Finding Text
Finding # 2025-001 Type: Noncompliance Assisting Listing Number: 14.186 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Name of Federal Program: Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA) Requirement: The HUD Regulatory Agreement requires the Project to make monthly deposits to the replacement reserve of $2,249 through July 31, 2025. Effective August 1, 2025, the required monthly deposit increased to $2,367, as provided in HUD‑9520. Condition: The replacement reserve account was underfunded by $2,249 at December 31, 2025. Context: Management did not increase monthly deposit amount from $2,239 to $2,367 effective August 1, 2025, as required. In addition, the Project was underfunded by $12,279 at December 31, 2024, of which only $10,670 was deposited during 2025. Cause: The underfunding partially resulted from an oversight by management in updating the required monthly deposit amount effective August 1, 2025. Additionally, the Project was unable to fully fund the required catch‑up deposits due to cash flow constraints. Effect: The Project was not in compliance with the HUD Regulatory Agreement related to replacement reserve funding requirements. Questioned Costs: None Recommendation: We recommend that management update the monthly replacement reserve deposit to $2,367 in accordance with the HUD Regulatory Agreement and make the remaining catch‑up deposit of $2,249 as soon as feasible. Management’s Response: Management agrees with the recommendation.