Finding Text
Finding No. 2025-001 – Replacement Reserve Funding – Other Matter Criteria: The Project is required to make annual deposits to a replacement reserve account in accordance with its approved budget. Condition: During our audit, we noted that the replacement reserve established for the program was not funded at the minimum level required by the USDA-RD approved budget. As of the fiscal year‑end, the reserve balance was approximately $7,500 below the required threshold. Effect: The Project is not in compliance with the replacement reserve funding requirement. Cause: The Project relied on outdated reserve schedules and did not reconcile actual contributions to required amounts. Additionally, the Project’s monitoring controls were insufficient to identify the underfunding on a timely basis. Recommendation: We recommend that management implement a quarterly review process to verify that replacement reserve contributions meet required levels. We also recommend management fund the reserve shortage promptly and develop a plan to prevent future underfunding. Reporting Views of Responsible Officials: Management agrees with the finding, see the Corrective Action Plan.