Finding Text
Criteria: The provision of the HUD Regulatory Agreements require the Group establish and maintain replacement
reserve funds for each project in a separate interest-bearing bank account and deposit an identical amount on a
monthly basis, as stated in each project’s most recent HUD 9250 which includes any changes in monthly deposits.
Condition and Context: During the testing performed over the five HUD projects and related replacement reserve required monthly deposits, we noted that lump sum deposits for each project were made during the months of October and November to the replacement reserve account instead of monthly deposits being made, as required by HUD. In addition, we noted that the total annual deposit to the replacement reserve for one project was under deposited by $23.
Effect or Potential Effect: The Group is not in compliance with HUD Regulatory Agreements.
Cause: Administrative oversight on the part of the Group's management resulted in the items noted above.
Questioned Costs: None
Recommendations: We recommend the Group comply with their HUD Regulatory Agreements and implement
appropriate processes and internal controls, including an independent monthly review, to identify the correct
monthly replacement reserve amount for each project and make those deposits monthly in accordance with federal requirements.
View of Responsible Officials: The Group agrees with this finding. The retroactive deposit for underpayment to
the replacement reserve will be deposited and monthly deposits will be made monthly moving forward effective May 1, 2025.