Finding Text
Information on universe/sample size: It was noted during testing that the Property is not utilizing the replacement reserves for its main purpose.
Identification of repeat finding: No
Condition: The Property should be utilizing its restricted funds from the replacement reserve.
Criteria: The replacement reserve is to aid in funding extraordinary maintenance and repair costs of the property.
Effect: Cash flow issues for the property, with high balances in the replacement reserve.
Context: Auditor noted low operating cash balances and high related party payables, but a significant balance for the replacement reserve account.
Cause: Significant turnover at the management agent and lack of monitoring/review.
Recommendation: Regularly assess reserve balances and implement a procedure in order to consistently utilize the funds of the replacement reserve as outlined by HUD.