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:
- Five out of 10 existing tenants tested did not follow EIV guidelines;
- Two out of 10 existing tenants had issues where the files were not maintained in accordance
with guidelines;
- One out of one former tenant had an issue where the file was not maintained in accordance
with guidelines; and
- One out of one new tenant tested did not follow EIV guidelines.
Cause
Management's policies with respect to 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 security deposits and 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.
Identification as a Repeat Finding
This is a repeat finding.
Recommendation
Management should establish procedures and monitor compliance with those procedures to
ensure that tenant security deposits are correctly recorded, tenant eligibility is correctly
determined and that tenant lease files are properly maintained in accordance with the
requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily
Housing Programs. Views of Responsible Officials
Management agrees with the finding and recommendation and has reviewed the HUD
requirements.
1. Move in EIV's - All move in files will be sent to our in house compliance department and
Franklin Group has an EIV specialist who follows and tracks all moves for accuracy for all
move files and the EIV specialist also sends out the 90-day reminders for all move in.
2. Existing Tenant EIV - It is the policy that all existing tenant EIV and 120-day reports are run
per the 4350 guidelines. The Community Manager for Renaissance Gardens has been
provided the HUD Trainings and has noted on her daily task reminder from One Site to pull
all reports as required. The RM is required during monthly visits to spot check at least five
existing tenants.
3. Gross Rent Change and Medical Reporting - The policy states that all Gross Rent Changes
are to be completed as approved by the new rent schedule - The Community Manager is
required to scheduled appointments with all residents to sign the effective gross rent change
and file in tenants files, it is also required that residents 50059s are signed and in the file,
the Community Manager has taken the latest HUD training with our in house HUD
Compliance Manager - The Regional Manager ("RM") will also spot check files to be certain
that all Gross Rent Changes are in its 6-part file folders. Medical reporting records were
discussed in our HUD Compliance Training and all expenses must be in the 6-part file
folder. Again, the RM will continue to spot check files during the monthly required
inspections. All HUD Communities were required to participate in the HUD Training as a
reminder tool.
4. Security Deposit - Franklin Companies has a policy that all security deposit refunds must be
submitted within the three-day move out period. This situation was due to the changeover in
Management.
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:
- Five out of 10 existing tenants tested did not follow EIV guidelines;
- Two out of 10 existing tenants had issues where the files were not maintained in accordance
with guidelines;
- One out of one former tenant had an issue where the file was not maintained in accordance
with guidelines; and
- One out of one new tenant tested did not follow EIV guidelines.
Cause
Management's policies with respect to 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 security deposits and 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.
Identification as a Repeat Finding
This is a repeat finding.
Recommendation
Management should establish procedures and monitor compliance with those procedures to
ensure that tenant security deposits are correctly recorded, tenant eligibility is correctly
determined and that tenant lease files are properly maintained in accordance with the
requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily
Housing Programs. Views of Responsible Officials
Management agrees with the finding and recommendation and has reviewed the HUD
requirements.
1. Move in EIV's - All move in files will be sent to our in house compliance department and
Franklin Group has an EIV specialist who follows and tracks all moves for accuracy for all
move files and the EIV specialist also sends out the 90-day reminders for all move in.
2. Existing Tenant EIV - It is the policy that all existing tenant EIV and 120-day reports are run
per the 4350 guidelines. The Community Manager for Renaissance Gardens has been
provided the HUD Trainings and has noted on her daily task reminder from One Site to pull
all reports as required. The RM is required during monthly visits to spot check at least five
existing tenants.
