Finding Text
Replacement Reserve: The Organization is required to make monthly deposits of $1,125 into a replacement reserve fund. We noted that 11 out of 12 of these deposits were made during the year. We also noted that the deposits that were made were made at irregular intervals rather than monthly.
Criteria: Rules governing HUD projects with a capital advance loan required that monthly deposits
be made into a replacement reserve account to aid in funding extraordinary maintenance and repair
and replacement of capital items.
Cause: Due to depositing funds to the reserve at irregular intervals.
Effect: The project did not comply with making monthly deposits to the replacement reserve.
Recommendation: A procedure should be documented that ensures the monthly replacement
reserve deposit is made.
Response and Corrective Action Planned: We will develop a procedure ensuring that the monthly
replacement reserve deposits are made timely.
Conclusion: Response accepted.