FINDING No. 2024-001: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155
Finding Resolution Status: Unresolved.
Information on Universe Population Size: One hundred nineteen tenants.
Sample Size Information: Twenty tenants.
Identification of Repeat Finding and Finding Reference Number: No.
Criteria: HUD regulation requires all initial and ongoing tenant eligibility documentation to be obtained timely and maintained during tenancy. Additionally, unit inspections must be performed annually.
Statement of Condition: Missing documentation in tenant files:
• Two Form 50059 were signed after the effective date by the tenants.
• One tenant file was unable to be obtained.
• One tenant file did not contain a background check.
• Three tenant files did not contain annual unit inspection reports.
Cause: The Project did not maintain appropriate tenant eligibility documentation as required by HUD.
Effect or Potential Effect: Unable to verify tenant eligibility and cost of assistance may be disallowed.
Auditor Non-Compliance Code: R – Section 8 Program Administration.
Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: The Project should implement procedures to ensure that initial and ongoing tenant eligibility documentation is obtained timely, and that unit inspections are performed annually.
Response Indicator: Agree.
Completion Date: 3/31/2025
Response: Staff training has been provided with additional HUD training inclusive of EIV reporting and included in monthly report procedures.
FINDING No. 2024-002: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155
Finding Resolution Status: Unresolved.
Information on Universe Population Size: All replacement reserve deposits for the year ended March 31, 2024.
Sample Size Information: All replacement reserve deposits for the year ended March 31, 2024.
Identification of Repeat Finding and Finding Reference Number: No.
Criteria: In accordance with HUD, required monthly deposits must be made to the Project’s reserve for replacement account.
Statement of Condition: The Project underfunded the account by $120.
Cause: The Project did not fund the replacement reserve account by $120.
Effect or Potential Effect: Deficiently funded reserve for replacement account.
Auditor Non-Compliance Code: N – Reserve for Replacements Deposits.
Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: Management should implement procedures to ensure that the correct amount is deposited into the replacement reserve account each month.
Response Indicator: Agree.
Completion Date: 3/31/2025
Response: Escrows were underfunded due primarily to a high increase in insurance rates. The project will fund the shortfall. Escrow balances will be reviewed on a regular basis to ensure adequate funding.
FINDING No. 2024-003: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155
Finding Resolution Status: Unresolved.
Information on Universe Population Size: Total rent revenue.
Sample Size Information: Total rent revenue.
Identification of Repeat Finding and Finding Reference Number: No.
Criteria: As required by HUD regulations, a HUD approved rent change must be executed as of its effective date, and all earned revenue recorded in the correct period.
Statement of Condition: The Project did not implement the accepted HUD approved rent change as of the March 1, 2023 and March 1, 2024 effective dates, resulting in a $59,201 omission.
Cause: The Project did not follow HUD regulations for timely applying the gross rent change, resulting in an underpayment of rent for each unit.
Effect or Potential Effect: The Project did not request $59,201 of HAP funds in the audit period, nor record the receivable at year end. An audit adjustment was posted to reflect the correct rent revenue for the year.
Auditor Non-Compliance Code: R – Section 8 Program Administration.
Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should comply with HUD regulations for executing the required rent change as of its effective date when approved.
Response Indicator: Agree.
Completion Date: 3/31/2025
Response: New manager has been trained to implement gross rent changes immediately and new procedures have been implemented to ensure timely changes. Questioned Costs – Department of Housing and Urban Development $59,201
FINDING No. 2024-004: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155
Finding Resolution Status: Unresolved.
Information on Universe Population Size: All management fee expenses.
Sample Size Information: All management fee expenses.
Identification of Repeat Finding and Finding Reference Number: Yes, 2023-001
Criteria: As required by HUD, the Project shall only use funds as specified in the Regulatory Agreement and owes the management company fees at the rate specified in the Project Owner’s/Management Agent’s Certification (Form HUD-9839-B).
Statement of Condition: As a result of an expired Form HUD-9839-B, the Project has been overcharged management fees, resulting in an unauthorized loan to the management company.
Cause: The Project’s Form HUD-9839-B expired and a new one was not prepared nor approved by HUD.
Effect or Potential Effect: The Project has made an unauthorized loan to the management company as a result of overpaying management fees of $52,384.
Auditor Non-Compliance Code: J – Unauthorized Management Fees.
Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should implement procedures to monitor the expiration of HUD required documents to ensure timely preparation and approval.
