Finding Text
2023-003 – Replacement Reserve Account
Finding Type. Immaterial noncompliance; Significant deficiency in internal control over compliance (Special Tests and Provisions)
Federal program
U.S. Department of Housing and Urban Development
· Supportive Housing for the Elderly (ALN# 14.157)
Criteria. Under Section 202 of the National Housing Act of 1959, Project management is required to maintain replacement reserve funds in a interest bearing account.
Condition. The replacement reserve balance was not maintained in an interest bearing account during 2023.
Cause. Management has not properly implemented procedures to comply with HUD program requirements related to holding the reserve balance in an interest bearing account.
Effect. As a result of this condition, the reserve for replacements account was underfunded during 2023 as no interest was earned.
Questioned Costs. No costs are required to be questioned as a result of this finding, inasmuch as no unallowable expenditures were noted.
"Recommendation. We recommend that management move funds to an interest bearing account.
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View of Responsible Officials. Management agrees with this comment and has prepared a corrective action plan.