Audit 12264

Finding 2023-001 U.S. Department of Housing and Urban Development Supportive Housing for Persons with Disabilities (Section 811) – Assistance Listing 14.181; Grant period – Year ended June 30, 2023 Material Noncompliance with Program Requirements Significant Deficiency Over Compliance: Special Tests and Provisions Statement of Condition: Failure to make required deposits to the replacement reserve. Criteria: In accordance with the regulatory agreement, a monthly deposit in the amount of $455 is required to be made to the replacement reserve account. Cause of Condition: The Project applied for and received an approved distribution from the replacement reserve for $4,356 in November 2022. In lieu of making a withdraw from the replacement reserve for the approved amount, the Project’s sponsor and management company turned off the required monthly deposit until the distribution amount had been matched. The Project’s sponsor experienced turnover in their accounting department during the year which led to the required monthly deposits remaining off. Effect of Condition: This condition resulted in required deposits to the replacement reserve not properly transferred and reconciliation of the replacement reserve account not properly maintained. Identification of Repeat Finding: None. Recommendation: We recommend that the Project’s sponsor reconcile the replacement reserve account and reinstate the required monthly deposit of $455. Management’s Response: The Project’s sponsor is aware of the requirement to make monthly deposits of $455 to the replacement reserve. In July 2023, the replacement reserve was reconciled and a transfer of $713 was made from the replacement reserve to the operating account to fulfill the approved distribution. Monthly deposits to the replacement reserve were reinstated as of August 1, 2023.

Finding 2023-001 U.S. Department of Housing and Urban Development Supportive Housing for Persons with Disabilities (Section 811) – Assistance Listing 14.181; Grant period – Year ended June 30, 2023 Material Noncompliance with Program Requirements Significant Deficiency Over Compliance: Special Tests and Provisions Statement of Condition: Failure to make required deposits to the replacement reserve. Criteria: In accordance with the regulatory agreement, a monthly deposit in the amount of $455 is required to be made to the replacement reserve account. Cause of Condition: The Project applied for and received an approved distribution from the replacement reserve for $4,356 in November 2022. In lieu of making a withdraw from the replacement reserve for the approved amount, the Project’s sponsor and management company turned off the required monthly deposit until the distribution amount had been matched. The Project’s sponsor experienced turnover in their accounting department during the year which led to the required monthly deposits remaining off. Effect of Condition: This condition resulted in required deposits to the replacement reserve not properly transferred and reconciliation of the replacement reserve account not properly maintained. Identification of Repeat Finding: None. Recommendation: We recommend that the Project’s sponsor reconcile the replacement reserve account and reinstate the required monthly deposit of $455. Management’s Response: The Project’s sponsor is aware of the requirement to make monthly deposits of $455 to the replacement reserve. In July 2023, the replacement reserve was reconciled and a transfer of $713 was made from the replacement reserve to the operating account to fulfill the approved distribution. Monthly deposits to the replacement reserve were reinstated as of August 1, 2023.