Finding Text
Finding No. 2024-004; Federal Assistance Listing Number 14.157
Criteria
The Section 202 agreement requires that the Company make monthly deposits to its
replacement reserve.
Condition
During the year ended December 31 2024, the project did not make the required monthly
deposits to the replacement reserve in the amount of $857 per month from January through
August. The project is required to make monthly deposits to the reserve in the amount of $918 a
month commencing September 1, 2024. Deposits from September 2024 through December
2024 were made in accordance with HUD requirements.
Cause
The Company was making monthly deposits at an old rate and did not increase the monthly
deposit amounts in accordance with the agreement from January through August.
Effect or Potential Effect
Failure to make monthly payments resulted in an underfunding the replacement reserve and a
violation of the agreement.
Questioned Costs
N/A
Context
In connection with testing the withdrawals from reserves we noted HUD correspondence
signaling there had been an increase in the required monthly deposit and that the months of
January to August 2024 were underfunded.
Identification as a Repeat Finding
No
Recommendation
Management should establish procedures to ensure the correct amount is being transferred into
the replacement reserve account monthly.
Auditor Noncompliance Code: N - Special Tests and Provisions for Uniform Guidance
Finding Resolution Status: Resolved
Views of Responsible Officials and Planned Corrective Actions:
During 2024 when a rental increase was approved it came to management's attention that the
correct amount was not being deposited into the replacement reserve. Management had not
received any previous notification from HUD that the deposits were insufficient and began
payment of the agreed upon amount in September, 2024. The entity does not have the funds to
adjust for payments prior to September, 2024.