Finding Text
Condition: During 2024, replacement reserve deposits were made in the amount of $12,435.
Additionally, catch up deposits of $7,028 were made in 2024. As of December 31, 2024, there is
a shortfall of $17,414 in required deposits into the reserve for replacements. Criteria: As of December 31, 2024, in accordance with the Section 811 Capital Advance Program
("Program") Regulatory Agreement ("Agreement") with the United States Department of Housing
and Urban Development ("HUD"), the Corporation is obligated to establish and maintain a reserve
for replacements in a separate bank account under the Corporation's name. The Corporation is
required to make monthly payments of $1,036 from April 1, 2022, through December 31,2024, or
until a different amount or schedule is approved in writing by HUD. During 2024, the Corporation
made the required monthly deposits into the reserve, plus an additional $9,770 resulting in a
cumulative shortfall of $17,414.
Cause: Failure to make all required payments into the replacement reserve during the period under
audit as result of the Corporation not having the cash to make the deposits.
Effect or Potential Effect: Noncompliance with the terms and requirements of the Agreement as
well as the compliance requirements of the Program in accordance with the requirements of Title
2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards.
Recommendation: We recommend that the Corporation make up the shortfall of deposits in the
subsequent period and on a going forward basis, make the monthly required reserve for
replacement deposits.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the
auditor’s finding and recommendation. The Corporation will subsequently make the necessary
deposits to align the reserve for replacement balance with the requirements of the Section 811
Capital Advance Program Regulatory Agreement.