Finding Text
Criteria: According to the Regulatory Agreement, The Organization is required to make monthly deposits into its Reserve for Replacement account and that the amount of the monthly deposit may be increased at the written direction of HUD.
Condition: HUD provided notice to the Organization that its required monthly deposit would increase from $1,750 to $1,792 effective March 1, 2023. However, the Organization failed to increase its monthly deposits.
Cause: A process control to ensure the automatic transfer of deposits from the operating account to the replacements reserve was updated in accordance with HUD directives was not in place.
Effect: Deposits for two months during the year were underfunded. Therefore, the Organization is not in compliance with the Regulatory Agreement.
Recommendation: We recommend management implement a control to ensure that correspondence from HUD, especially those requiring changes to the required monthly deposits, are reviewed and documented to ensure compliance the Regulatory Agreement.
Views of Responsible Officials: The Organization agrees with the finding and the recommendation will be implemented. Controls implemented include ensuring that evidence supporting management’s review of HUD correspondence is maintained and that such correspondence is forwarded to the individual responsible for any relevant updates.
Condition Status: In Progress
Repeat Finding: No