Finding 1131526 (2024-001)

2024-001 - Special Tests and Provisions - Replacement Reserve Funding Agency: United States Department of Housing and Urban Development Title: Supportive Housing for Persons with Disabilities Assistance Listing Number: 14.181 Questioned Costs: None How Questioned Costs Were Computed: N/A Criteria or Specific Requirement: Old Middleton Road Apartments, Inc. (the "Project") was required to 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. An amount as required by the Department of Housing and Urban Development (HUD) will be deposited monthly in the reserve fund. All disbursements from the reserve must be approved by HUD. Condition: During our audit procedures we noted that the Project’s monthly deposits for 2024 were less than the amount required by HUD. Additionally, there was a withdrawal from the replacement reserve for which the Project was not able to provide HUD approval support. Context: The Project had turnover in their residential department during 2024, which resulted in reorganization of job responsibilities. Cause: Due to the turnover, the Project failed to properly oversee and manage the activity of the replacement reserve account. Effect: Without proper oversight and management of the replacement reserve account, the Project did not ensure it was complying with requirements of the program.. Auditor's Recommendation: Wipfli recommends that the Project closely reviews the replacement reserve activity in comparison to HUD requirements to ensure that they are in compliance with the requirements. View of Responsible Official: We agree with the finding and are committed to a corrective action.