3. Gross Rent Change and Medical Reporting - The policy states that all Gross Rent Changes
are to be completed as approved by the new rent schedule - The Community Manager is
required to scheduled appointments with all residents to sign the effective gross rent change
and file in tenants files, it is also required that residents 50059s are signed and in the file,
the Community Manager has taken the latest HUD training with our in house HUD
Compliance Manager - The Regional Manager ("RM") will also spot check files to be certain
that all Gross Rent Changes are in its 6-part file folders. Medical reporting records were
discussed in our HUD Compliance Training and all expenses must be in the 6-part file
folder. Again, the RM will continue to spot check files during the monthly required
inspections. All HUD Communities were required to participate in the HUD Training as a
reminder tool.
4. Security Deposit - Franklin Companies has a policy that all security deposit refunds must be
submitted within the three-day move out period. This situation was due to the changeover in
Management.
Criteria
1. Management is responsible for the design, implementation, and maintenance of internal
controls relevant to the preparation and fair presentation of financial statements that are free
from material misstatement, whether due to fraud or error.
2. Management is responsible for timely submission of audited financial statements to Federal
Audit Clearinghouse ("FAC").
Condition
1. The accounting records required numerous material adjustments to be proposed and
recorded in order for the financial statements to be fairly presented in accordance with
generally accepted accounting principles in the United States of America.
2. Single Audit reports are required to be submitted to the FAC pursuant to the audit
requirement of Title 2 U.S. Code of Federal Regulations Part 200. Submission of June 30,
2023 financial statements was not completed within specified time frame.
Cause
Management did not have sufficient controls over financial reporting.
Effect or Potential Effect
Condition 1 may lead to inaccurate financial reporting and potential misstatement of the financial
statements such that they are not in accordance with accounting principles generally accepted
in the United States of America. Condition 2 results in auditee being designated as not a lowrisk
auditee, which may have an effect on future federal grants and program eligibility.
Recommendation
1. Management should undertake a review of internal controls over financial reporting and
ensure that financial data is properly recorded in the books and records of the project to
prevent misstatements from occurring in the future.
2. Management should implement procedures to ensure that required filing is completed
timely.
Auditor Noncompliance Code
S. Internal control deficiencies
Views of Responsible Officials
1. Management agrees with the finding and recommendation and has implemented reviews of
the financial statements by senior management prior to closing books to ensure accuracy of
information.
2. Management agrees with the finding and recommendation and will ensure required filing is
completed timely.
Finding Resolution Status: Resolve
Criteria
1. Management is responsible for the design, implementation, and maintenance of internal
controls relevant to the preparation and fair presentation of financial statements that are free
from material misstatement, whether due to fraud or error.
2. Management is responsible for timely submission of audited financial statements to Federal
Audit Clearinghouse ("FAC").
Condition
1. The accounting records required numerous material adjustments to be proposed and
recorded in order for the financial statements to be fairly presented in accordance with
generally accepted accounting principles in the United States of America.
2. Single Audit reports are required to be submitted to the FAC pursuant to the audit
requirement of Title 2 U.S. Code of Federal Regulations Part 200. Submission of June 30,
2023 financial statements was not completed within specified time frame.
Cause
Management did not have sufficient controls over financial reporting.
Effect or Potential Effect
Condition 1 may lead to inaccurate financial reporting and potential misstatement of the financial
statements such that they are not in accordance with accounting principles generally accepted
in the United States of America. Condition 2 results in auditee being designated as not a lowrisk
auditee, which may have an effect on future federal grants and program eligibility.
Recommendation
1. Management should undertake a review of internal controls over financial reporting and
ensure that financial data is properly recorded in the books and records of the project to
prevent misstatements from occurring in the future.
2. Management should implement procedures to ensure that required filing is completed
timely.
Auditor Noncompliance Code
S. Internal control deficiencies
Views of Responsible Officials
1. Management agrees with the finding and recommendation and has implemented reviews of
the financial statements by senior management prior to closing books to ensure accuracy of
information.
2. Management agrees with the finding and recommendation and will ensure required filing is
completed timely.
Finding Resolution Status: Resolve
Criteria
In accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily
Housing Programs, HUD projects are required to establish and maintain at all times a fully
funded separate bank account for tenant security deposits collected.
