FAC Explorer

Audit 306693

FY End
2023-12-31
Total Expended
$5.16M
Findings
6
Programs
3
Organization: Falcon Housing Corporation 023-Ee-122 (MA)
Year: 2023 Accepted: 2024-05-20
Auditor: Burkhart Pizzanelli PC

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
397979 2023-001 - - E
397980 2023-002 - Yes E
397981 2023-003 - Yes C
974421 2023-001 - - E
974422 2023-002 - Yes E
974423 2023-003 - Yes C

Programs

ALN Program Spent Major Findings
14.157 Supportive Housing for the Elderly (section 202 Capital Advance - Accumulated Balance) $4.81M Yes 3
14.871 Section 8 Housing Choice Vouchers $338,600 - 0
14.871 Covid-19 Supplemental Payments $7,087 - 0

Contacts

Name Title Type
JC5MAGJ32DW7 Bryan Joyce Auditee
4135254321 Julie Quink Auditor
No contacts on file

Notes to SEFA

Title: Loan/loan guarantee outstanding balances Accounting Policies: The schedule of expenditures of federal awards is prepared on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Project did not pass-through any federal funds to a subrecipient in 2023. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. The Section 202 Capital Advance is presented as of January 1, 2023. The Section 202 Capital Advance balance as of December 31, 2023 was $4,812,100.
Title: Basis of presentation Accounting Policies: The schedule of expenditures of federal awards is prepared on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Project did not pass-through any federal funds to a subrecipient in 2023. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. The accompanying schedule of expenditures of federal awards includes the federal grant activity of Falcon Housing Corporation, HUD Project No. 023-EE-122. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the schedule presents only a selected portion of the operations of Falcon Housing Corporation, HUD Project No. 023-EE-122, it is not intended to and does not present the financial position, change in net assets, or cash flows of Falcon Housing Corporation, HUD Project No. 023-EE-122.
Title: Summary of Significant Accounting Policies Accounting Policies: The schedule of expenditures of federal awards is prepared on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Project did not pass-through any federal funds to a subrecipient in 2023. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. The schedule of expenditures of federal awards is prepared on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Project has elected not to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. The Project did not pass-through any federal funds to a subrecipient in 2023.

