Finding Text
Condition: As of December 31, 2025, there was a shortfall of $12,498 in required deposits into the reserve for replacements. Criteria: As of December 31, 2025, in accordance with the Section 811 Capital Advance Program ("Program") Regulatory Agreement ("Agreement") with the United States Department of Housing and Urban Development ("HUD"), the Corporation is obligated to establish and maintain a reserve for replacements in a separate bank account under the Corporation's name. The Corporation was required to make monthly payments of $1,064 and $1,125, for the fiscal year 2025, unless a different amount or schedule is approved in writing by HUD. During 2025, the Corporation deposited $13,134 into the reserve account. While this met the minimum required monthly payments, the opening shortfall of $12,498 stemming from the period ended December 31, 2024, remains to be funded. This resulted in a shortfall of $12,498 as of December 31, 2025. Cause: Failure to make all required payments into the replacement reserve during the period under audit as result of the Corporation not having the cash to make the deposits. Effect or Potential Effect: Noncompliance with the terms and requirements of the Agreement as well as the compliance requirements of the Program in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Recommendation: We recommend that the Corporation make up the shortfall of deposits in the subsequent period and on a going forward basis continue to make the monthly required reserve for replacement deposits. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the auditor’s finding and recommendation. The Corporation will subsequently make the necessary deposits to align the reserve for replacement balance with the requirements of the Section 811 Capital Advance Program Regulatory Agreement.