Condition
As of June 30, 2024, management has not fully funded the tenant security deposits cash
account. The tenant security deposits cash account was underfunded by $3,391.
Cause
The tenant security deposits liability exceeds the tenant security deposits cash account by
$3,391 as of June 30, 2024.
Effect or Potential Effect
Management commingled tenant security deposits with its operating cash and did not have
sufficient cash balance in the tenant security deposits cash account to cover the tenant security
deposits liability as of June 30, 2024.
Questioned Costs
$3,391
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendations
Management should transfer $3,391 from the operating account in order to fully fund the tenant
security deposits account.
Auditor Noncompliance Code:
M. Security Deposits
View of Responsible Officials
Management agrees with the finding and recommendation and has reviewed the HUD
requirement for security funding. Funds have been transferred and will be maintained based on
HUD requirements in a separate account from operating funds.
Finding Resolution Status: Resolved
Criteria
In accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily
Housing Programs, HUD projects are required to establish and maintain at all times a fully
funded separate bank account for tenant security deposits collected.
Condition
As of June 30, 2024, management has not fully funded the tenant security deposits cash
account. The tenant security deposits cash account was underfunded by $3,391.
Cause
The tenant security deposits liability exceeds the tenant security deposits cash account by
$3,391 as of June 30, 2024.
Effect or Potential Effect
Management commingled tenant security deposits with its operating cash and did not have
sufficient cash balance in the tenant security deposits cash account to cover the tenant security
deposits liability as of June 30, 2024.
Questioned Costs
$3,391
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendations
Management should transfer $3,391 from the operating account in order to fully fund the tenant
security deposits account.
Auditor Noncompliance Code:
M. Security Deposits
View of Responsible Officials
Management agrees with the finding and recommendation and has reviewed the HUD
requirement for security funding. Funds have been transferred and will be maintained based on
HUD requirements in a separate account from operating funds.
Finding Resolution Status: Resolved
Criteria
Residual receipts funds should be made within 90 days of year-end.
Condition
During the year ended June 30, 2024, management did not make the required residual receipts
reserve deposit in the amount of $10,012 within 90 days of year-end, as required by HUD.
Cause
Controls were not in place to ensure that residual receipts funds were timely deposited.
Effect or Potential Effect
The Organization is not in compliance with the requirements of the regulatory agreement and of
the Consolidated Appropriations Act of 2016, governing Residual Receipts for PRAC program.
Questioned Costs
$10,012
Identification as a Repeat Finding
This is not a repeat finding.
Recommendations
Management should establish internal controls and procedures to ensure that excess residual
receipts reserve funds are remitted timely.
Auditor Noncompliance Code:
B - Failure to make required residual receipts deposits.
Views of Responsible Officials
Management agrees with the finding and due to the property being short on funds, management
will work with HUD on funding.
Finding Resolution Status: In process
Criteria
Residual receipts funds should be made within 90 days of year-end.
Condition
During the year ended June 30, 2024, management did not make the required residual receipts
reserve deposit in the amount of $10,012 within 90 days of year-end, as required by HUD.
Cause
Controls were not in place to ensure that residual receipts funds were timely deposited.
Effect or Potential Effect
The Organization is not in compliance with the requirements of the regulatory agreement and of
the Consolidated Appropriations Act of 2016, governing Residual Receipts for PRAC program.
Questioned Costs
$10,012
Identification as a Repeat Finding
This is not a repeat finding.
Recommendations
Management should establish internal controls and procedures to ensure that excess residual
receipts reserve funds are remitted timely.
Auditor Noncompliance Code:
B - Failure to make required residual receipts deposits.
Views of Responsible Officials
Management agrees with the finding and due to the property being short on funds, management
will work with HUD on funding.
Finding Resolution Status: In process
Criteria
Management fee payments are limited to amounts determined in accordance with the terms of
the HUD approved management agreement.
