Finding Text
Criteria: In accordance with a Regulatory Agreement with HUD dated September 23, 2003, the Project is required to maintain a reserve for replacements fund. Effective September 1, 2016, monthly deposits of $5,000 are required to be paid to a separate FDIC insured bank account and may be further invested in obligations of, or guaranteed by, the United States of America.
Condition: During fiscal 2024, the Project should have made nine monthly deposits from January to September 2024 for a total amount of $45,000. The Project did not make any of the required deposits during that time period.
Cause: HUD approved a suspension of required deposits from March 1, 2023 to December 1, 2023. The Project was to resume monthly deposits starting January of 2024 but failed to reinitiate automatic withdrawals.Effect: The reserve for replacements account was underfunded by $45,000 during the year causing the Project to not be in compliance with the Regulatory Agreement.
Recommendation: Management should fund the required deposits as soon as possible.
Management’s Views and Corrective Action Plan:
Management’s failure to fund the $5,000 monthly deposits was an oversight which was realized in December 2024. Payments to cover the missing deposits were made in December 2024 and January 2025. Automatic payments have been set up as of January 2025 and the Project is currently up to date.