Audit 308469

Finding No. 2022-001 HUD HOME Investment Partnerships Program Federal Assistance Listing Number #14.239 Uniform Guidance Compliance Requirement Code: N-Special Tests and Provisions Criteria During the period of affordability (i.e., the period for which the nonfederal entity must maintain subsidized housing) for HOME assisted rental housing, the participating jurisdiction must perform on-site inspections to determine compliance with property standards and verify the information submitted by the owners no less than (a) every three years for projects containing one to four units, (b) every two years for projects containing five to 25 units, and (c) every year for projects containing 26 or more units. The participating jurisdiction must perform on-site inspections of rental housing occupied by tenants receiving HOME/HOME-ARP-assisted tenant-based rental assistance to determine compliance with housing quality standards (24 CFR sections 92.209(i), 92.251(f), and 92.504(d)). Condition The owner did not ensure passing HQS inspections were performed during 2022. Cause Management did not perform HQS inspections during 2022 due to the COVID-19 pandemic as they were unable to safely gain access to the units. Effect or Potential Effect Housing units may be out of compliance with HUD Quality Standards. Questioned Costs: Not applicable. Context In connection with the procedures applied to tenant file testing there were 8 instances of the 8 files tested where the passing HQS inspections were not performed during the year ended December 31, 2022. Repeat Finding: Yes - Finding 2021-003 Recommendation Management should resume making sure all units meet the HUD Housing Quality Standards and ensure that the responses to any findings are cleared timely. Views of Responsible Officials Unit inspections are being done for 2023.

Finding No. 2022-002 HUD HOME Investment Partnerships Program Federal Assistance Listing Number #14.239 Uniform Guidance Compliance Requirement Code: E-Eligibility Criteria Tenant lease files are required to be maintained and tenant eligibility determined in accordance with the Compliance in State of Oregon Housing and Community Services HOME Program Compliance Manual. Condition In connection with our lease file review we noted one instance of eight tenants tested where management did not perform a 3rd party income verification in accordance with policy. Cause Management’s policies with respect to recertifications and eligibility and the maintenance of tenant lease files in accordance with Compliance in State of Oregon Housing and Community Services HOME Program Compliance Manual were not consistently followed. Effect or Potential Effect This could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD. Questioned Costs: Not applicable. Context In connection with the procedures applied to our HOME units testing, one of the eight tenants tested did have the 3rd party income verification performed timely. Repeat Finding: No Recommendation Management should establish procedures and monitor compliance with those procedures to ensure that recertifications and correct income verification procedures are performed timely, tenant eligibility is correctly determined and that tenant lease files are properly maintained in accordance with the requirements of Compliance in State of Oregon Housing and Community Services HOME Program Compliance Manual. Views of Responsible Officials Community Manager reviewed file noting 2017 and 2018 were both done as self-certifications. REACH is currently doing full reviews for all HOME units during 2023.

Finding No. 2022-003 HUD HOME Investment Partnerships Program Federal Assistance Listing Number #14.239 Uniform Guidance Compliance Requirement Code: E-Eligibility Criteria Each owner must comply with the requirements set forth in 24 CFR Part 92 regulations as outlined in the "Compliance in HOME Rental Projects: A Guide for Property Owners" published by HUD which requires the property to maintain the contracted number of HOME units as well as the designated splits in bedroom size and High Home/Low Home unit ratios. Condition The owner did not make available to HOME tenants the contracted number and type of HOME units. Cause Management’s policies with respect to maintaining the number and split of contracted HOME units were not consistently followed. Effect or Potential Effect The procedures for determining and maintaining the correct HOME units within the property were not applied. This could result in ineligible tenants occupying HOME designated units. Questioned Costs: Not applicable. Context In connection with the procedures applied to our HOME units testing, one of the five properties tested did not meet the contracted HOME units size portfolio (there should be four 3-bedroom units (there are 5); and there should be three 4-bedroom units (there are 2)). Repeat Finding: Yes - Finding 2021-002 Recommendation Management should follow procedures in place to ensure consistent application and adherence to the requirements in accordance with the “Compliance in HOME Rental Projects: A Guide for Property Owners” published by HUD. Views of Responsible Officials A unit will be re-classified the next time there is a vacant unit of the corresponding size/type.

