Finding Text
Condition: The Organization funded its reserve for replacement account in the amount of $48,000 during the year ended December 31, 2025. This amount meets the annual funding requirement and reduces the cumulative underfunded amount. However, the reserve for replacement account is underfunded by $47,691 as of December 31, 2025, due to the cumulative effect of underfunding the reserve in previous years. Criteria: As required by the Regulatory Agreement with HUD, the Organization must fund a reserve for replacement account in the amount of $30,005 on an annual basis. Cause: The Organization did not possess adequate cash flow to meet the requirement in previous years. Effect: The reserve for replacement account was underfunded during the years ended December 31, 2017 through 2021. During those years, the Organization was not in compliance with the reserve for replacement requirement as stated in the Regulatory Agreement. As of December 31, 2025, the reserve for replacement account was underfunded by a total of $47,691. Recommendation: As cash flow allows, we recommend that the Organization continue making additional payments to the reserve for replacement account to correct the cumulative underfunded amount.