Finding 2022-001 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ended June 30, 2022, the Corporation made thirteen payments on the mortgage payable, however, as of June 30, 2022 the Corporation was delinquent by two months of principal and interest. Additionally, the Corporation incurred late fees of $911 during the year ended June 30, 2022.
Criteria: The Loan Agreement and the Regulatory Agreement with HUD requires the Corporation to make all required payments of mortgage principal and interest by its due date.
Effect: Noncompliance with HUD regulations and mortgage default.
Cause: Vacancy and cash flow shortages.
Context: A test to compare the required mortgage payments to the actual mortgage payments was performed. The Corporation made thirteen payments on the mortgage payable, however, as of June 30, 2022 the Corporation was delinquent by two months of principal and interest.
Questioned Costs: $911
Recommendation: We recommend that management and the board of directors work to improve occupancy and submit special claims requests to HUD for vacant units to improve cash flow to ensure timely payment of the mortgage principal and interest payments.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the required mortgage were not made. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company is increasing advertising to fill vacancies and submitting special claims requests to improve the cash flow. Additionally, the new management company is working with the lender to make additional mortgage payments as cash flow permits.
Finding 2022-002 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155 Statement of Condition: The Corporation did not submit the data collection form and required reporting package to the Federal Audit Clearinghouse (FAC) for the year ended June 30, 2022 by the required due date. Criteria: The Uniform Guidance, 2 CFR Part 200 Section 200.512(d), Report Submission, requires any non-federal entity that expends Federal awards which must be audited under Subpart F of 2 CFR to electronically submit to the FAC the data collection form and the reporting package described in 2 CFR Part 200 Section 200.512. The Uniform Guidance, 2 CFR Part 200 Section 200.512(a)(1), Report Submission, requires the data collection form and the reporting package described in 2 CFR Part 200 Section 200.512 to be submitted within the earlier of 30 calendar days after the receipt of the auditor's report(s) or nine months after the end of the audit period. Effect: Noncompliance with Uniform Guidance regulations. Cause: Prior management oversight.
Context: The engagement letter for the audit was executed after the required due date for the required reporting package to the Federal Audit Clearinghouse (FAC). Questioned Costs: N/A
Recommendation: We recommend the board of directors and management ensure that the audit and data collection forms are completed timely and the data collection form and required reported package are submitted electronically to the FAC each fiscal year going forward. Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledge that the data collection form for the year ended June 30, 2022 is past the required due date. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company will ensure the data collection forms are submitted electronically to the FAC each fiscal year.
Finding 2022-003 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: The Corporation did not submit the annual financial report to HUD for the year ended June 30, 2022 by the required deadline.
Criteria: The Regulatory Agreement requires the Corporation to submit to HUD the annual financial report within 90 days following the end of each fiscal year.
Effect: Noncompliance with HUD regulations and mortgage default.
Cause: Prior management oversight.
Context: The engagement letter for the audit was executed after the required due date for the HUD annual financial report due date.
Questioned Costs: N/A
Recommendation: We recommend the board of directors and management ensure that the annual financial reports to HUD are submitted by the required due dates.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the annual financial report to HUD for the year ended June 30, 2022 is past the required due date. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company will ensure the annual financial reports to HUD are submitted once the audits are back on track with the scheduled due dates.
Finding 2022-001 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ended June 30, 2022, the Corporation made thirteen payments on the mortgage payable, however, as of June 30, 2022 the Corporation was delinquent by two months of principal and interest. Additionally, the Corporation incurred late fees of $911 during the year ended June 30, 2022.
Criteria: The Loan Agreement and the Regulatory Agreement with HUD requires the Corporation to make all required payments of mortgage principal and interest by its due date.
Effect: Noncompliance with HUD regulations and mortgage default.
Cause: Vacancy and cash flow shortages.
Context: A test to compare the required mortgage payments to the actual mortgage payments was performed. The Corporation made thirteen payments on the mortgage payable, however, as of June 30, 2022 the Corporation was delinquent by two months of principal and interest.
Questioned Costs: $911
Recommendation: We recommend that management and the board of directors work to improve occupancy and submit special claims requests to HUD for vacant units to improve cash flow to ensure timely payment of the mortgage principal and interest payments.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the required mortgage were not made. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company is increasing advertising to fill vacancies and submitting special claims requests to improve the cash flow. Additionally, the new management company is working with the lender to make additional mortgage payments as cash flow permits.
Finding 2022-002 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155 Statement of Condition: The Corporation did not submit the data collection form and required reporting package to the Federal Audit Clearinghouse (FAC) for the year ended June 30, 2022 by the required due date. Criteria: The Uniform Guidance, 2 CFR Part 200 Section 200.512(d), Report Submission, requires any non-federal entity that expends Federal awards which must be audited under Subpart F of 2 CFR to electronically submit to the FAC the data collection form and the reporting package described in 2 CFR Part 200 Section 200.512. The Uniform Guidance, 2 CFR Part 200 Section 200.512(a)(1), Report Submission, requires the data collection form and the reporting package described in 2 CFR Part 200 Section 200.512 to be submitted within the earlier of 30 calendar days after the receipt of the auditor's report(s) or nine months after the end of the audit period. Effect: Noncompliance with Uniform Guidance regulations. Cause: Prior management oversight.
Context: The engagement letter for the audit was executed after the required due date for the required reporting package to the Federal Audit Clearinghouse (FAC). Questioned Costs: N/A
Recommendation: We recommend the board of directors and management ensure that the audit and data collection forms are completed timely and the data collection form and required reported package are submitted electronically to the FAC each fiscal year going forward. Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledge that the data collection form for the year ended June 30, 2022 is past the required due date. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company will ensure the data collection forms are submitted electronically to the FAC each fiscal year.
Finding 2022-003 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: The Corporation did not submit the annual financial report to HUD for the year ended June 30, 2022 by the required deadline.
Criteria: The Regulatory Agreement requires the Corporation to submit to HUD the annual financial report within 90 days following the end of each fiscal year.
Effect: Noncompliance with HUD regulations and mortgage default.
Cause: Prior management oversight.
Context: The engagement letter for the audit was executed after the required due date for the HUD annual financial report due date.
Questioned Costs: N/A
Recommendation: We recommend the board of directors and management ensure that the annual financial reports to HUD are submitted by the required due dates.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the annual financial report to HUD for the year ended June 30, 2022 is past the required due date. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company will ensure the annual financial reports to HUD are submitted once the audits are back on track with the scheduled due dates.