Finding Text
Significant Deficiency and Noncompliance – Required Payments to General Operating Reserve Department of Housing and Urban Development Assistance Listing Number 14.126 – Mortgage Insurance – Cooperative Projects Significant Deficiency and Noncompliance Category of Finding – Special Tests and Provisions Criteria - The HUD regulatory agreement requires the Cooperative to deposit monthly payments at 3% of annual member carrying charges until the balance exceeds 15% of current annual member carrying charges. The required deposit may be reduced to 2% of annual member carrying charges until the balance of the reserve exceeds 25% of annual member carrying charges. Condition - Required deposits were made in amounts insufficient to exceed 3% of annual member carrying charges. Cause - The Cooperative did not make monthly deposits to the general operating reserve in accordance with the HUD regulatory agreement. Effect - The Cooperative was out of compliance with their HUD regulatory agreement at August 31, 2025. Recommendation - We recommend that the Cooperative implement a control process to ensure adherence to the regulatory agreement and make the required monthly deposits to the general operating reserve. Auditee’s comment - The Cooperative will make deposits to the general operating reserve to meet the HUD regulatory agreement. In September 2025, the Cooperative entered into a management agreement with Paramark Real Estate Services to manage the Cooperative. The management agent will implement a process to ensure deposits are made as required by the regulatory agreement. Status - Resolved