Finding Text
2025-003 Required Deposits to the Replacement Reserve Fund (Significant Deficiency) Federal Agency: Department of Housing and Urban Development Program Name: Section 811 Supportive Housing for Person with Disabilities Assistance Listing Number: 14.181 HUD Project Number: 102-HD018 Compliance Requirement: Special Tests and Provisions Questioned Costs: $10,800 Award period: Year ended June 30, 2025 Criteria: According to HUD a replacement reserve fund 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 must be deposited in the reserve fund (Regulatory Agreement , item 5 (a)). Condition: Audit tests revealed that no required monthly deposits were made into a federally insured depository in an interest-bearing account during the fiscal year ended June 30, 2025. Cause: The Organization failed to make the required payments to the replacement reserve fund as they were awaiting certain payments to be received. Effect: The Organization's failure to make the required payments to the replacement reserve could result in regulatory action by HUD. Recommendation: We recommend that the Organization make the required monthly deposits as required by the regulatory agreement. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and will implement procedures that will ensure that the required monthly deposits are made by the Organization as required by the regulatory agreement.