Finding Text
Finding No. 2023-007: Replacement Reserves (Significant Deficiency)
Statement of condition
Special Tests and Provisions
For two months of the fiscal year, the monthly replacement reserve deposit was funded in the subsequent month.
The replacement reserve was underfunded by one month's deposit at June 30, 2023.
Criteria
The Regulatory Agreement requires a monthly deposit of $27 in the replacement reserve.
Cause
The monthly replacement reserve transfer was delayed by several days into the subsequent month due to it being on a set interval of time rather than on a monthly date. This late funding resulted in only 11 deposits being made during the year ended June 30, 2023.
Effect
Late deposits and underfunding of the replacement reserve could result in insufficient funds for repairs and replacements.
Recommendation
Management should review and enhance policies, procedures and internal controls to ensure that the replacement reserve deposits are made timely.
Identification of repeat finding
The finding is a repeat of Finding No. 2022-001.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
Remediated subsequent to year-end.