cause: There was not enough cash on hand to remit the required deposits. Repeat Finding: Item 2022-001. Recommendation: The Organization should have procedures in place to ensure deposits are completed on a timely basis in accordance with the requirements. Views of Responsible Officials and Planned Corrective Actions: The Organization acknowledges that the required replacement deposits had not been made due to cash flow constraints. The entity is taking steps to ensure that delinquent replacement reserve deposits are made as soon as is practicable.