Finding Text
Finding 2025-001 – Replacement Reserve Account Underfunding Finding Resolution Status: Corrected subsequent to year-end. The Project’s replacement reserve account was underfunded by $2,028 at December 31, 2025. The underfunding was corrected after year-end through deposit of the required amount to the replacement reserve account. Population Size: 12 monthly replacement reserve deposit calculations. Sample Size: 12 monthly replacement reserve deposit calculations. Criteria: HUD rules, regulations, and the Project’s applicable regulatory agreement require the Project to make required deposits to the reserve for replacement account. Required replacement reserve deposits must be calculated and deposited in accordance with HUD requirements, including adjustments resulting from HUD-approved increases in contract rents or other required changes to the monthly reserve deposit amount. Condition: At December 31, 2025, the replacement reserve account was underfunded by $2,028. This amount related to the unresolved underfunding previously reported in the Finding 2024-001. This is a repeat finding. During 2025, the mortgage company corrected the replacement reserve deposit calculation for the current-year deposit requirement; however, the mortgage company did not include the prior-year underfunding of $2,028 in the calculation as requested by the Management Agent. As a result, the prior-year underfunding remained outstanding at December 31, 2025. Cause: The underfunding occurred because the mortgage company corrected only the current-year replacement reserve deposit calculation and did not include the prior-year underfunding identified in Finding 2024-001 as requested by the Management Agent. Effect: The Project’s replacement reserve account was underfunded by $2,028. Recommendation: Because the $2,028 underfunding was corrected subsequent to year-end, no additional deposit is required for this specific amount. Questioned Costs: $2,028