Finding 1292 (2023-002)

Criteria: In accordance with the Regulatory Agreement from HUD, management will maintain a reserve for replacement account. The reserve for replacement account shall at all times be subject to the control of HUD. Monthly deposits are required into the reserve for replacement as required by HUD. Condition: The project did not make the required monthly deposits into the reserve account for the year. Cause: This was an oversight by management during the year. Effect: This resulted in an underfunded reserve for replacement account at June 30, 2023 in the amount of two monthly deposits totaling $2,126. Context: The Regulatory Agreement with HUD requires monthly deposits to the reserve for replacement account. The current required monthly deposit is $1,063. Only ten required monthly deposits were made during the year. Recommendation: We recommend that additional deposits be made to the reserve for replacement account for the underfunded amount. We also recommend processes and controls are established to monitor the activities of the reserve for replacement account to ensure compliance with HUD requirements. Views of Responsible Officials: Management concurs that the required monthly deposits were not made for the year. Management will implement procedures to ensure future deposits to the reserve for replacement account are consistent with the amount required by HUD.