Finding 981301 (2023-002)

Criteria Owners shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally insured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund (Regulatory Agreement, item 5 A). All disbursements from the reserve must be approved by HUD (24 CFR sections 891.405 and 891.605). Condition Deposits into the reserve account were not made monthly. Two (2) out of 12 monthly deposit to the reserve account were made subsequent to June 30, 2023. Cause An oversight which was corrected subsequent to June 30, 2023. Effect Required replacement reserve was not complied with during fiscal year 2023. Questioned Cost None. Context Failure to make required monthly deposits for two (2) months. Recommendation We recommend that the Corporation regularly monitors the replacement reserve to ensure that it complies with the requirements of 24 CFR sections 891.405 and 891.605. View of Responsible Official and Planned Corrective Action We will monitor monthly to ensure deposits to replacement reserves are done on a timely basis.