Finding Text
Replacement Reserve Account Underfunding Criteria: The replacement reserve account should be funded annually in accordance with the HUD loan agreement. Condition: The replacement reserve account was reported to be underfunded $12,332 as of December 31, 2024. The entity did not make the required deposits for the year which also includes a prior year delinquency. Cause: Funds were not available to adequately fund the replacement reserve account. Effect: Funds would not be available for major capital expenditures that could be necessary. Recommendation: We recommend management request a deposit suspension from HUD until cash flow improves. Management Response: Management plans to restore the replacement reserve to the required balance when funds are available. They have also submitted for rent increases to assist with cash flow. The expected completion date is July 31, 2026.