Finding Details

Finding 2023-001
FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT Department of Housing and Urban Development Finding, 2023-001: Major Program: Supportive Housing for the Elderly (Section 202 Capital Advance - Accumulated Balance), Federal Assistance Listing Number 14.157 STATEMENT OF CONDITION One tenant file, out of six files reviewed, incorrectly accounted for tenant’s income, which resulted in undercharging the tenant $22 a month in rent. CRITERIA HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to properly calculate tenants rent derived from the appropriate documents on file for tenants. EFFECT OF CONDITION The tenant was improperly undercharged $264 of rent for the year ended December 31, 2023. HUD was overcharged $264 of additional rental assistance payments for the year ended December 31, 2023. CONTEXT During audit fieldwork, six tenant files from a statistically valid sample were examined for compliance with tenant eligibility criteria and HUD lease requirements. Of the six tenant files examined, income for one tenant was incorrectly accounted for, resulting in the wrong calculation of tenant rent and HUD tenant assistance payments. CAUSE OF CONDITION Management mistakenly did not ensure the proper income was used to calculate the tenant’s rent. RECOMMENDATION The auditor recommends ensuring all tenants’ paperwork is thoroughly reviewed and accurately used in the calculation of the tenant’s required monthly rent and HUD’s tenant assistance payments. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project will be billing the tenant for the $264 and reimbursing HUD for additional tenant assistance payments of $264 due to the Project.
Finding 2023-002
FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED) Department of Housing and Urban Development Finding, 2023-002: Major Program: Supportive Housing for the Elderly (Section 202 Capital Advance - Accumulated Balance), Federal Assistance Listing Number 14.157 STATEMENT OF CONDITION One tenant file, out of six files reviewed, was for a tenant who moved in during the year and management did not properly generate the Enterprise Income Verification (EIV) report timely. CRITERIA HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to review the EIV report within 90 days after transmission of the move in certification to the Tenant Rental Assistance Certification System (TRACS). EFFECT OF CONDITION The EIV report for the tenant moved in was not generated until after the 90-day period specified by HUD. CONTEXT During audit fieldwork, six files from a statistically valid sample were examined for compliance with tenant eligibility criteria. Of the six tenant files examined, one tenant was a new move in. The tenant’s file did not contain the EIV verified in the required 90-day timeframe. CAUSE OF CONDITION The procedures to ensure compliance over HUD tenant compliance, including EIV verification, were not followed timely. RECOMMENDATION The auditor recommends ensuring all current and new staff are trained on tenants’ 90-day EIV reports and ensuring they are generated within the required time period to verify tenant information promptly and help reduce errors in subsidy payments. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project will be monitoring use of the EIV system for move ins and recertifications.
Finding 2023-003
FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED) Department of Housing and Urban Development Finding, 2023-003: Major Program: Supportive Housing for the Elderly (Section 202 Capital Advance - Accumulated Balance), Federal Assistance Listing Number 14.157 STATEMENT OF CONDITION All required deposits were not made to the Reserve for Replacement account for the years ended December 31, 2023 and 2022, totaling $5,727 and $24,287 outstanding as of December 31, 2023. CRITERIA HUD Handbook 4350.1 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to make monthly deposits to the Reserve for Replacement account based on the Project’s monthly deposit authorized by HUD. EFFECT OF CONDITION Management did not make all required deposits to the Reserve for Replacement account in 2023. CONTEXT During audit fieldwork, the Reserve for Replacement accounts were tested for compliance with required monthly deposits. Insufficient monthly deposits were noted on the bank statements. CAUSE OF CONDITION Management did not make all monthly deposits to the Reserve for Replacement account due to cash flow issues during 2023. RECOMMENDATION The auditor recommends the Reserve for Replacement be properly funded on a monthly basis. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project has suffered dramatically from the results of COVID-19. During all years prior to 2022, the Reserve for Replacement has been in compliance. Although HUD did help with small COVID-19 grants, it was not sufficient to overcome the costs. Properties of 50-units and less suffered far more during COVID-19 than the larger developments due to the economies of scale. It should be noted that in addition to the Reserve for Replacement that was not funded in 2023, the property management firm was also not paid $24,523. Management received a substantial rent increase in June 2023 and plans to make all required deposits in 2024 when they will begin to see the effects of this increase.
Finding 2023-001
FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT Department of Housing and Urban Development Finding, 2023-001: Major Program: Supportive Housing for the Elderly (Section 202 Capital Advance - Accumulated Balance), Federal Assistance Listing Number 14.157 STATEMENT OF CONDITION One tenant file, out of six files reviewed, incorrectly accounted for tenant’s income, which resulted in undercharging the tenant $22 a month in rent. CRITERIA HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to properly calculate tenants rent derived from the appropriate documents on file for tenants. EFFECT OF CONDITION The tenant was improperly undercharged $264 of rent for the year ended December 31, 2023. HUD was overcharged $264 of additional rental assistance payments for the year ended December 31, 2023. CONTEXT During audit fieldwork, six tenant files from a statistically valid sample were examined for compliance with tenant eligibility criteria and HUD lease requirements. Of the six tenant files examined, income for one tenant was incorrectly accounted for, resulting in the wrong calculation of tenant rent and HUD tenant assistance payments. CAUSE OF CONDITION Management mistakenly did not ensure the proper income was used to calculate the tenant’s rent. RECOMMENDATION The auditor recommends ensuring all tenants’ paperwork is thoroughly reviewed and accurately used in the calculation of the tenant’s required monthly rent and HUD’s tenant assistance payments. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project will be billing the tenant for the $264 and reimbursing HUD for additional tenant assistance payments of $264 due to the Project.
Finding 2023-002
FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED) Department of Housing and Urban Development Finding, 2023-002: Major Program: Supportive Housing for the Elderly (Section 202 Capital Advance - Accumulated Balance), Federal Assistance Listing Number 14.157 STATEMENT OF CONDITION One tenant file, out of six files reviewed, was for a tenant who moved in during the year and management did not properly generate the Enterprise Income Verification (EIV) report timely. CRITERIA HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to review the EIV report within 90 days after transmission of the move in certification to the Tenant Rental Assistance Certification System (TRACS). EFFECT OF CONDITION The EIV report for the tenant moved in was not generated until after the 90-day period specified by HUD. CONTEXT During audit fieldwork, six files from a statistically valid sample were examined for compliance with tenant eligibility criteria. Of the six tenant files examined, one tenant was a new move in. The tenant’s file did not contain the EIV verified in the required 90-day timeframe. CAUSE OF CONDITION The procedures to ensure compliance over HUD tenant compliance, including EIV verification, were not followed timely. RECOMMENDATION The auditor recommends ensuring all current and new staff are trained on tenants’ 90-day EIV reports and ensuring they are generated within the required time period to verify tenant information promptly and help reduce errors in subsidy payments. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project will be monitoring use of the EIV system for move ins and recertifications.
Finding 2023-003
FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED) Department of Housing and Urban Development Finding, 2023-003: Major Program: Supportive Housing for the Elderly (Section 202 Capital Advance - Accumulated Balance), Federal Assistance Listing Number 14.157 STATEMENT OF CONDITION All required deposits were not made to the Reserve for Replacement account for the years ended December 31, 2023 and 2022, totaling $5,727 and $24,287 outstanding as of December 31, 2023. CRITERIA HUD Handbook 4350.1 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to make monthly deposits to the Reserve for Replacement account based on the Project’s monthly deposit authorized by HUD. EFFECT OF CONDITION Management did not make all required deposits to the Reserve for Replacement account in 2023. CONTEXT During audit fieldwork, the Reserve for Replacement accounts were tested for compliance with required monthly deposits. Insufficient monthly deposits were noted on the bank statements. CAUSE OF CONDITION Management did not make all monthly deposits to the Reserve for Replacement account due to cash flow issues during 2023. RECOMMENDATION The auditor recommends the Reserve for Replacement be properly funded on a monthly basis. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project has suffered dramatically from the results of COVID-19. During all years prior to 2022, the Reserve for Replacement has been in compliance. Although HUD did help with small COVID-19 grants, it was not sufficient to overcome the costs. Properties of 50-units and less suffered far more during COVID-19 than the larger developments due to the economies of scale. It should be noted that in addition to the Reserve for Replacement that was not funded in 2023, the property management firm was also not paid $24,523. Management received a substantial rent increase in June 2023 and plans to make all required deposits in 2024 when they will begin to see the effects of this increase.