Finding Text
MAJOR FEDERAL AWARD PROGRAM FINDINGS FINDING 2025-004 – SPECIAL TESTS AND PROVISIONS: DEBT SERVICE RESERVE REQUIREMENTS Criteria The USDA requires AHDI to establish a debt service reserve account and deposit a minimum amount annually until the required reserve balance for the specific USDA loan is met. These funds are restricted for the purpose of ensuring timely debt repayment and emergency repairs. Condition During our audit procedures, we noted that one restricted debt service reserve account was underfunded by $497 as of the fiscal year-end. Cause AHDI failed to adjust its monthly transfer accordingly to the annual reserve requirement increase. This resulted in an annual net contribution below the required threshold for the year. Effect AHDI was in technical non-compliance with its loan covenants with the USDA Rural Development office. Questioned Costs None. Recommendation We recommend that management review monthly transfers calculation to ensure that the monthly transfers will meet the annual required contribution. Views of Responsible Officials Management agrees with the finding and is aware it will continue to remain a finding.