Core Issue: Monthly deposits of $542.34 into the replacement reserve fund were not made, lacking HUD's authorization for suspension.
Impacted Requirements: Compliance with HUD rules for capital advance loans, which mandate these deposits for maintenance and repairs.
Recommended Follow-up: The Board should ensure proper recordkeeping and obtain HUD documentation to authorize any future suspension of deposits.
Finding Text
Replacement Reserve: The Organization is required to make monthly deposits of $542.34 into a
replacement reserves fund. We noted that these deposits were not being made during the year. A
signed copy of the suspension authorization form for deposits to the replacement reserve could not
be produced to indicate HUD’s approval.
Criteria: Rules governing HUD projects with a capital advance loan required that monthly deposits
be made into a replacement reserve account to aid in funding extraordinary maintenance and repair
and replacement of capital items.
Cause: Due to a change in management companies, the current management agent could not locate
the suspension authorization form nor was a new copy obtained.
Effect: Not having prior authorization from HUD for the suspension of the required deposits could
jeopardize the Organization’s good standing with HUD and cause the project to be non-compliant
with the Special Tests and Provisions requirement.
Recommendation: The Board of Directors has a responsibility to ensure proper recordkeeping by
requesting to review original documents issued by governing agencies.
Response and Corrective Action Planned: We will ensure that proper documentation from HUD
indicating that the Organization is authorized to suspend their monthly deposits into the
replacement reserve fund is maintained.
Conclusion: Response accepted.