Finding Text
2024-003 - SPECIAL TESTS AND PROVISIONS Significant Deficiency/Other Noncompliance Criteria In accordance with HUD regulations, Owners shall 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. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund (Regulatory Agreement, item 5 A). All disbursements from the reserve must be approved by HUD (24 CFR sections 891.405 and 891.605). Condition Winslow Village II, Inc. did not make the additional deposits into the replacement reserve account required to meet project’s capital needs based on its December 31, 2023 financial statements. In addition, the Organization did make all of the required monthly deposits into the replacement reserve account. The Organization has delinquent deposits to reserve for replacement account in the amount of $65,380. Cause Sufficient controls were not in place which resulted in failure to deposits the required funds into the replacements reserve account in a timely manner. Effect The Organization’s reserve for replacement account is not sufficiently funded. Prior Year Finding None noted. Recommendation Management should review the Organization’s budget to ensure that the replacement reserve is funded in accordance with HUD regulations. Views of Responsible Officials See corrective action plan.