Finding 1241471 (2026-001)

Material Weakness Repeat Finding
Requirement
N
Questioned Costs
-
Year
2026
Accepted
2026-11-02

AI Summary

  • Core Issue: St. Joseph Garden Courts, Inc. failed to make required monthly deposits of $5,175 into the reserve for replacements, leading to an underfunding of $9,344 as of June 30, 2026.
  • Impacted Requirements: The Project did not comply with the funding provisions outlined in the HUD Regulatory Agreement.
  • Recommended Follow-Up: Ensure future monthly deposits are made to meet the required reserve funding and address the underfunding issue promptly.

Finding Text

The regulatory agreement specifies that the mortgagor shall establish and maintain a reserve for replacements with the mortgage, funded by monthly deposits. During the year ended June 30, 2026, St. Joseph Garden Courts, Inc. did not fund the reserve for replacements account in accordance with the Regulatory Agreement. The required monthly deposits of $5,175 were not made each month. The Project deposited a total of $52,756 during 2026, resulting in an underfunding of $9,344. The Project did not fully fund the reserve for replacements account in accordance with the Regulatory Agreement. The Project was underfunded by $9,344 as of June 30, 2026. Although the Project maintained a replacement reserve balance of $170,897 and no significant replacement or repair activities were pending during the period, the Project was not in compliance with the required reserve funding provisions of the HUD Regulatory Agreement.

Corrective Action Plan

Management should immediately deposit the cumulative shortfall into the Reserve for Replacements account and implement strict cash management reviews to ensure monthly compliance. The issue was administrative rather than financial, and the Project is planning to make extra payments to fully fund the replacement reserve balance.

Categories

HUD Housing Programs Special Tests & Provisions

Programs in Audit

ALN Program Name Expenditures
14.155 MORTGAGE INSURANCE FOR THE PURCHASE OR REFINANCING OF EXISTING MULTIFAMILY HOUSING PROJECTS $403,141