Finding Text
FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED) Department of Housing and Urban Development Finding, 2025-003: Major Programs: Capital Advance Program, Federal Assistance Listing Number 14.U01 and Section 8 New Construction and Substantial Rehabilitation, Federal Assistance Listing Number 14.182 STATEMENT OF CONDITION All required deposits were not made to the replacement reserve account for the year ended September 30, 2025. The replacement reserve account was also under funded by $49,769 for the year ended September 30, 2025. CRITERIA HUD Handbook 4350.1 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to make monthly deposits to the replacement reserve account based on the Project’s monthly deposit authorized by HUD. Under the Use Agreement, the replacement reserve should be maintained at a minimum balance of two years of annual deposits. EFFECT OF CONDITION Management did not make all required deposits to the replacement reserve account in 2025 and ensure the replacement reserve was fully funded at September 30, 2025. CONTEXT During audit fieldwork, the replacement reserve accounts were tested for compliance with required monthly deposits and minimum balance per the Use Agreement was maintained. Insufficient monthly deposits were noted on the bank statements, and the balance was determined to be under funded. CAUSE OF CONDITION Management mistakenly did not make all monthly deposits to the replacement reserve account and depleted the balance below the requirement. RECOMMENDATION The auditor recommends the replacement reserve be properly funded and the minimum balance be assessed on a monthly basis. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS Carrasquillo Management LLC acknowledges the finding regarding the required deposits to the replacement reserve account and ensuring the replacement reserve is fully funded. Corrective Actions: 1. Make the necessary deposits to comply. 2. Internal Compliance Controls. 3. Staff Training. 4. Monthly Monitoring and Reporting - Staff will confirm at the end of the month that the monthly deposit to the replacement reserve has been made with each closing to ensure no deposit has been missed. We will increase the monthly deposits to make sure we maintain the accurate balance in the replacement reserve account. Carrasquillo Management LLC is committed to full regulatory compliance and to restoring the integrity of all Project accounts in collaboration with HUD.