Finding 794 (2022-001)

Finding 2022-001: Supportive Housing for the Elderly Program: Replacement Reserve Account Questioned Costs: $228,163 Information on Universe and Population Size: Not Applicable Sample Size Information: Not Applicable Noncompliance Information: The Project's Replacement Reserve account was underfunded by the amount of $228,163. Condition: The Project switched management agents during the year. As part of the transition, all the old bank accounts were closed and the funds were transferred to the new management agent to open new bank accounts. The bank accounts were opened by the new management agent and at year end the Replacement Reserve account was underfunded by $228,163. This was detected and corrected in 2023 by management upon closing the 2022 books at year-end. Criteria: The Project's Regulatory Agreement, item 5A, requires the Project to establish and maintain a Replacement Reserve Account in a separate account. Page 38 Cause: The Management Agent upon assuming the management of the Project during 2022, received funds from many bank accounts which were closed by the old management agent. Management was in the process of reconciling all the old bank accounts. Upon closing the 2022 books, in the beginning of 2023, the management agent noted that the Replacement Reserve account was underfunded and funded the Replacement Reserve account to the correct amount. Effect or Potential Effect: The Replacement Reserve was underfunded at year-end. Recommendations: Management should reconcile the Replacement Reserve Account shortly after assuming management of the Project. Reporting Views of Responsible Officials: Management concurs with this finding and detected and corrected this finding upon reconciling the 2022 books at year-end.