Finding Text
Finding 2022-004 Condition: Form 3560-12 was not filled out for a transfer that was made from the reserve funds. Bank fees have also been paid out of the reserve funds and Form 3560-12 was not filled out. The required annual payments have not been made to the reserve funds. Criteria: The Corporation is required to fill out Form 3560-12 to obtain approval for withdrawals from the reserve funds. The Corporation is required to make annual payments to the reserve funds until the funds reach a minimum dollar amount. Cause: The Corporation?s previous property manager did not have the proper forms on file for all disbursements made from the reserve funds. The previous property manager did not have a system in place to make the required annual payments to the reserve funds. Effect: Lack of documentation of reserve withdrawals and not funding the reserve funds could adversely affect the Corporation?s compliance with the USDA-Rural Development regulations. Recommendation: We recommend the Corporation fill out Form 3560-12 each time distributions are to be made from the reserve funds and validate the forms to match the invoices that were paid. We also recommend that the Corporation discuss with the USDA the required minimum amounts in the reserve funds and determine what the annual payments should be for each apartment building. Repeat Finding: Yes. Views of Responsible Officials and Planned Corrective Actions: We agree with the auditor and will take under advisement.