Finding 574730 (2023-001)

Finding Number: 2023-001 REPLACEMENT RESERVE DEPOSITS Program Title: Section 8 Housing Assistance Payments Program Name of Federal Agency: U. S. Department of Housing and Urban Development (HUD) CFDA Number: 14.195 Criteria Owners shall 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. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve funds. All disbursements from the reserve must be approved by HUD, (24 CFR section 891.405 and 891.605). Condition The Project deposited the required February 2023 monthly amount during March 2023. Cause The Project had a problem with its internet connection, so based on the premise that it is in compliance with HUD, it decided to make the deposit in March. Effect The Project failed to make the corresponding deposit in the month of February 2023 and later deposited on March 2023 affecting interest earned on those deposits. Questioned cost None since the deposit was made in March 2023. Context Condition observed on one of the twelve deposits required by the Regulatory Agreement. Prior year finding No Recommendation Management should monitor monthly the activity of the replacement reserve account, and tenant’s security deposit account. Required deposits should be made to the correct account on a monthly basis to avoid deficiencies in the reserve account balance.