Audit 2765

FINDING No. 2023-001: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: All replacement reserve deposits for the year ended June 30, 2023. Sample Size Information: Required replacement reserve deposits for the year ended June 30, 2023. Identification of Repeat Finding and Finding Reference Number: No. Criteria: In accordance with HUD, required monthly deposits must be made to the Project’s reserve for replacement account. Statement of Condition: The Project overfunded the account by $468. Cause: The Project implemented a funding increase incorrectly during the current year resulting in excess deposits. Effect or Potential Effect: Overfunded reserve for replacements. Auditor Non-Compliance Code: N – Reserve for Replacements Deposits. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should implement procedures to ensure that the correct amount is deposited into the replacement reserve account each month. A HUD approved 9250 should be obtained to remove excess funds. Response Indicator: Agree. Completion Date: 6/30/2024 Response: The lender inadvertently took the retro R4R increase of $468.00 again after already being paid in the previous month. A 9250 will be prepared so that the over funding can be deposited back to the account.

FINDING No. 2023-002: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: Fifty-six tenants. Sample Size Information: Ten tenants. Identification of Repeat Finding and Finding Reference Number: Yes, finding 2022-002. Criteria: HUD regulations require proper maintenance of tenant files including: • Apartment application that is signed and dated by management; • Documentation of tenant security deposit collection; • Evidence that tenants are age 62 or disabled upon move in; • Electronic Income Verification (EIV) performed within 90 days after the move-in information is transmitted to Tenant Rental Assistance Certification System (TRACS) to confirm/validate the income reported by the household. Statement of Condition: • Applications were not signed and dated upon receipt by the manager for four tenants. • The Project did not maintain documentation of security deposits for five tenants. • The Project did not maintain evidence that a tenant under the age of 62 was disabled upon move in and a total of $3,260 of disallowed HAP was collected. • The Project did not obtain income verification via EIV within 90 days after move-in for eight tenants. Cause: The Project did not maintain appropriate tenant eligibility documentation required by HUD did not perform timely income verification. Effect or Potential Effect Unable to determine date and time for the receipt of the application for proper waiting list placement and subsequent selection to occupy a unit. In addition, unable to verify the cost of assistance and residency may be disallowed. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should maintain all required tenant documentation including proper signatures on applications, support for security deposit collections, evidence that tenants meet the age or disability requirements, and verification of tenant income through the EIV system. Response Indicator: Agree. Completion Date: 6/30/2024 Response: The compliance department will provide additional training with the manager on screening policies and procedures. Compliance will also conduct periodic file reviews ensuring screenings were performed and that a copy of the report was put into the tenant file.

FINDING No. 2023-003: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: Total rent revenue for the year ended June 30, 2023. Sample Size Information: All monthly HAP requests for the year ended June 30, 2023. Identification of Repeat Finding and Finding Reference Number: No. Criteria: As required by HUD regulations, a HUD approved rent change must be executed as of its effective date upon election and acceptance of an automatic rent increase. Statement of Condition: The Project did not implement the accepted HUD approved rent change to its monthly HAP requests as of the June 6, 2022 effective date resulting in a $12,819 omission. Cause: The Project did not follow HUD regulations for the gross rent change resulting in an underpayment of HAP for each unit. Effect or Potential Effect: The Project is not in compliance with HUD regulations for not executing a rent change as of the effective date, resulting in a $12,819 under collection of HAP. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should comply with HUD regulations for executing the required rent change as of its effective date and all earned revenue should be recorded in the correct accounting period. Response Indicator: Agree. Completion Date: 6/30/2024 Response: The compliance department will provide additional training to the manager on implementing HUD approved rent increases.

FINDING No. 2023-001: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: All replacement reserve deposits for the year ended June 30, 2023. Sample Size Information: Required replacement reserve deposits for the year ended June 30, 2023. Identification of Repeat Finding and Finding Reference Number: No. Criteria: In accordance with HUD, required monthly deposits must be made to the Project’s reserve for replacement account. Statement of Condition: The Project overfunded the account by $468. Cause: The Project implemented a funding increase incorrectly during the current year resulting in excess deposits. Effect or Potential Effect: Overfunded reserve for replacements. Auditor Non-Compliance Code: N – Reserve for Replacements Deposits. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should implement procedures to ensure that the correct amount is deposited into the replacement reserve account each month. A HUD approved 9250 should be obtained to remove excess funds. Response Indicator: Agree. Completion Date: 6/30/2024 Response: The lender inadvertently took the retro R4R increase of $468.00 again after already being paid in the previous month. A 9250 will be prepared so that the over funding can be deposited back to the account.

FINDING No. 2023-002: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: Fifty-six tenants. Sample Size Information: Ten tenants. Identification of Repeat Finding and Finding Reference Number: Yes, finding 2022-002. Criteria: HUD regulations require proper maintenance of tenant files including: • Apartment application that is signed and dated by management; • Documentation of tenant security deposit collection; • Evidence that tenants are age 62 or disabled upon move in; • Electronic Income Verification (EIV) performed within 90 days after the move-in information is transmitted to Tenant Rental Assistance Certification System (TRACS) to confirm/validate the income reported by the household. Statement of Condition: • Applications were not signed and dated upon receipt by the manager for four tenants. • The Project did not maintain documentation of security deposits for five tenants. • The Project did not maintain evidence that a tenant under the age of 62 was disabled upon move in and a total of $3,260 of disallowed HAP was collected. • The Project did not obtain income verification via EIV within 90 days after move-in for eight tenants. Cause: The Project did not maintain appropriate tenant eligibility documentation required by HUD did not perform timely income verification. Effect or Potential Effect Unable to determine date and time for the receipt of the application for proper waiting list placement and subsequent selection to occupy a unit. In addition, unable to verify the cost of assistance and residency may be disallowed. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should maintain all required tenant documentation including proper signatures on applications, support for security deposit collections, evidence that tenants meet the age or disability requirements, and verification of tenant income through the EIV system. Response Indicator: Agree. Completion Date: 6/30/2024 Response: The compliance department will provide additional training with the manager on screening policies and procedures. Compliance will also conduct periodic file reviews ensuring screenings were performed and that a copy of the report was put into the tenant file.

FINDING No. 2023-003: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: Total rent revenue for the year ended June 30, 2023. Sample Size Information: All monthly HAP requests for the year ended June 30, 2023. Identification of Repeat Finding and Finding Reference Number: No. Criteria: As required by HUD regulations, a HUD approved rent change must be executed as of its effective date upon election and acceptance of an automatic rent increase. Statement of Condition: The Project did not implement the accepted HUD approved rent change to its monthly HAP requests as of the June 6, 2022 effective date resulting in a $12,819 omission. Cause: The Project did not follow HUD regulations for the gross rent change resulting in an underpayment of HAP for each unit. Effect or Potential Effect: The Project is not in compliance with HUD regulations for not executing a rent change as of the effective date, resulting in a $12,819 under collection of HAP. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should comply with HUD regulations for executing the required rent change as of its effective date and all earned revenue should be recorded in the correct accounting period. Response Indicator: Agree. Completion Date: 6/30/2024 Response: The compliance department will provide additional training to the manager on implementing HUD approved rent increases.