Finding No. 2022-004 HUD Low Income Housing Preservation and Resident Homeownership Act of 1990 Federal Assistance Listing Number #99.999 Uniform Guidance Compliance Requirement Code: E-Eligibility Criteria Tenant lease files are required to be maintained and tenant eligibility determined in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Condition Our testing procedures noted that the owner did not perform certifications and recertifications timely, did not maintain tenant files in compliance with HUD Rules in Code of Federal Regulations at 24 CFR Part 92, and did not select tenants from the waitlist appropriately. Cause Management's policies with respect to the determination of eligibility and the maintenance of tenant lease files in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs were not consistently followed. Effect or Potential Effect The procedures for determining tenant eligibility and maintaining tenant lease files were not consistently applied in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. This could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD. Questioned Costs: Not applicable. Context The procedures applied to our lease file review revealed the following: o One of two recertifications tested and one of one initial certifications tested were not performed timely. o Management was unable to provide one Affordable Housing Marketing Plan for the two properties tested. o Three of three tenant file Electronic Income Verifications (“EIVs”) tested were either run late or not done during 2022. o For two of two tenant files tested found that the tenant payments per recertifications did not agree to the rent rolls. o Move-in inspection was not provided for one of one new tenant file tested. o One new tenant of one tested did not appear on the waitlist. o One of one move-out inspections tested were not provided. Repeat Finding: Yes - Finding 2021-006 Recommendation Management should put procedures in place and provide additional training to compliance personnel to ensure consistent application and adherence to the requirements in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Views of Responsible Officials Management has policies and procedures in place, compliance has been impacted by being understaffed while recovering from covid-related social distancing/limited on site presence. This resulted in recertification and move-in compliance issues. Compliance team and the new HUD Portfolio Manager have been providing trainings for the HUD managers in 2023 and will continue to do so in 2024. In 2022 and 2023, Compliance Manager ensured that all staff who needed access to EIV took the appropriate steps (Cyber Awareness Training, updated EIV authorizations) to access EIV for their properties to run the reports timely. In 2023, The HUD Portfolio Manager created an EIV workflow training for the HUD managers. Both the Compliance team and HUD managers were present. One Compliance Specialist with HUD experience has been filling in and assisting at the HUD properties where we continue to be understaffed. As a Below Market Interest Rate (“BMIR”), we do not receive HUD subsidy or oversight from HUD. Because both properties are due for Affirmative Fair Housing Marketing Plan (“AFHMP”) updates, we will submit an updated plan to HUD for review and approval in 2024. Management is aware and has been performing Move-out inspections with tenants whenever possible.

Finding No. 2022-005 HUD Low Income Housing Preservation and Resident Homeownership Act of 1990 Federal Assistance Listing Number #99.999 Uniform Guidance Compliance Requirement Code: N-Special Tests and Provisions Criteria Owners of insured and assisted multifamily housing projects are required by HUD administrative guidelines as found in HUD Handbook 4381.5 REV-2, “The Management Agent Handbook”, to submit certain data for review by the local HUD office for approval of a new management agent. These requirements apply to insured multifamily projects or HUD-held mortgages and subsidized, non-insured projects that are not financed by State Agencies or the Rural Housing Service Agency. Condition The owner was unable to provide the Management Entity Profile HUD 9832 documentation for one of two properties tested and approved Management Agent's Certification HUD 9839-B for one of two properties tested. Cause Lack of management oversight caused management fees to be paid without an approved Management Agent's Certification HUD form HUD-9839-B during the current year. Effect or Potential Effect Management fees may have been overpaid for the year ended December 31, 2022. Questioned Costs: $4,320. Context In connection with the procedures applied to a sample of two properties one was unable to obtain the HUD 9832 Management Agent Profile specifying the management entity and related information and one was unable to provide an approved Management Agent's Certification HUD form HUD-9839-B and therefore we were unable to determine if the management fees paid were in compliance with the HUD approved management fee percentage. Repeat Finding: Yes – 2021-007 Recommendation Management should secure a HUD 9832 Management Agent Profile and an approved Management Agent's Certification HUD form HUD-9839-B and review fees paid to ensure compliance with HUD requirements for this property and take any action necessary resulting from this review. Views of Responsible Officials REACH has contacted HUD office to request missing copies of HUD approved Management entity profile and certifications.

