Audit 12646

Finding No. 2021-002 (Significant Deficiency) Condition The Project failed to deposit current year’s surplus cash into its residual receipts account within 90 days of year-end. Criteria The Company is required to follow HUD’s guidelines and procedures for depositing surplus cash into a residual receipts account within 90 days after the end of the fiscal period. Cause Management of the Company did not complete the calculation within the 90-day period as required. Effect The Company was not in compliance with their Regulatory Agreement. Context During our audit procedure for the computation of surplus cash, we recalculated the amounts in the schedule and noted the schedule to be accurate. However, while completing our audit procedure to review the transfer into the surplus cash account prior to the 90-day deadline, we noted the transfer was not made. Recommendation The Company should ensure their procedures require the calculation of residual receipts and the transfer occur within 90 days of year-end. Reporting Views of Responsible Officials Management has acknowledged a breach in protocol and deposited the current year’s surplus cash on December 2, 2021.

Finding No. 2021-003 (Significant Deficiency) Condition Project failed to maintain security deposits for each occupied unit as required by the Regulatory Agreement. Criteria The Regulatory Agreement stipulates that each unit shall have at least one month of security, and any funds collected as a security deposit shall be kept separate and apart from all other funds of the Project in a trust account. Cause Management did not have proper control to ensure each unit’s tenant security deposit was maintain in a segregated bank account. Effect The Company was not in compliance with its Regulatory Agreement. Context During our audit procedures for compliance testing of security deposits, the auditor noted that the Company was not in custody of 16 of the 93 occupied units’ security deposit in the Development. Recommendation The Company should implement monitoring controls to ensure compliance with tenants’ security deposits and Management should transfer all security deposit amounts currently being held in the Company's operating project account to a separate security deposit bank account as soon as possible. Reporting Views of Responsible Officials Management has acknowledged a breach in protocol and is in the process of transferring the tenants’ security deposits collected and held in the operating bank account to a segregated bank account. Prior Year Finding Yes.

Finding No. 2021-003 (Significant Deficiency) Condition Project failed to maintain security deposits for each occupied unit as required by the Regulatory Agreement. Criteria The Regulatory Agreement stipulates that each unit shall have at least one month of security, and any funds collected as a security deposit shall be kept separate and apart from all other funds of the Project in a trust account. Cause Management did not have proper control to ensure each unit’s tenant security deposit was maintain in a segregated bank account. Effect The Company was not in compliance with its Regulatory Agreement. Context During our audit procedures for compliance testing of security deposits, the auditor noted that the Company was not in custody of 16 of the 93 occupied units’ security deposit in the Development. Recommendation The Company should implement monitoring controls to ensure compliance with tenants’ security deposits and Management should transfer all security deposit amounts currently being held in the Company's operating project account to a separate security deposit bank account as soon as possible. Reporting Views of Responsible Officials Management has acknowledged a breach in protocol and is in the process of transferring the tenants’ security deposits collected and held in the operating bank account to a segregated bank account. Prior Year Finding Yes.

Finding No. 2021-002 (Significant Deficiency) Condition The Project failed to deposit current year’s surplus cash into its residual receipts account within 90 days of year-end. Criteria The Company is required to follow HUD’s guidelines and procedures for depositing surplus cash into a residual receipts account within 90 days after the end of the fiscal period. Cause Management of the Company did not complete the calculation within the 90-day period as required. Effect The Company was not in compliance with their Regulatory Agreement. Context During our audit procedure for the computation of surplus cash, we recalculated the amounts in the schedule and noted the schedule to be accurate. However, while completing our audit procedure to review the transfer into the surplus cash account prior to the 90-day deadline, we noted the transfer was not made. Recommendation The Company should ensure their procedures require the calculation of residual receipts and the transfer occur within 90 days of year-end. Reporting Views of Responsible Officials Management has acknowledged a breach in protocol and deposited the current year’s surplus cash on December 2, 2021.

