MARTINSBURG COMMUNITY HOUSING CORPORATION

Single Audit Findings Significant Deficiency 2021-002 Criteria Management is responsible for maintaining and replenishing the replacement reserves in accordance with the loan agreement with RD. Condition During our audit, we were made aware the Corporation's replacement reserve was underfunded and that the Corporation had not been making the full required annual contributions to the replacements reserve. Cause This condition was caused by management oversight of the required reserves, and based on RD not clearly establishing the appropriate funding requirements with the Corporation in the past. Effect As a result of this condition, the Corporation?s is currently not in compliance with the replacement reserve requirement of the loan agreement with RD and it could lead to the Corporation not having adequate funds available if the need arose for a major capital project. Recommendation The Corporation should work with RD to replenish the replacement reserve to fully fund the account, and then to continue to fund annually as required per the agreement. Reporting Views of Management Management concurs with this finding. The Corporation will begin making the required contributions during 2022 to fully fund the account. Corrective Action Management concurs with this finding. The Corporation will begin making the required contributions monthly during the 2021/2022 fiscal year to fully fund the account. USDA Rural Development Material Weakness: See Finding 2022-002 Section 515 Rural Rental Housing Loan ? ALN #10.415