Finding Text
Finding 2024-002: Delinquent deposits to the replacement reserve
Statement of Condition
During the year ended June 30, 2024, the Project did not make all of the required monthly deposits to the replacement reserve. The Project is required to make monthly deposits of $1,915, or $22,980 annually. During the year ended June 30, 2024, the Project deposited $20,064 to the replacement reserve. Therefore, the replacement reserve was underfunded by $2,916 for the year ended June 30, 2024.
Criteria
The HAP contract requires that the project make monthly deposits to its replacement reserve.
Effect
Failure to make monthly payments resulted in an underfunding the replacement reserve and a violation of the HAP contract.
Cause
There were not proper internal controls in place to ensure monthly replacement reserve deposits in the amount required by the HAP contract.
Questioned Costs
None noted.
Recommendation
Management should review the project budget to determine of nonessential costs can be cut (or request a loan from the owner) to ensure that the replacement reserve is funded in accordance with the terms of the HAP contract.
Auditor Noncompliance Code
N – Reserve for replacements deposits
View of Responsible Officials
Management concurs with the finding and will review internal control policies to ensure monthly replacement reserve deposits are made in accordance with the terms of the HAP contract.