Finding No. 2021-002 (Significant Deficiency) Condition The Project failed to deposit current year’s surplus cash into its residual receipts account within 90 days of year-end. Criteria The Company is required to follow HUD’s guidelines and procedures for depositing surplus cash into a residual receipts account within 90 days after the end of the fiscal period. Cause Management of the Company did not complete the calculation within the 90-day period as required. Effect The Company was not in compliance with their Regulatory Agreement. Context During our audit procedure for the computation of surplus cash, we recalculated the amounts in the schedule and noted the schedule to be accurate. However, while completing our audit procedure to review the transfer into the surplus cash account prior to the 90-day deadline, we noted the transfer was not made. Recommendation The Company should ensure their procedures require the calculation of residual receipts and the transfer occur within 90 days of year-end. Reporting Views of Responsible Officials Management has acknowledged a breach in protocol and deposited the current year’s surplus cash on December 2, 2021.

Finding No. 2021-003 (Significant Deficiency) Condition Project failed to maintain security deposits for each occupied unit as required by the Regulatory Agreement. Criteria The Regulatory Agreement stipulates that each unit shall have at least one month of security, and any funds collected as a security deposit shall be kept separate and apart from all other funds of the Project in a trust account. Cause Management did not have proper control to ensure each unit’s tenant security deposit was maintain in a segregated bank account. Effect The Company was not in compliance with its Regulatory Agreement. Context During our audit procedures for compliance testing of security deposits, the auditor noted that the Company was not in custody of 16 of the 93 occupied units’ security deposit in the Development. Recommendation The Company should implement monitoring controls to ensure compliance with tenants’ security deposits and Management should transfer all security deposit amounts currently being held in the Company's operating project account to a separate security deposit bank account as soon as possible. Reporting Views of Responsible Officials Management has acknowledged a breach in protocol and is in the process of transferring the tenants’ security deposits collected and held in the operating bank account to a segregated bank account. Prior Year Finding Yes.

Finding No. 2021-003 (Significant Deficiency) Condition Project failed to maintain security deposits for each occupied unit as required by the Regulatory Agreement. Criteria The Regulatory Agreement stipulates that each unit shall have at least one month of security, and any funds collected as a security deposit shall be kept separate and apart from all other funds of the Project in a trust account. Cause Management did not have proper control to ensure each unit’s tenant security deposit was maintain in a segregated bank account. Effect The Company was not in compliance with its Regulatory Agreement. Context During our audit procedures for compliance testing of security deposits, the auditor noted that the Company was not in custody of 16 of the 93 occupied units’ security deposit in the Development. Recommendation The Company should implement monitoring controls to ensure compliance with tenants’ security deposits and Management should transfer all security deposit amounts currently being held in the Company's operating project account to a separate security deposit bank account as soon as possible. Reporting Views of Responsible Officials Management has acknowledged a breach in protocol and is in the process of transferring the tenants’ security deposits collected and held in the operating bank account to a segregated bank account. Prior Year Finding Yes.

Finding No. 2021-002 (Significant Deficiency) Condition The Project failed to deposit current year’s surplus cash into its residual receipts account within 90 days of year-end. Criteria The Company is required to follow HUD’s guidelines and procedures for depositing surplus cash into a residual receipts account within 90 days after the end of the fiscal period. Cause Management of the Company did not complete the calculation within the 90-day period as required. Effect The Company was not in compliance with their Regulatory Agreement. Context During our audit procedure for the computation of surplus cash, we recalculated the amounts in the schedule and noted the schedule to be accurate. However, while completing our audit procedure to review the transfer into the surplus cash account prior to the 90-day deadline, we noted the transfer was not made. Recommendation The Company should ensure their procedures require the calculation of residual receipts and the transfer occur within 90 days of year-end. Reporting Views of Responsible Officials Management has acknowledged a breach in protocol and deposited the current year’s surplus cash on December 2, 2021.