Condition
During the year ended June 30, 2024, the project paid management fees of $10,442 in excess
of the amount approved by HUD.
Cause
There were two different management agreements and management did not follow the HUD
approved management agreement when paying management fees from operations.
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Questioned Costs
$10,442
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
The management company should reimburse the project for overpaid management fee in the
amount of $10,442 and implement procedures to ensure that the management fee paid does
not exceed the amount determined in accordance with the HUD approved management
agreement.
Auditor Noncompliance Code:
J. Unauthorized management fees.
Views of Responsible Officials
Management agrees with the finding and is working with ownership on reimbursements to the
property. Management will collect in accordance with HUD going forward.
Finding Resolution Status: Unresolved
Criteria
Management fee payments are limited to amounts determined in accordance with the terms of
the HUD approved management agreement.
Condition
During the year ended June 30, 2024, the project paid management fees of $10,442 in excess
of the amount approved by HUD.
Cause
There were two different management agreements and management did not follow the HUD
approved management agreement when paying management fees from operations.
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Questioned Costs
$10,442
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
The management company should reimburse the project for overpaid management fee in the
amount of $10,442 and implement procedures to ensure that the management fee paid does
not exceed the amount determined in accordance with the HUD approved management
agreement.
Auditor Noncompliance Code:
J. Unauthorized management fees.
Views of Responsible Officials
Management agrees with the finding and is working with ownership on reimbursements to the
property. Management will collect in accordance with HUD going forward.
Finding Resolution Status: Unresolved
Criteria
Management's internal control processes should include timely clearing out of reconciliating
items on the reconciliation of the project's operating cash account. These reconciliations should
be reviewed by a supervisory person who understands both the general ledger and project
operations and can assist in researching and clearing out reconciling items.
Condition
There were material old items carried on the bank reconciliation that were not properly
recorded, resulting in adjustments that ultimately lead to a bank overdraft at June 30, 2024.
Cause
Management carried reconciling items on the bank reconciliation longer than their policy.
Effect or Potential Effect
The cash balance reported on the project's books is not an accurate account of the actual cash
balance which resulted in a bank overdraft. Additionally, there is a potential for fraudulent
activity to not be timely identified and rectified due to the lack of enforcement of controls.
Questioned Costs
N/A
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
Management should ensure there is enough oversight by qualified accounting personnel who
have the ability to research and resolve reconciling items. Additionally, management should
create a review process where they can enforce their existing policies.
Auditor Noncompliance Code:
S. Internal control deficiencies
Views of Responsible Officials
Management agrees with the finding and has implemented a new policy that financials are not
to be delivered to ownership until the property has completed all outstanding items.
Finding Resolution Status: Resolved
Criteria
Management's internal control processes should include timely clearing out of reconciliating
items on the reconciliation of the project's operating cash account. These reconciliations should
be reviewed by a supervisory person who understands both the general ledger and project
operations and can assist in researching and clearing out reconciling items.
Condition
There were material old items carried on the bank reconciliation that were not properly
recorded, resulting in adjustments that ultimately lead to a bank overdraft at June 30, 2024.
Cause
Management carried reconciling items on the bank reconciliation longer than their policy.
Effect or Potential Effect
The cash balance reported on the project's books is not an accurate account of the actual cash
balance which resulted in a bank overdraft. Additionally, there is a potential for fraudulent
activity to not be timely identified and rectified due to the lack of enforcement of controls.
Questioned Costs
N/A
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
Management should ensure there is enough oversight by qualified accounting personnel who
have the ability to research and resolve reconciling items. Additionally, management should
create a review process where they can enforce their existing policies.
Auditor Noncompliance Code:
S. Internal control deficiencies
Views of Responsible Officials
Management agrees with the finding and has implemented a new policy that financials are not
to be delivered to ownership until the property has completed all outstanding items.
