Finding Text
2025-001 Replacement Reserve Deposits Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Program: 14.157 Supportive Housing for the Elderly Condition: Required monthly deposits to the replacement reserve account was not made timely for three months. Criteria: An amount, as required by HUD, will be deposited monthly in the replacement reserve account. Cause: The Organization did not have sufficient cash flow in order to make the required deposits into the replacement reserve account and meet the Organization’s other obligations as they became due. Effect: Monthly required deposits to the replacement reserve account were not made timely. Context: A sample of twelve months were selected for the replacement reserve account to determine if the monthly required deposits were deposited in accordance with HUD requirements. Our test found that for three months, the deposit was not made timely. Our sample was not a statistically valid sample. This was a repeat finding from a prior period, finding number 2024-001. Questioned Costs: None Recommendations: Management should ensure that the required deposits to the replacement reserve account are made in accordance with the agreements. Management Response: The Organization’s unit rents are not at a level to fund the Organization’s operations and properly maintain the Project’s maintenance which requires the Organization to prioritize paying its utility bills and other required immediate operating costs during the year. See management’s attached corrective action plan for additional information.