Audit 310458

Department of Housing and Urban Development Section 8 Housing Assistance Program, AL 14.195 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 In connection with our lease file review we noted the following deficiencies: -6 out of 9 tenants tested did not have documentation in their lease file that their income was verified using EIV. - 2 out of 2 tenants tested did not have move in inspections in their lease files Cause Management's policies with respect to the determination of tenant 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, and there were no procedures in place to ensure these tasks were performed during transition to new management. Effect The procedures for determining 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: None Context Procedures were not in place during the transition to new management to ensure HUD policies as it relates to tenant eligibility and maintaining tenant lease files were not followed at all times. Identification as a Repeat Finding This finding is not a repeat finding Recommendation We recommend that management review its internal controls over obtaining and maintaining tenant file documentation to ensure compliance with eligibility requirements. Views of Responsible Officials

Department of Housing and Urban Development Section 8 Housing Assistance Program, AL 14.195 Criteria HUD regulations require the project’s management agent to have fidelity bond coverage equal to the greater of $50,000 or the value of two months gross potential rent. If the policy covers more than one project, this minimum must be computed using the project with the highest gross potential rent. Condition The Owner did not provide evidence of fidelity bond coverage as required by HUD regulations. Cause The Owner was unable to provide evidence of the required minimum coverage. Effect Management may have coverage below HUD’s required minimum in violation of HUD regulations. Questioned Costs: None Context The Owner did not provide evidence of fidelity bond coverage to the audit team. Identification as a Repeat Finding This finding is not a repeat finding Recommendation Management should obtain fidelity coverage as required by HUD regulations immediately or should provide evidence sufficient fidelity bond insurance was obtained through the year ended September 30, 2023. Views of Responsible Officials

Department of Housing and Urban Development Section 8 Housing Assistance Program, AL 14.195 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 In connection with our lease file review we noted the following deficiencies: -6 out of 9 tenants tested did not have documentation in their lease file that their income was verified using EIV. - 2 out of 2 tenants tested did not have move in inspections in their lease files Cause Management's policies with respect to the determination of tenant 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, and there were no procedures in place to ensure these tasks were performed during transition to new management. Effect The procedures for determining 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: None Context Procedures were not in place during the transition to new management to ensure HUD policies as it relates to tenant eligibility and maintaining tenant lease files were not followed at all times. Identification as a Repeat Finding This finding is not a repeat finding Recommendation We recommend that management review its internal controls over obtaining and maintaining tenant file documentation to ensure compliance with eligibility requirements. Views of Responsible Officials

Department of Housing and Urban Development Section 8 Housing Assistance Program, AL 14.195 Criteria HUD regulations require the project’s management agent to have fidelity bond coverage equal to the greater of $50,000 or the value of two months gross potential rent. If the policy covers more than one project, this minimum must be computed using the project with the highest gross potential rent. Condition The Owner did not provide evidence of fidelity bond coverage as required by HUD regulations. Cause The Owner was unable to provide evidence of the required minimum coverage. Effect Management may have coverage below HUD’s required minimum in violation of HUD regulations. Questioned Costs: None Context The Owner did not provide evidence of fidelity bond coverage to the audit team. Identification as a Repeat Finding This finding is not a repeat finding Recommendation Management should obtain fidelity coverage as required by HUD regulations immediately or should provide evidence sufficient fidelity bond insurance was obtained through the year ended September 30, 2023. Views of Responsible Officials