REALIFE OF COLUMBUSNon-Profit

Criteria As a condition of the U.S. Department of Housing and Urban Development's (HUD) federally insured mortgage, the Cooperative has entered into a Regulatory Agreement with HUD. Under the terms of the Regulatory Agreement, the Cooperative has agreed to fund a general operating reserve. Annual funding of the general operating reserve is based on a percentage of annual member fees. Once a balance in the reserve exceeds 25% of the annual member fees, monthly deposits into the General Operating Reserve may cease. Condition The Cooperative incorrectly calculated the threshold in which monthly deposits to the general operating reserve may be ceased. As a result, the Cooperative under funded the general operating reserve by approximately $5,000 during the year ended December 31, 2024. Cause The calculation for the funding threshold was based on the Cooperative's preliminary 2024 budget, rather than final approved member rates. Effect The general operating reserve was underfunded by approximately $5,000 during the fiscal year. Recommendation Management should ensure final, approved rates are used in determining the annual funding requirements of the reserve. Management should evaluate whether catch-up contributions should be made to the reserve. Views of Responsible Officials The final approved budget will be used in determining funding requirements. Monthly deposits into the reserve have been restarted and the reserve is scheduled to reach the 25% funding threshold in the upcoming fiscal year. Conclusion Response accepted.