Finding Text
Compliance Requirement: Special Tests and Provisions
Criteria: In accordance with the Project’s regulatory agreement with HUD, management shall establish and maintain a replacement reserve account to aid in funding extraordinary maintenance and repair and replacement of capital items. HUD regulation mandates that permission be obtained prior to any withdrawals from the replacement reserve.
Condition: Based on the evaluation of withdrawal and permission obtained, it was noted that withdrawal took place prior to receiving permission from HUD.
Cause: Management was unaware of replacement reserve compliance requirements.
Effect: The organization is not in compliance with this requirement.
Recommendation: To avoid potential non-compliance, we recommend that management request and receive permission for withdrawals prior to processing any withdrawals.
Management’s Response: Refer to Corrective Action Plan.