Reserve for replacement disbursements – line S1000-030

ID Status Date Public/Private Industry AHACPA Contact
#15243 Closed public Multifamily _General Support
Customer Reply

An FHA Section 232 Project , in accordance with the Q&A for External Stakeholders Coronavirus, Question 10, had released funds from the reserve for replacement account to cover debt service payments including, principal, interest and escrow deposits.  For illustrative purposes, $240,000 had been withdrawn to pay three months debt service which, when broken down to components was approximately $180,000 for interest, $25,000 for principal and $35,000 to the real estate tax, insurance and MIP escrows.

Line S1000-030 description in HUD Appendix A is “Replacement Reserves, or Residual Receipts and Releases which are included as expense items on this Profit and Loss statement.”
Does this refer specifically to fixed assets below capitalization threshold that were reimbursed from the reserve account?  In my example, would any or all of these withdrawals need to be reported on line S1000-030?
I have included a copy of the Q&A document with the relevant section circled.

Thank you

Les Sparks

Joseph, this is a trick question. This account is not only for items not capitalized; it is just the case. In your scenario, I am uncertain as to the requirement to include them. My reasoning is that the payments being made from the R4R are not for expenses, per se. They are to fund the escrows. Escrow releases could then be considered expenses or prepaid expenses. (Not sure if this makes sense…?)

 

Nobody has any experience with this issue as we have never experienced this kind of thing before.

 

Nevertheless, there is also another question – What happens to the R4R and surplus cash schedules?

 

In your case S1000-020 will still require a 12-month deposit schedule. In other words that account will still equal the full 12-month required deposits. Then in the cash flow and the R4R schedule you will only list the actual deposits made. This will require the surplus cash schedule will require the completion of the delinquent deposits to show the difference between s1000-020 and the actual deposits unless you. In this case REAC has indicated that HUD approval to skip the deposits on an emergency basis while using R4R to make mortgage payments should force the owner to include those amounts in the surplus cash calculation. This could be controversial.

 

Les Sparks

AHACPA

(801) 547-0809

 

From: AHACPA Support <support@ahacpa.org>
Sent: Wednesday, March 17, 2021 2:33 PM
To: les@ahacpa.org
Subject: Reserve for replacement disbursements – line S1000-030 [NEW]

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