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:
One hundred eighteen tenants.
Sample Size Information: Twenty tenants.
Identification of Repeat Finding and Finding Reference Number:
No.
Criteria: HUD regulation requires the following be performed in a timely manner and corresponding documentation maintained:
• Annual unit inspections.
• Apartment applications stamped with date and time received.
• Verification of initial income through the use of Enterprise Income Verification (EIV) performed within 90 days of the tenant being entered into Tenant Rental Assistance Certification System (TRACS)
• Verification of initial income through third-party verification documentation.
Statement of Condition: The Project did not:
• Perform an annual unit inspection for one tenant.
• Mark the application for housing with the date and time received for one tenant.
• Review the initial EIV within 90 days after transmission of move-in certification to TRACS for two tenants.
• Obtain and/or maintain third party verification of initial income for one tenant.
Cause: The Project did not maintain appropriate tenant eligibility documentation as required by HUD.
Effect or Potential Effect: Unable to verify tenant eligibility and cost of assistance residency may be disallowed. Unable to determine and assess whether the property has sustained any damages.
Auditor Non-Compliance Code: R – Section 8 Program Administration.
Reporting Views of Responsible Officials:
The Project agrees with the finding and the auditor’s recommendations will be adopted.
Recommendation: The Project should implement procedures to ensure initial tenant income through EIV system and third-party documentation are verified in a timely manner, annual unit inspections are performed, and all required tenant documentation is complete and accurate.
Response Indicator: Agree.
Completion Date: 06/30/2024
Response: Monthly reminders are being sent to all managers to run their EIV reports for the month. In addition, random files are being reviewed by compliance to ensure EIV reports are pulled, unit inspections performed, and required documentation is complete and accurate.
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:
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: As required by HUD regulation, timely monthly deposits must be made to the Replacement Reserve account.
Statement of Condition: The Project underfunded the account by $175.
Cause: The Project did not implement the required monthly deposit into the replacement reserve account increase in a timely manner effective May 1, 2023.
Effect or Potential Effect: Deficiently funded replacement reserve.
Auditor Non-Compliance Code: N – Reserve for Replacements Deposits
Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted.
Recommendation: The Project should implement procedures to ensure that the correct amount is deposited into the replacement reserve account each month.
Response Indicator: Agree.
Completion Date: 06/30/2024
Response: Management nor the lender received the approved 9250 dated 06.06.2023 until 10.26.2023. Management will submit the retro amount of $174.84 in December 2023.
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:
Escrow accounts.
Sample Size Information: Escrow accounts.
Identification of Repeat Finding and Finding Reference Number:
No.
Criteria: As required by the regulatory agreement, the Project is required to pay, when due, all taxes, assessments and other charges.
Statement of Condition: The Project is deficient in funding escrow deposits, as required by HUD and as a result, overdrew the account.
Cause: The Project did not properly fund the escrow accounts based on current period insurance premiums and tax rates.
Effect or Potential Effect: The escrow deposits are not sufficient to meet future obligations and the escrow deposits account was overdrawn.
Auditor Non-Compliance Code: Z – Other
Reporting Views of Responsible Officials:
The Project agrees with the finding and the auditor’s recommendations will be adopted.
Recommendation: The Project should make sufficient monthly deposits to the escrow accounts in a timely manner.
Response Indicator: Agree.
Completion Date: 06/30/2024
Response: The shortfall was due to the property insurance premium unexpectedly increasing by more than $170,000. The account was subsequently analyzed, and the monthly escrow deposit is now sufficient to cover the new rates.
Questioned Costs – Department of Housing and Urban Development $208,565
FINDING No. 2023-004: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155
Finding Resolution Status: Resolved.
Information on Universe Population Size:
Payroll disbursements.
Sample Size Information: Property manager payroll disbursements.
Identification of Repeat Finding and Finding Reference Number:
No.
Criteria: Per HUD compliance requirements, all disbursements from the regular operating account must be supported by approved invoices, bills, or other supporting documentation and should only be used to pay for activities of the Project. Project funds cannot be loaned or used on nonproject purposes without HUD approval.
Statement of Condition: The Project paid the full biweekly wage amount of the property manager, who is also employed at a second sister property, for approximately three months. That property is responsible for the other half of the property manager’s wages totaling $6,840.
Cause: The Project did not adjust the wage amount prior to submitting payroll for payment.
Effect or Potential Effect: Unauthorized use of project assets.
Auditor Non-Compliance Code: H – Unauthorized distribution of project assets
Reporting Views of Responsible Officials:
The Project agrees with the finding and the auditor’s recommendations have been adopted.
Recommendation: The Project should improve monitoring of the payroll disbursement process to ensure the appropriate approved wages are paid.
Response Indicator: Agree.
Completion Date: 06/30/2023
Response: Additional payroll controls are being evaluated and implemented in 2024. This will include establishing procedures to ensure the completeness and accuracy of payroll and related oversight.
Questioned Costs – Department of Housing and Urban Development $6,840
Total Questioned Costs – Department of Housing and Urban Development $215,405
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:
One hundred eighteen tenants.
