Finding 576321 (2024-001)

Finding Number: 2024-001 REPLACEMENT RESERVE DEPOSITS Program Title: Section 8 Project Based Cluster / Project Base Rental Assistance (PBRA) Name of Federal agency: U. S. Department of Housing and Urban Development (HUD) ALN Number: 14.195 Category Other matter Criteria Pursuant to Section 2 (a) of the Regulatory Agreement, the Property is required to make monthly deposits to the reserve for replacements fund as required by HUD. 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. Condition The Project deposited the required January 2024 monthly amount on the month of February 2024. Cause The project management was unaware that the total amount to be deposited into the replacement reserve had to be made in the first few days of the corresponding payment month, rather than as an annual or periodic deposit throughout the year. Effect The Project failed to make the corresponding deposit in the month of January 2024 and later deposited in February 2024 affecting interest earned on that deposit. Questioned cost None since the deposit was made in February 2024. Context Condition observed on one of the twelve deposits required by the Regulatory Agreement. Repeated finding Finding No. 2023-001 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. Views of responsible officials and planned corrective actions The Project’s management agrees with this finding. Please refer to the corrective action plan on page 41-42.