Finding 1156786 (2024-001)

Section 202 Capital Advance (CFDA #14.157) Type of Finding: Significant Deficiency/Noncompliance Criteria: The Regulatory Agreement requires the Project to make all required deposits to the replacement reserve account. Condition: The Project did not make all the required deposits in the current year. Cause: The Project’s controls over replacement reserve were not working properly. Effect or Potential Effect: Failure to make required deposits in noncompliance that could, at the discretion of HUD, result in the capital advance being called due, which would require the Project to reimburse HUD for the advance and pay interest. Perspective Information: The Project did not make all the required replacement reserve payments into the replacement reserve account. This is not a systemic issue that cannot be rectified. Recommendations: The Project should make the additional payment to meet the requirement and should implement a process to ensure that all required payments have been made to the replacement reserve account to ensure compliance with their Regulatory Agreement. Views of Responsible Officials: Management concurs with the finding. Management will make an additional deposits to meet requirements and implement controls to ensure that all required deposits are made.