Finding Text
Finding No. 2025-003 - Special Tests and Provisions - Significant Deficiency Name of Federal Agency: Department of Housing and Urban Development Federal Program Name: Section 8 Housing Assistance Payments Assistance Listing Number: 14.195 Federal Award Identification Number and Year: N/A Name of Pass-through Entity (if applicable): N/A Criteria The HAP contract requires that the project makes monthly deposits to its replacement reserve for a total annual deposits of $360,000. Condition During the year ended December 31, 2025, the project did not make the required deposits to the replacement reserve in the amount of $270,000 and only $90,000 of the required annual deposits of $360,000 was deposited. Cause The project does not generate sufficient cash flow to make the required monthly deposits. Effect or Potential Effect Failure to make monthly payments resulted in an underfunding the replacement reserve and a violation of the HAP contract. Questioned Costs N/A Context Lack of funding due to costs related to the transition of tenants to new properties and incurring expenses related to the vacant building. Identification as a Repeat Finding N/A Recommendations Management should review the project budget to determine if nonessential costs can be cut (or request a loan from the owner) to ensure that the replacement reserve is funded in accordance with the terms of the regulatory agreement. Auditor Noncompliance Code N - Reserve for replacements deposits. Uniform Guidance Auditor Noncompliance Code N - Special Tests and Provisions Finding Resolution Status: Resolved Views of Responsible Officials Management deposited the delinquent required deposits of $270,000 to the replacement reserve in February 2026.