Finding Text
2023-001 Replacement Reserve Deposits
Federal Agency: U.S. Department of Housing and Urban Development (HUD)
Federal Program: 14.571 Supportive Housing for the Elderly
Condition:
Required monthly deposits to the replacement reserve account were not made for three out of
twelve months.
Criteria:
An amount, as required by HUD, will be deposited monthly in the reserve fund.
Cause:
The Organization did not have sufficient cash flow in order to make the required deposits into the
replacement reserve fund and meet the Organization’s other obligations as they became due.
Effect:
Monthly required deposits to the replacement reserve fund were not made.
Context:
A sample of twelve months were selected for the replacement reserve account to determine if the
monthly required deposits were deposited in accordance with HUD requirements. Our test found
that for three months, the monthly required deposit was not made. Our sample was not a statistically
valid sample. This was not a repeat finding from a prior period.
Questioned Costs:
None
Recommendations:
Management should ensure that the required deposits to the replacement reserve are made in
accordance with the agreements.
Management Response:
The Organization’s unit rents are not at a level to fund the Organization’s operations and properly
maintain the project’s maintenance which required the Organization to prioritize paying its utility
bills and other required immediate operating costs during the year. See management’s attached
corrective action plan for additional information.