Finding No. 2022-006 HUD Low Income Housing Preservation and Resident Homeownership Act of 1990 Federal Assistance Listing Number #99.999 Uniform Guidance Compliance Requirement Code: N-Special Tests and Provisions Criteria Owner must respond with proof that any health and safety findings from a REAC inspection have been solved within 72 hours in accordance with 24 CFR Section 200.857 Paragraph ( c ). Condition The owner did not provide proof to REAC that all health and safety inspection findings were solved within 72 hours. Cause Management did not follow their procedures with respect to responding to REAC on all health and safety violations within 72 hours of the REAC inspection. Effect or Potential Effect Housing units may be out of compliance with HUD Quality Standards. Questioned Costs: Not applicable. Context In connection with the procedures applied to compliance testing there was one instance of the two properties tested where the REAC report tested contained health and safety findings and management did not provide proof to REAC timely showing that these were resolved. They provided proof to REAC on February 17, 2022, when they should have provided proof by January 27, 2022. Repeat Finding: No Recommendation Management should make sure that all findings are cleared in a timely manner and such correspondence with REAC occurs in a timely manner. Views of Responsible Officials REACH responded and resolved all Exigent Health & Safety within the 72 hour period , but did not submit the confirmation report until 5 business days after the review, REACH will retain evidence of same day repairs going forward to allow confirmation that the time frame was met.

Finding No. 2022-007 CDBG Entitlement Grants Cluster Federal Assistance Listing Number #14.218 Uniform Guidance Compliance Requirement Code: A-Allowable Costs Criteria Owners must use CDBG funded portion of programs to fund minor rehabilitation services to approved recipients /address' in accordance with the Rehabilitation and Preservation Activities (570.202(b)(2) and/or (11)). Condition The owner paid one vendor invoice, of eight tested, that was not listed on the CDBG Address List as reported to Portland Housing Bureau (“PHB”) and was charged through and reimbursed by PHB under their CDBG Grant. Cause REACH's Community Builders Program Manager did not make sure that the invoice was for an approved CDBG property. Effect or Potential Effect CDBG funds may be spent in appropriately and REACH will be required to repay the grants - possible loss of future grants. Questioned Costs: $130. Context In connection with the procedures applied to compliance testing, there was one vendor invoice of 8 tested that was not for an approved CDBG property. Repeat Finding: No Recommendation REACH Community Builders Program Manager should follow procedures to match each vendor invoice to the approved CDBG property listing prior to coding to CDBG and passing through for reimbursement from this grant. Views of Responsible Officials Since the time of this we have made some changes to have the appropriate funding code on each client’s folder/information so that it is easy to see where to charge when making a purchase and the CBP manager is reaching out to PHB on resolution to this instance.

Finding No. 2022-001 HUD HOME Investment Partnerships Program Federal Assistance Listing Number #14.239 Uniform Guidance Compliance Requirement Code: N-Special Tests and Provisions Criteria During the period of affordability (i.e., the period for which the nonfederal entity must maintain subsidized housing) for HOME assisted rental housing, the participating jurisdiction must perform on-site inspections to determine compliance with property standards and verify the information submitted by the owners no less than (a) every three years for projects containing one to four units, (b) every two years for projects containing five to 25 units, and (c) every year for projects containing 26 or more units. The participating jurisdiction must perform on-site inspections of rental housing occupied by tenants receiving HOME/HOME-ARP-assisted tenant-based rental assistance to determine compliance with housing quality standards (24 CFR sections 92.209(i), 92.251(f), and 92.504(d)). Condition The owner did not ensure passing HQS inspections were performed during 2022. Cause Management did not perform HQS inspections during 2022 due to the COVID-19 pandemic as they were unable to safely gain access to the units. Effect or Potential Effect Housing units may be out of compliance with HUD Quality Standards. Questioned Costs: Not applicable. Context In connection with the procedures applied to tenant file testing there were 8 instances of the 8 files tested where the passing HQS inspections were not performed during the year ended December 31, 2022. Repeat Finding: Yes - Finding 2021-003 Recommendation Management should resume making sure all units meet the HUD Housing Quality Standards and ensure that the responses to any findings are cleared timely. Views of Responsible Officials Unit inspections are being done for 2023.

Finding No. 2022-002 HUD HOME Investment Partnerships Program Federal Assistance Listing Number #14.239 Uniform Guidance Compliance Requirement Code: E-Eligibility Criteria Tenant lease files are required to be maintained and tenant eligibility determined in accordance with the Compliance in State of Oregon Housing and Community Services HOME Program Compliance Manual. Condition In connection with our lease file review we noted one instance of eight tenants tested where management did not perform a 3rd party income verification in accordance with policy. Cause Management’s policies with respect to recertifications and eligibility and the maintenance of tenant lease files in accordance with Compliance in State of Oregon Housing and Community Services HOME Program Compliance Manual were not consistently followed. Effect or Potential Effect This could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD. Questioned Costs: Not applicable. Context In connection with the procedures applied to our HOME units testing, one of the eight tenants tested did have the 3rd party income verification performed timely. Repeat Finding: No Recommendation Management should establish procedures and monitor compliance with those procedures to ensure that recertifications and correct income verification procedures are performed timely, tenant eligibility is correctly determined and that tenant lease files are properly maintained in accordance with the requirements of Compliance in State of Oregon Housing and Community Services HOME Program Compliance Manual. Views of Responsible Officials Community Manager reviewed file noting 2017 and 2018 were both done as self-certifications. REACH is currently doing full reviews for all HOME units during 2023.

