Finding Text
Delinquent Deposit to Reserve for Replacements
Criteria: The regulations under which the Project operates require the Organization to make monthly deposits to the reserve for replacements account pursuant to the Regulatory Agreement with HUD.
Condition: During the year ended June 30, 2024, the Organization only made eleven of the twelve required monthly deposits to the reserve for replacements account. The delinquent deposit totaled $2,400.
Cause: The Organization has not received the Housing Assistance Payments (HAP payments) from HUD since February 2024. Management has prioritized payments for payroll and related employee and resident expenditures for the past seven months.
Effect: The Organization is not in compliance with HUD guidelines which require monthly deposits to the reserve for replacements account.
Recommendation: We recommend the Organization deposit $2,400 to the reserve for replacements account.
Views of Responsible Officials: Management concurs with the finding and currently has five months of subsidies receivable from HUD. Management has been working with HUD administration to get the payments processed since March 2024 without success. The Organization has been operating on limited cashflow since March 2024; therefore, management believes that being delinquent by one month’s payment is reasonable. The Organization will process the delinquent deposit once the HAP payments are received.