Finding Resolution Status: Resolved
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:
- Five out of 10 existing tenants tested did not follow EIV guidelines;
- Two out of 10 existing tenants had issues where the files were not maintained in accordance
with guidelines;
- One out of one former tenant had an issue where the file was not maintained in accordance
with guidelines; and
- One out of one new tenant tested did not follow EIV guidelines.
Cause
Management's policies with respect to 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 security deposits and 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.
Identification as a Repeat Finding
This is a repeat finding.
Recommendation
Management should establish procedures and monitor compliance with those procedures to
ensure that tenant security deposits are correctly recorded, tenant eligibility is correctly
determined and that tenant lease files are properly maintained in accordance with the
requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily
Housing Programs. Views of Responsible Officials
Management agrees with the finding and recommendation and has reviewed the HUD
requirements.
1. Move in EIV's - All move in files will be sent to our in house compliance department and
Franklin Group has an EIV specialist who follows and tracks all moves for accuracy for all
move files and the EIV specialist also sends out the 90-day reminders for all move in.
2. Existing Tenant EIV - It is the policy that all existing tenant EIV and 120-day reports are run
per the 4350 guidelines. The Community Manager for Renaissance Gardens has been
provided the HUD Trainings and has noted on her daily task reminder from One Site to pull
all reports as required. The RM is required during monthly visits to spot check at least five
existing tenants.
3. Gross Rent Change and Medical Reporting - The policy states that all Gross Rent Changes
are to be completed as approved by the new rent schedule - The Community Manager is
required to scheduled appointments with all residents to sign the effective gross rent change
and file in tenants files, it is also required that residents 50059s are signed and in the file,
the Community Manager has taken the latest HUD training with our in house HUD
Compliance Manager - The Regional Manager ("RM") will also spot check files to be certain
that all Gross Rent Changes are in its 6-part file folders. Medical reporting records were
discussed in our HUD Compliance Training and all expenses must be in the 6-part file
folder. Again, the RM will continue to spot check files during the monthly required
inspections. All HUD Communities were required to participate in the HUD Training as a
reminder tool.
4. Security Deposit - Franklin Companies has a policy that all security deposit refunds must be
submitted within the three-day move out period. This situation was due to the changeover in
Management.
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:
- Five out of 10 existing tenants tested did not follow EIV guidelines;
- Two out of 10 existing tenants had issues where the files were not maintained in accordance
with guidelines;
- One out of one former tenant had an issue where the file was not maintained in accordance
with guidelines; and
- One out of one new tenant tested did not follow EIV guidelines.
Cause
Management's policies with respect to 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 security deposits and 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.
Identification as a Repeat Finding
This is a repeat finding.
Recommendation
Management should establish procedures and monitor compliance with those procedures to
ensure that tenant security deposits are correctly recorded, tenant eligibility is correctly
determined and that tenant lease files are properly maintained in accordance with the
requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily
Housing Programs. Views of Responsible Officials
Management agrees with the finding and recommendation and has reviewed the HUD
requirements.
1. Move in EIV's - All move in files will be sent to our in house compliance department and
Franklin Group has an EIV specialist who follows and tracks all moves for accuracy for all
move files and the EIV specialist also sends out the 90-day reminders for all move in.
2. Existing Tenant EIV - It is the policy that all existing tenant EIV and 120-day reports are run
per the 4350 guidelines. The Community Manager for Renaissance Gardens has been
provided the HUD Trainings and has noted on her daily task reminder from One Site to pull
all reports as required. The RM is required during monthly visits to spot check at least five
existing tenants.
