Finding 616097 (2022-001)

Significant Deficiency
Requirement
N
Questioned Costs
-
Year
2022
Accepted
2023-09-04

AI Summary

  • Core Issue: The client failed to make required monthly deposits into the RAD Replacement Reserve, violating the RAD Conversion Commitment and HAP agreement.
  • Impacted Requirements: Regular contributions to the reserve are essential for funding maintenance and capital repairs, which were not made for FY 2021 or FY 2022.
  • Recommended Follow-Up: Ensure compliance by resuming monthly deposits to the reserve as outlined in the agreements to avoid future funding deficits.

Finding Text

Finding 2022-001 - Special Tests and Provisions, RAD Replacement Reserve - Significant Deficiency, CFDA #14.182 Criteria: Code of Federal Regulations Title 24 Part 880 provides grantees the requirements of accounting for the reserve for replacement account. This language is incorporated into both the RAD HAP agreement and the RAD Conversion Commitment. Grantees are required to contribute regular deposits into the reserve for replacement account to aid in funding extraordinary maintenance and repair and replacement of capital items. These costs should be paid from the replacement reserve at a higher priority than project level funds. Condition & Cause: During our review of the RAD Reserve for Replacement account we noted that the client was not making regular monthly deposits. This is in contradiction to the RAD Conversion Commitment which originally required $11,000 monthly contributions which are subject to annual increases. Note that it is also stipulated in the RAD HAP contract that a monthly allocation to this account should be made. These contributions were not made for FY 2021 or FY 2022. Reserve for replacement contributions can be reduced but only with permission from appropriate oversight. We also noted that during the audit period the client funded $154,373 in capital additions from the RAD operating accounts without requesting reimbursement from the replacement reserve. This is in direct conflict with the aforementioned RAD HAP agreement which states that all capital and extraordinary repair items be funded from the replacement reserve. Effect: Inadequate contributions to the reserve account can lead to future funding deficits for required capital improvements, modernization, and extraordinary repairs. Recommendation: We recommend that the client continue to increase the reserve account pursuant to the signed RCC and RAD HAP contract. Questioned Costs: None Repeat Finding: No Was sampling statistically valid? Yes View of responsible officials: The Housing Authority of Douglas County agrees with the findings and recommended actions.

Categories

Special Tests & Provisions Allowable Costs / Cost Principles Cash Management Significant Deficiency Internal Control / Segregation of Duties

Other Findings in this Audit

  • 39655 2022-001
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
14.182 Section 8 New Construction and Substantial Rehabilitation $1.21M