Finding No. 2022-003 HUD HOME Investment Partnerships Program Federal Assistance Listing Number #14.239 Uniform Guidance Compliance Requirement Code: E-Eligibility Criteria Each owner must comply with the requirements set forth in 24 CFR Part 92 regulations as outlined in the "Compliance in HOME Rental Projects: A Guide for Property Owners" published by HUD which requires the property to maintain the contracted number of HOME units as well as the designated splits in bedroom size and High Home/Low Home unit ratios. Condition The owner did not make available to HOME tenants the contracted number and type of HOME units. Cause Management’s policies with respect to maintaining the number and split of contracted HOME units were not consistently followed. Effect or Potential Effect The procedures for determining and maintaining the correct HOME units within the property were not applied. This could result in ineligible tenants occupying HOME designated units. Questioned Costs: Not applicable. Context In connection with the procedures applied to our HOME units testing, one of the five properties tested did not meet the contracted HOME units size portfolio (there should be four 3-bedroom units (there are 5); and there should be three 4-bedroom units (there are 2)). Repeat Finding: Yes - Finding 2021-002 Recommendation Management should follow procedures in place to ensure consistent application and adherence to the requirements in accordance with the “Compliance in HOME Rental Projects: A Guide for Property Owners” published by HUD. Views of Responsible Officials A unit will be re-classified the next time there is a vacant unit of the corresponding size/type.

Finding No. 2022-004 HUD Low Income Housing Preservation and Resident Homeownership Act of 1990 Federal Assistance Listing Number #99.999 Uniform Guidance Compliance Requirement Code: E-Eligibility Criteria Tenant lease files are required to be maintained and tenant eligibility determined in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Condition Our testing procedures noted that the owner did not perform certifications and recertifications timely, did not maintain tenant files in compliance with HUD Rules in Code of Federal Regulations at 24 CFR Part 92, and did not select tenants from the waitlist appropriately. Cause Management's policies with respect to the determination of eligibility and the maintenance of tenant lease files in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs were not consistently followed. Effect or Potential Effect The procedures for determining tenant eligibility and maintaining tenant lease files were not consistently applied in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. This could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD. Questioned Costs: Not applicable. Context The procedures applied to our lease file review revealed the following: o One of two recertifications tested and one of one initial certifications tested were not performed timely. o Management was unable to provide one Affordable Housing Marketing Plan for the two properties tested. o Three of three tenant file Electronic Income Verifications (“EIVs”) tested were either run late or not done during 2022. o For two of two tenant files tested found that the tenant payments per recertifications did not agree to the rent rolls. o Move-in inspection was not provided for one of one new tenant file tested. o One new tenant of one tested did not appear on the waitlist. o One of one move-out inspections tested were not provided. Repeat Finding: Yes - Finding 2021-006 Recommendation Management should put procedures in place and provide additional training to compliance personnel to ensure consistent application and adherence to the requirements in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Views of Responsible Officials Management has policies and procedures in place, compliance has been impacted by being understaffed while recovering from covid-related social distancing/limited on site presence. This resulted in recertification and move-in compliance issues. Compliance team and the new HUD Portfolio Manager have been providing trainings for the HUD managers in 2023 and will continue to do so in 2024. In 2022 and 2023, Compliance Manager ensured that all staff who needed access to EIV took the appropriate steps (Cyber Awareness Training, updated EIV authorizations) to access EIV for their properties to run the reports timely. In 2023, The HUD Portfolio Manager created an EIV workflow training for the HUD managers. Both the Compliance team and HUD managers were present. One Compliance Specialist with HUD experience has been filling in and assisting at the HUD properties where we continue to be understaffed. As a Below Market Interest Rate (“BMIR”), we do not receive HUD subsidy or oversight from HUD. Because both properties are due for Affirmative Fair Housing Marketing Plan (“AFHMP”) updates, we will submit an updated plan to HUD for review and approval in 2024. Management is aware and has been performing Move-out inspections with tenants whenever possible.