3. Gross Rent Change and Medical Reporting - The policy states that all Gross Rent Changes
are to be completed as approved by the new rent schedule - The Community Manager is
required to scheduled appointments with all residents to sign the effective gross rent change
and file in tenants files, it is also required that residents 50059s are signed and in the file,
the Community Manager has taken the latest HUD training with our in house HUD
Compliance Manager - The Regional Manager ("RM") will also spot check files to be certain
that all Gross Rent Changes are in its 6-part file folders. Medical reporting records were
discussed in our HUD Compliance Training and all expenses must be in the 6-part file
folder. Again, the RM will continue to spot check files during the monthly required
inspections. All HUD Communities were required to participate in the HUD Training as a
reminder tool.
4. Security Deposit - Franklin Companies has a policy that all security deposit refunds must be
submitted within the three-day move out period. This situation was due to the changeover in
Management.
Criteria
1. Management is responsible for the design, implementation, and maintenance of internal
controls relevant to the preparation and fair presentation of financial statements that are free
from material misstatement, whether due to fraud or error.
2. Management is responsible for timely submission of audited financial statements to Federal
Audit Clearinghouse ("FAC").
Condition
1. The accounting records required numerous material adjustments to be proposed and
recorded in order for the financial statements to be fairly presented in accordance with
generally accepted accounting principles in the United States of America.
2. Single Audit reports are required to be submitted to the FAC pursuant to the audit
requirement of Title 2 U.S. Code of Federal Regulations Part 200. Submission of June 30,
2023 financial statements was not completed within specified time frame.
Cause
Management did not have sufficient controls over financial reporting.
Effect or Potential Effect
Condition 1 may lead to inaccurate financial reporting and potential misstatement of the financial
statements such that they are not in accordance with accounting principles generally accepted
in the United States of America. Condition 2 results in auditee being designated as not a lowrisk
auditee, which may have an effect on future federal grants and program eligibility.
Recommendation
1. Management should undertake a review of internal controls over financial reporting and
ensure that financial data is properly recorded in the books and records of the project to
prevent misstatements from occurring in the future.
2. Management should implement procedures to ensure that required filing is completed
timely.
Auditor Noncompliance Code
S. Internal control deficiencies
Views of Responsible Officials
1. Management agrees with the finding and recommendation and has implemented reviews of
the financial statements by senior management prior to closing books to ensure accuracy of
information.
2. Management agrees with the finding and recommendation and will ensure required filing is
completed timely.
Finding Resolution Status: Resolve
Criteria
1. Management is responsible for the design, implementation, and maintenance of internal
controls relevant to the preparation and fair presentation of financial statements that are free
from material misstatement, whether due to fraud or error.
2. Management is responsible for timely submission of audited financial statements to Federal
Audit Clearinghouse ("FAC").
Condition
1. The accounting records required numerous material adjustments to be proposed and
recorded in order for the financial statements to be fairly presented in accordance with
generally accepted accounting principles in the United States of America.
2. Single Audit reports are required to be submitted to the FAC pursuant to the audit
requirement of Title 2 U.S. Code of Federal Regulations Part 200. Submission of June 30,
2023 financial statements was not completed within specified time frame.
Cause
Management did not have sufficient controls over financial reporting.
Effect or Potential Effect
Condition 1 may lead to inaccurate financial reporting and potential misstatement of the financial
statements such that they are not in accordance with accounting principles generally accepted
in the United States of America. Condition 2 results in auditee being designated as not a lowrisk
auditee, which may have an effect on future federal grants and program eligibility.
Recommendation
1. Management should undertake a review of internal controls over financial reporting and
ensure that financial data is properly recorded in the books and records of the project to
prevent misstatements from occurring in the future.
2. Management should implement procedures to ensure that required filing is completed
timely.
Auditor Noncompliance Code
S. Internal control deficiencies
Views of Responsible Officials
1. Management agrees with the finding and recommendation and has implemented reviews of
the financial statements by senior management prior to closing books to ensure accuracy of
information.
2. Management agrees with the finding and recommendation and will ensure required filing is
completed timely.
Finding Resolution Status: Resolve
Criteria
In accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily
Housing Programs, HUD projects are required to establish and maintain at all times a fully
funded separate bank account for tenant security deposits collected.
