Finding 1208453 (2025-002)

Criteria The HUD regulatory agreement requires that the project make monthly deposits to its replacement reserve. Condition During the year ended December 31 2025, the project did not make the required monthly deposits to the replacement reserve in the amount of $10,616. Avondale is required to make monthly deposits to the reserve of $1,924. Effective July 1, 2025, the monthly deposits required by HUD increased to $2,090. Cause The project does not generate sufficient cash flow to make the required monthly deposits. Effect or Potential Effect Failure to make monthly payments resulted in an underfunding the replacement reserve and a violation of the regulatory agreement. Questioned Costs NoneContext Isolated instance which was not part of a statistical sample. Identification as a Repeat Finding This finding is not a repeat finding. Recommendation Management should review the project budget to determine if nonessential costs can be cut (or request a loan from the owner) to ensure that the replacement reserve is funded in accordance with the terms of the regulatory agreement. Auditor Noncompliance Code: N - Reserve for replacements deposits Finding Resolution Status: Resolved Views of Responsible Officials All required replacement reserve deposits were brought current as of January 13, 2026. Going forward, management will implement enhanced monitoring procedures to ensure timely monthly funding in accordance with HUD requirements. In the event of cash flow constraints, management will proactively reduce nonessential expenditures or seek an owner contribution to maintain compliance with the regulatory agreement.