Finding 2023-001
significant deficiencyquestioned costsmodified opinion
- Program
- MORTGAGE INSURANCE FOR THE PURCHASE OR REFINANCING OF EXISTING MULTIFAMILY HOUSING PROJECTS (14.155)
- Compliance requirement
- Special tests and provisions
- Questioned costs
- no amount stated
- FAC record
- FY2023 audit on fac.gov
Finding text from the filing
Statement of condition 2023-001: As of June 30, 2023, deposits to the reserve for replacements totaling $768 had not been made.
Criteria: Pursuant to Section 10 of the Regulatory Agreement, the Company shall deposit a monthly amount into the reserve for replacements account. The amount of the monthly deposit may be increased or decreased from time to time at the written direction of HUD. Effective April 1, 2023, HUD increased the monthly deposit from $8,012 to $8,396.
Effect: The Company was not in compliance with the terms of the Regulatory Agreement. The reserve for replacements was underfunded by $768 as of June 30, 2023.
Cause: Effective April 1, 2023, HUD increased the monthly deposit from $8,012 to $8,396. Management inadvertently did not increase the monthly deposit until June 2023. In addition, the initial notice to cover the $768 shortfall sent to management from the lender was not received by management until July 17, 2023.
Recommendation: Management should transfer $768 from the operating checking account to the reserve for replacements.
Management's response: Management concurs with the finding and recommendation and transferred $768 to the reserve for replacements on August 11, 2023.