Audit 1587

2023-002 Delinquent Deposit to Replacement Reserve Federal Agency United States Department of Housing and Urban Development CFDA 14.157 – Supportive Housing for the Elderly (Section 202) Award Numbers 171-EE027 Criteria [X] Compliance Finding The regulatory agreement requires the Organization to make monthly deposits to its Replacement Reserve account. Condition: During the year ended May 31, 2023, the Organization did not make one of therequired deposits to the Replacement Reserve. The Organization was required to make monthly deposits to the reserve in the amount of $1,662 before the deposits were temporarily suspended on January 1, 2023. Context: This finding appears to be an isolated problem. Cause: The Organization failed to make the required deposit for one month due to a management oversight. Effect: Failure to make monthly payments resulted in an underfunding of the Replacement Reserve and a violation of the regulatory agreement. Recommendation Management should implement further controls to ensure that the Replacement Reserve is funded in accordance with the terms of the regulatory agreement. Recommendation: Management should implement further controls to ensure that the Replacement Reserve is funded in accordance with the terms of the regulatory agreement. Views of responsible officials and planned corrective actions: Management will make a deposit to the replacement reserve account and ensure that future deposits are made timely. Kiemle Hagood moved to a new multifamily software platform in 2022. Specifically, this property migrated from MRI to ResMan at the end of November 2022, further the multifamily accountant resigned in December. The previous Multifamily Accountant was responsible for entering the monthly reserve payments for processing, however, did not complete this task in December prior to leaving the firm. Like many businesses are experiencing, it took an extended period of time to find a replacement (late March 2023). During the gathering of material for the audit, it was noted there were 6 payments from June to November showing in MRI and no December payment processed. The suspension of deposits started on January 1, 2023, for 6 months. It was thought that 6 deposits showing in the previous software and 6 suspended deposits made up 12 deposits, not noting the months of these. With the previous Multifamily Accountant never having entered the December reserve deposit, the new Regional Manager for this property was not aware that the property was missing the December reserve payment. Corrective actions: The Regional Manager has been trained that the reserve deposits must occur every month and should take notice if it is not there and take corrective action immediately. The new Multifamily Accountant double checks that the reserve deposits are entered and paid during each period when reviewing accrual financials. The accounting department has set up an invoice template for the reserve deposit which produces a task monthly on the 10th, it must be posted by the accounting department and then approved for the funds to be deposited to the reserve account.

2023-002 Delinquent Deposit to Replacement Reserve Federal Agency United States Department of Housing and Urban Development CFDA 14.157 – Supportive Housing for the Elderly (Section 202) Award Numbers 171-EE027 Criteria [X] Compliance Finding The regulatory agreement requires the Organization to make monthly deposits to its Replacement Reserve account. Condition: During the year ended May 31, 2023, the Organization did not make one of therequired deposits to the Replacement Reserve. The Organization was required to make monthly deposits to the reserve in the amount of $1,662 before the deposits were temporarily suspended on January 1, 2023. Context: This finding appears to be an isolated problem. Cause: The Organization failed to make the required deposit for one month due to a management oversight. Effect: Failure to make monthly payments resulted in an underfunding of the Replacement Reserve and a violation of the regulatory agreement. Recommendation Management should implement further controls to ensure that the Replacement Reserve is funded in accordance with the terms of the regulatory agreement. Recommendation: Management should implement further controls to ensure that the Replacement Reserve is funded in accordance with the terms of the regulatory agreement. Views of responsible officials and planned corrective actions: Management will make a deposit to the replacement reserve account and ensure that future deposits are made timely. Kiemle Hagood moved to a new multifamily software platform in 2022. Specifically, this property migrated from MRI to ResMan at the end of November 2022, further the multifamily accountant resigned in December. The previous Multifamily Accountant was responsible for entering the monthly reserve payments for processing, however, did not complete this task in December prior to leaving the firm. Like many businesses are experiencing, it took an extended period of time to find a replacement (late March 2023). During the gathering of material for the audit, it was noted there were 6 payments from June to November showing in MRI and no December payment processed. The suspension of deposits started on January 1, 2023, for 6 months. It was thought that 6 deposits showing in the previous software and 6 suspended deposits made up 12 deposits, not noting the months of these. With the previous Multifamily Accountant never having entered the December reserve deposit, the new Regional Manager for this property was not aware that the property was missing the December reserve payment. Corrective actions: The Regional Manager has been trained that the reserve deposits must occur every month and should take notice if it is not there and take corrective action immediately. The new Multifamily Accountant double checks that the reserve deposits are entered and paid during each period when reviewing accrual financials. The accounting department has set up an invoice template for the reserve deposit which produces a task monthly on the 10th, it must be posted by the accounting department and then approved for the funds to be deposited to the reserve account.