Condition
As of June 30, 2024, management has not fully funded the tenant security deposits cash
account. The tenant security deposits cash account was underfunded by $3,391.
Cause
The tenant security deposits liability exceeds the tenant security deposits cash account by
$3,391 as of June 30, 2024.
Effect or Potential Effect
Management commingled tenant security deposits with its operating cash and did not have
sufficient cash balance in the tenant security deposits cash account to cover the tenant security
deposits liability as of June 30, 2024.
Questioned Costs
$3,391
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendations
Management should transfer $3,391 from the operating account in order to fully fund the tenant
security deposits account.
Auditor Noncompliance Code:
M. Security Deposits
View of Responsible Officials
Management agrees with the finding and recommendation and has reviewed the HUD
requirement for security funding. Funds have been transferred and will be maintained based on
HUD requirements in a separate account from operating funds.
Finding Resolution Status: Resolved
Criteria
In accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily
Housing Programs, HUD projects are required to establish and maintain at all times a fully
funded separate bank account for tenant security deposits collected.
Condition
As of June 30, 2024, management has not fully funded the tenant security deposits cash
account. The tenant security deposits cash account was underfunded by $3,391.
Cause
The tenant security deposits liability exceeds the tenant security deposits cash account by
$3,391 as of June 30, 2024.
Effect or Potential Effect
Management commingled tenant security deposits with its operating cash and did not have
sufficient cash balance in the tenant security deposits cash account to cover the tenant security
deposits liability as of June 30, 2024.
Questioned Costs
$3,391
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendations
Management should transfer $3,391 from the operating account in order to fully fund the tenant
security deposits account.
Auditor Noncompliance Code:
M. Security Deposits
View of Responsible Officials
Management agrees with the finding and recommendation and has reviewed the HUD
requirement for security funding. Funds have been transferred and will be maintained based on
HUD requirements in a separate account from operating funds.
Finding Resolution Status: Resolved
Criteria
Residual receipts funds should be made within 90 days of year-end.
Condition
During the year ended June 30, 2024, management did not make the required residual receipts
reserve deposit in the amount of $10,012 within 90 days of year-end, as required by HUD.
Cause
Controls were not in place to ensure that residual receipts funds were timely deposited.
Effect or Potential Effect
The Organization is not in compliance with the requirements of the regulatory agreement and of
the Consolidated Appropriations Act of 2016, governing Residual Receipts for PRAC program.
Questioned Costs
$10,012
Identification as a Repeat Finding
This is not a repeat finding.
Recommendations
Management should establish internal controls and procedures to ensure that excess residual
receipts reserve funds are remitted timely.
Auditor Noncompliance Code:
B - Failure to make required residual receipts deposits.
Views of Responsible Officials
Management agrees with the finding and due to the property being short on funds, management
will work with HUD on funding.
Finding Resolution Status: In process
Criteria
Residual receipts funds should be made within 90 days of year-end.
Condition
During the year ended June 30, 2024, management did not make the required residual receipts
reserve deposit in the amount of $10,012 within 90 days of year-end, as required by HUD.
Cause
Controls were not in place to ensure that residual receipts funds were timely deposited.
Effect or Potential Effect
The Organization is not in compliance with the requirements of the regulatory agreement and of
the Consolidated Appropriations Act of 2016, governing Residual Receipts for PRAC program.
Questioned Costs
$10,012
Identification as a Repeat Finding
This is not a repeat finding.
Recommendations
Management should establish internal controls and procedures to ensure that excess residual
receipts reserve funds are remitted timely.
Auditor Noncompliance Code:
B - Failure to make required residual receipts deposits.
Views of Responsible Officials
Management agrees with the finding and due to the property being short on funds, management
will work with HUD on funding.
Finding Resolution Status: In process
Criteria
Management fee payments are limited to amounts determined in accordance with the terms of
the HUD approved management agreement.
