Finding Text
Criteria: According to the Regulatory Agreement, “mortgagor will establish and maintain a reserve fund for replacements in a separate account in a bank…concurrently with the effective commencement of rental assistance payments under the Project Rental Assistance Contract, the Mortgagor will deposit an amount…per month unless a different date or amount is approved in writing by HUD”.
Condition: The Organization did not make all required deposits into the Reserve for Replacements bank account in a timely manner.
Cause: A process control to ensure the automatic transfer of deposits from the operating account to the replacements reserve on a monthly basis was not in place.
Effect: Deposits for three of the twelve months of the year were not made timely. Therefore, the Organization is not in compliance with the Regulatory Agreement.
Recommendation: We recommend management implement a control to ensure the monthly transfer is completed automatically and in accordance with the Regulatory Agreement.
Views of Responsible Officials: The Organization agrees with the finding and the recommendation will be implemented. Controls implemented include scheduling of automatic transfers to the reserve for replacement savings account as well as updating our treasury standard operating procedures to ensure funds are available for the transfer.
Condition Status: In Progress
Repeat Finding: No.