Finding Text
Criteria - Replacement Reserves: Compliance Requirement ? 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 fund (Regulatory Agreement, item 5 A). All disbursements from the reserve must be approved by HUD (24 CFR sections 891.405 and 891.605). Condition: The Project did not make three of the required deposits to the replacement reserve account. Effect: The Project is not in compliance with the Regulatory Agreement. Context: The population included the 12 monthly cash disbursements from the operating account. Cause: Due to limited cash flow, management was unable to remit the required deposits. Recommendation: We recommend management make the required deposits as soon as possible. Views of Responsible Officials and Planned Corrective Actions: The Organization agrees with the finding and is in the process of taking necessary steps to transfer the delinquent deposits.