Condition
During the year ended June 30, 2024, the project paid management fees of $10,442 in excess
of the amount approved by HUD.
Cause
There were two different management agreements and management did not follow the HUD
approved management agreement when paying management fees from operations.
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Questioned Costs
$10,442
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
The management company should reimburse the project for overpaid management fee in the
amount of $10,442 and implement procedures to ensure that the management fee paid does
not exceed the amount determined in accordance with the HUD approved management
agreement.
Auditor Noncompliance Code:
J. Unauthorized management fees.
Views of Responsible Officials
Management agrees with the finding and is working with ownership on reimbursements to the
property. Management will collect in accordance with HUD going forward.
Finding Resolution Status: Unresolved
Criteria
Management fee payments are limited to amounts determined in accordance with the terms of
the HUD approved management agreement.
Condition
During the year ended June 30, 2024, the project paid management fees of $10,442 in excess
of the amount approved by HUD.
Cause
There were two different management agreements and management did not follow the HUD
approved management agreement when paying management fees from operations.
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Questioned Costs
$10,442
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
The management company should reimburse the project for overpaid management fee in the
amount of $10,442 and implement procedures to ensure that the management fee paid does
not exceed the amount determined in accordance with the HUD approved management
agreement.
Auditor Noncompliance Code:
J. Unauthorized management fees.
Views of Responsible Officials
Management agrees with the finding and is working with ownership on reimbursements to the
property. Management will collect in accordance with HUD going forward.
Finding Resolution Status: Unresolved
Criteria
Management's internal control processes should include timely clearing out of reconciliating
items on the reconciliation of the project's operating cash account. These reconciliations should
be reviewed by a supervisory person who understands both the general ledger and project
operations and can assist in researching and clearing out reconciling items.
Condition
There were material old items carried on the bank reconciliation that were not properly
recorded, resulting in adjustments that ultimately lead to a bank overdraft at June 30, 2024.
Cause
Management carried reconciling items on the bank reconciliation longer than their policy.
Effect or Potential Effect
The cash balance reported on the project's books is not an accurate account of the actual cash
balance which resulted in a bank overdraft. Additionally, there is a potential for fraudulent
activity to not be timely identified and rectified due to the lack of enforcement of controls.
Questioned Costs
N/A
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
Management should ensure there is enough oversight by qualified accounting personnel who
have the ability to research and resolve reconciling items. Additionally, management should
create a review process where they can enforce their existing policies.
Auditor Noncompliance Code:
S. Internal control deficiencies
Views of Responsible Officials
Management agrees with the finding and has implemented a new policy that financials are not
to be delivered to ownership until the property has completed all outstanding items.
Finding Resolution Status: Resolved
Criteria
Management's internal control processes should include timely clearing out of reconciliating
items on the reconciliation of the project's operating cash account. These reconciliations should
be reviewed by a supervisory person who understands both the general ledger and project
operations and can assist in researching and clearing out reconciling items.
Condition
There were material old items carried on the bank reconciliation that were not properly
recorded, resulting in adjustments that ultimately lead to a bank overdraft at June 30, 2024.
Cause
Management carried reconciling items on the bank reconciliation longer than their policy.
Effect or Potential Effect
The cash balance reported on the project's books is not an accurate account of the actual cash
balance which resulted in a bank overdraft. Additionally, there is a potential for fraudulent
activity to not be timely identified and rectified due to the lack of enforcement of controls.
Questioned Costs
N/A
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
Management should ensure there is enough oversight by qualified accounting personnel who
have the ability to research and resolve reconciling items. Additionally, management should
create a review process where they can enforce their existing policies.
Auditor Noncompliance Code:
S. Internal control deficiencies
Views of Responsible Officials
Management agrees with the finding and has implemented a new policy that financials are not
to be delivered to ownership until the property has completed all outstanding items.
Finding Resolution Status: Resolved