Finding No. 2022-005 HUD Low Income Housing Preservation and Resident Homeownership Act of 1990 Federal Assistance Listing Number #99.999 Uniform Guidance Compliance Requirement Code: N-Special Tests and Provisions Criteria Owners of insured and assisted multifamily housing projects are required by HUD administrative guidelines as found in HUD Handbook 4381.5 REV-2, “The Management Agent Handbook”, to submit certain data for review by the local HUD office for approval of a new management agent. These requirements apply to insured multifamily projects or HUD-held mortgages and subsidized, non-insured projects that are not financed by State Agencies or the Rural Housing Service Agency. Condition The owner was unable to provide the Management Entity Profile HUD 9832 documentation for one of two properties tested and approved Management Agent's Certification HUD 9839-B for one of two properties tested. Cause Lack of management oversight caused management fees to be paid without an approved Management Agent's Certification HUD form HUD-9839-B during the current year. Effect or Potential Effect Management fees may have been overpaid for the year ended December 31, 2022. Questioned Costs: $4,320. Context In connection with the procedures applied to a sample of two properties one was unable to obtain the HUD 9832 Management Agent Profile specifying the management entity and related information and one was unable to provide an approved Management Agent's Certification HUD form HUD-9839-B and therefore we were unable to determine if the management fees paid were in compliance with the HUD approved management fee percentage. Repeat Finding: Yes – 2021-007 Recommendation Management should secure a HUD 9832 Management Agent Profile and an approved Management Agent's Certification HUD form HUD-9839-B and review fees paid to ensure compliance with HUD requirements for this property and take any action necessary resulting from this review. Views of Responsible Officials REACH has contacted HUD office to request missing copies of HUD approved Management entity profile and certifications.

Finding No. 2022-006 HUD Low Income Housing Preservation and Resident Homeownership Act of 1990 Federal Assistance Listing Number #99.999 Uniform Guidance Compliance Requirement Code: N-Special Tests and Provisions Criteria Owner must respond with proof that any health and safety findings from a REAC inspection have been solved within 72 hours in accordance with 24 CFR Section 200.857 Paragraph ( c ). Condition The owner did not provide proof to REAC that all health and safety inspection findings were solved within 72 hours. Cause Management did not follow their procedures with respect to responding to REAC on all health and safety violations within 72 hours of the REAC inspection. Effect or Potential Effect Housing units may be out of compliance with HUD Quality Standards. Questioned Costs: Not applicable. Context In connection with the procedures applied to compliance testing there was one instance of the two properties tested where the REAC report tested contained health and safety findings and management did not provide proof to REAC timely showing that these were resolved. They provided proof to REAC on February 17, 2022, when they should have provided proof by January 27, 2022. Repeat Finding: No Recommendation Management should make sure that all findings are cleared in a timely manner and such correspondence with REAC occurs in a timely manner. Views of Responsible Officials REACH responded and resolved all Exigent Health & Safety within the 72 hour period , but did not submit the confirmation report until 5 business days after the review, REACH will retain evidence of same day repairs going forward to allow confirmation that the time frame was met.

Finding No. 2022-007 CDBG Entitlement Grants Cluster Federal Assistance Listing Number #14.218 Uniform Guidance Compliance Requirement Code: A-Allowable Costs Criteria Owners must use CDBG funded portion of programs to fund minor rehabilitation services to approved recipients /address' in accordance with the Rehabilitation and Preservation Activities (570.202(b)(2) and/or (11)). Condition The owner paid one vendor invoice, of eight tested, that was not listed on the CDBG Address List as reported to Portland Housing Bureau (“PHB”) and was charged through and reimbursed by PHB under their CDBG Grant. Cause REACH's Community Builders Program Manager did not make sure that the invoice was for an approved CDBG property. Effect or Potential Effect CDBG funds may be spent in appropriately and REACH will be required to repay the grants - possible loss of future grants. Questioned Costs: $130. Context In connection with the procedures applied to compliance testing, there was one vendor invoice of 8 tested that was not for an approved CDBG property. Repeat Finding: No Recommendation REACH Community Builders Program Manager should follow procedures to match each vendor invoice to the approved CDBG property listing prior to coding to CDBG and passing through for reimbursement from this grant. Views of Responsible Officials Since the time of this we have made some changes to have the appropriate funding code on each client’s folder/information so that it is easy to see where to charge when making a purchase and the CBP manager is reaching out to PHB on resolution to this instance.