Finding Text
Finding 2023-004 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ended June 30, 2023, the Corporation only made ten of the required monthly deposits to the replacement reserve account resulting in delinquent deposits for the current year of $1,482. Furthermore, the Corporation also has delinquent deposits of $1,482 from the prior year resulting in total delinquent reserve deposits of $2,964 as of June 30, 2023. Criteria: HUD Handbook 4370.2 REV-1 CHG-1, Chapter 2, Section 2-7 and the Regulatory Agreement specifies that the replacement reserve account must be maintained in a separate account, with monthly deposits made as required.
Effect: Noncompliance with HUD regulations.
Cause: Vacancy and cash flow shortages.
Context: A test to compare actual deposits to the replacement reserve account to the required deposits to the replacement reserve account was performed. During the year ending June 30, 2023, only ten of the required deposits were made to the replacement reserve account.
Questioned Costs: N/A
Recommendation: We recommend that management and the board of directors work to improve occupancy and submit special claims requests to HUD for vacant units to improve cash flow to ensure timely monthly deposits to the replacement reserve account are made as required.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the required reserve deposits were not made. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company is increasing advertising to fill vacancies and submitting special claims requests to improve the cash flow.