Finding Text
Finding 2024-001, Replacement Reserve Deposits (Assistance Listing No. 14.181)
Criteria: The federal program 14.181 requires that the Owner establish and maintain a
replacement reserve to aid in funding extraordinary maintenance and repair and replacement of
capital items. The replacement reserve funds must be deposited in a federally insured depository
in an interest-bearing account. An amount as required by HUD will be deposited monthly in the
reserve fund.
Condition and Context: Timely deposits were not made to the reserve account. Five (5) out of
the 12 monthly required deposits into the replacement reserve were not timely deposited during
the first half of the fiscal year.
Cause: There was turnover in staff during the year, and the new staff was not aware of the
monthly deposit requirement.
Effect: The Organization was not in compliance with the monthly deposit requirement.
Identification as a repeat finding: Yes.
Questioned costs: None.
Recommendation: We recommend that the Organization regularly monitors deposits in the
reserve for replacement to ensure that it complies with the requirements of 24 CFR sections
891.405 and 891.605 and ensure that personnel in-charge are made aware of the HUD
compliance requirements.
View of responsible officials:
This finding was identified in the June 30, 2023 audit and correction was implemented in the fiscal
year ended June 30, 2024. To address this issue the monthly replacement reserve bank transfers
were set up in the banking system as ongoing automatic recurring transfers. A separate Financial
Close and Compliance Check list was be put in place for the Organization and a step added to
the to reconcile cash (review and post recurring bank transfer activity) quarterly. An additional
step will be added to assess any future changes to the replacement reserve transfer levels when
the Contract renews annually.
Completion Date: February 2024