Sample Size Information: Twenty tenants.
Identification of Repeat Finding and Finding Reference Number:
No.
Criteria: HUD regulation requires the following be performed in a timely manner and corresponding documentation maintained:
• Annual unit inspections.
• Apartment applications stamped with date and time received.
• Verification of initial income through the use of Enterprise Income Verification (EIV) performed within 90 days of the tenant being entered into Tenant Rental Assistance Certification System (TRACS)
• Verification of initial income through third-party verification documentation.
Statement of Condition: The Project did not:
• Perform an annual unit inspection for one tenant.
• Mark the application for housing with the date and time received for one tenant.
• Review the initial EIV within 90 days after transmission of move-in certification to TRACS for two tenants.
• Obtain and/or maintain third party verification of initial income for one tenant.
Cause: The Project did not maintain appropriate tenant eligibility documentation as required by HUD.
Effect or Potential Effect: Unable to verify tenant eligibility and cost of assistance residency may be disallowed. Unable to determine and assess whether the property has sustained any damages.
Auditor Non-Compliance Code: R – Section 8 Program Administration.
Reporting Views of Responsible Officials:
The Project agrees with the finding and the auditor’s recommendations will be adopted.
Recommendation: The Project should implement procedures to ensure initial tenant income through EIV system and third-party documentation are verified in a timely manner, annual unit inspections are performed, and all required tenant documentation is complete and accurate.
Response Indicator: Agree.
Completion Date: 06/30/2024
Response: Monthly reminders are being sent to all managers to run their EIV reports for the month. In addition, random files are being reviewed by compliance to ensure EIV reports are pulled, unit inspections performed, and required documentation is complete and accurate.
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:
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: As required by HUD regulation, timely monthly deposits must be made to the Replacement Reserve account.
Statement of Condition: The Project underfunded the account by $175.
Cause: The Project did not implement the required monthly deposit into the replacement reserve account increase in a timely manner effective May 1, 2023.
Effect or Potential Effect: Deficiently funded replacement reserve.
Auditor Non-Compliance Code: N – Reserve for Replacements Deposits
Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted.
Recommendation: The Project should implement procedures to ensure that the correct amount is deposited into the replacement reserve account each month.
Response Indicator: Agree.
Completion Date: 06/30/2024
Response: Management nor the lender received the approved 9250 dated 06.06.2023 until 10.26.2023. Management will submit the retro amount of $174.84 in December 2023.
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:
Escrow accounts.
Sample Size Information: Escrow accounts.
Identification of Repeat Finding and Finding Reference Number:
No.
Criteria: As required by the regulatory agreement, the Project is required to pay, when due, all taxes, assessments and other charges.
Statement of Condition: The Project is deficient in funding escrow deposits, as required by HUD and as a result, overdrew the account.
Cause: The Project did not properly fund the escrow accounts based on current period insurance premiums and tax rates.
Effect or Potential Effect: The escrow deposits are not sufficient to meet future obligations and the escrow deposits account was overdrawn.
Auditor Non-Compliance Code: Z – Other
Reporting Views of Responsible Officials:
The Project agrees with the finding and the auditor’s recommendations will be adopted.
Recommendation: The Project should make sufficient monthly deposits to the escrow accounts in a timely manner.
Response Indicator: Agree.
Completion Date: 06/30/2024
Response: The shortfall was due to the property insurance premium unexpectedly increasing by more than $170,000. The account was subsequently analyzed, and the monthly escrow deposit is now sufficient to cover the new rates.
Questioned Costs – Department of Housing and Urban Development $208,565
FINDING No. 2023-004: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155
Finding Resolution Status: Resolved.
Information on Universe Population Size:
Payroll disbursements.
Sample Size Information: Property manager payroll disbursements.
Identification of Repeat Finding and Finding Reference Number:
No.
Criteria: Per HUD compliance requirements, all disbursements from the regular operating account must be supported by approved invoices, bills, or other supporting documentation and should only be used to pay for activities of the Project. Project funds cannot be loaned or used on nonproject purposes without HUD approval.
Statement of Condition: The Project paid the full biweekly wage amount of the property manager, who is also employed at a second sister property, for approximately three months. That property is responsible for the other half of the property manager’s wages totaling $6,840.
Cause: The Project did not adjust the wage amount prior to submitting payroll for payment.
Effect or Potential Effect: Unauthorized use of project assets.
Auditor Non-Compliance Code: H – Unauthorized distribution of project assets
Reporting Views of Responsible Officials:
The Project agrees with the finding and the auditor’s recommendations have been adopted.
Recommendation: The Project should improve monitoring of the payroll disbursement process to ensure the appropriate approved wages are paid.
Response Indicator: Agree.
Completion Date: 06/30/2023
Response: Additional payroll controls are being evaluated and implemented in 2024. This will include establishing procedures to ensure the completeness and accuracy of payroll and related oversight.
Questioned Costs – Department of Housing and Urban Development $6,840
Total Questioned Costs – Department of Housing and Urban Development $215,405