Finding Text
Finding reference number: #2025-003 Assistance Listing (federal award identification number and year): Supportive Housing for the Elderly (Assistance Listing No. 14.157, 2011) Auditor non-compliance code: N – Reserve for Replacements Deposits Finding resolution status: Cleared Universe population size: 12 months Statistically valid sample: 12 months Name of federal agency: Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $24,400 Was the sampling statistically valid: Yes Statement of condition of #2025-003: During the year ended December 31, 2025, the Corporation failed to make the required deposits to the reserve for replacement account. The Corporation made two months of required deposits and the repayment of the withdrawal from 2024 totaling $21,834. The Corporation did not make deposits totaling $24,400 for the current year. Criteria: Pursuant to the Regulatory Agreement, the Corporation is required to make monthly deposits into a separate reserve for replacement account. Effect or potential effect: The Corporation is not in compliance with the terms of the Regulatory Agreement. At December 31, 2025, the reserve for replacements account is underfunded by $24,400. Cause: Due to operating cash flow shortages, the required monthly deposits to the reserve for replacement are not being made. Recommendation: Management should transfer $24,400 into the reserve for replacement from the operating cash account. Reporting response: Management concurs that monthly deposits totaling $24,400 were not made during 2025. During the same year the Corporation deposited $21,834 to the reserve, consisting of two monthly deposits totaling $4,880 and the $16,954 repayment of the 2024 withdrawal, bringing the reserve balance to $327,507 at December 31, 2025. The missed deposits resulted from operating cash shortfalls: revenue under the PRAC contract was flat while payroll, payroll taxes, and insurance costs increased substantially in 2025. On September 17, 2026, the Corporation deposited $24,400 into the reserve for replacements, fully funding the delinquent 2025 deposits, and monthly deposits for 2026 are current. The Corporation is also submitting a budget-based rent adjustment request under the PRAC to restore positive operating cash flow.