Response Indicator: Agree.
Completion Date: 3/31/2025
Response: Management is in the process of obtaining a new management agent certification. Questioned Costs – Department of Housing and Urban Development $52,384
Total Questioned Costs – Department of Housing and Urban Development $111,585
FINDING No. 2024-001: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155
Finding Resolution Status: Unresolved.
Information on Universe Population Size: One hundred nineteen tenants.
Sample Size Information: Twenty tenants.
Identification of Repeat Finding and Finding Reference Number: No.
Criteria: HUD regulation requires all initial and ongoing tenant eligibility documentation to be obtained timely and maintained during tenancy. Additionally, unit inspections must be performed annually.
Statement of Condition: Missing documentation in tenant files:
• Two Form 50059 were signed after the effective date by the tenants.
• One tenant file was unable to be obtained.
• One tenant file did not contain a background check.
• Three tenant files did not contain annual unit inspection reports.
Cause: The Project did not maintain appropriate tenant eligibility documentation as required by HUD.
Effect or Potential Effect: Unable to verify tenant eligibility and cost of assistance may be disallowed.
Auditor Non-Compliance Code: R – Section 8 Program Administration.
Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: The Project should implement procedures to ensure that initial and ongoing tenant eligibility documentation is obtained timely, and that unit inspections are performed annually.
Response Indicator: Agree.
Completion Date: 3/31/2025
Response: Staff training has been provided with additional HUD training inclusive of EIV reporting and included in monthly report procedures.
FINDING No. 2024-002: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155
Finding Resolution Status: Unresolved.
Information on Universe Population Size: All replacement reserve deposits for the year ended March 31, 2024.
Sample Size Information: All replacement reserve deposits for the year ended March 31, 2024.
Identification of Repeat Finding and Finding Reference Number: No.
Criteria: In accordance with HUD, required monthly deposits must be made to the Project’s reserve for replacement account.
Statement of Condition: The Project underfunded the account by $120.
Cause: The Project did not fund the replacement reserve account by $120.
Effect or Potential Effect: Deficiently funded reserve for replacement account.
Auditor Non-Compliance Code: N – Reserve for Replacements Deposits.
Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: Management should implement procedures to ensure that the correct amount is deposited into the replacement reserve account each month.
Response Indicator: Agree.
Completion Date: 3/31/2025
Response: Escrows were underfunded due primarily to a high increase in insurance rates. The project will fund the shortfall. Escrow balances will be reviewed on a regular basis to ensure adequate funding.
FINDING No. 2024-003: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155
Finding Resolution Status: Unresolved.
Information on Universe Population Size: Total rent revenue.
Sample Size Information: Total rent revenue.
Identification of Repeat Finding and Finding Reference Number: No.
Criteria: As required by HUD regulations, a HUD approved rent change must be executed as of its effective date, and all earned revenue recorded in the correct period.
Statement of Condition: The Project did not implement the accepted HUD approved rent change as of the March 1, 2023 and March 1, 2024 effective dates, resulting in a $59,201 omission.
Cause: The Project did not follow HUD regulations for timely applying the gross rent change, resulting in an underpayment of rent for each unit.
Effect or Potential Effect: The Project did not request $59,201 of HAP funds in the audit period, nor record the receivable at year end. An audit adjustment was posted to reflect the correct rent revenue for the year.
Auditor Non-Compliance Code: R – Section 8 Program Administration.
Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should comply with HUD regulations for executing the required rent change as of its effective date when approved.
Response Indicator: Agree.
Completion Date: 3/31/2025
Response: New manager has been trained to implement gross rent changes immediately and new procedures have been implemented to ensure timely changes. Questioned Costs – Department of Housing and Urban Development $59,201
FINDING No. 2024-004: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155
Finding Resolution Status: Unresolved.
Information on Universe Population Size: All management fee expenses.
Sample Size Information: All management fee expenses.
Identification of Repeat Finding and Finding Reference Number: Yes, 2023-001
Criteria: As required by HUD, the Project shall only use funds as specified in the Regulatory Agreement and owes the management company fees at the rate specified in the Project Owner’s/Management Agent’s Certification (Form HUD-9839-B).
Statement of Condition: As a result of an expired Form HUD-9839-B, the Project has been overcharged management fees, resulting in an unauthorized loan to the management company.
Cause: The Project’s Form HUD-9839-B expired and a new one was not prepared nor approved by HUD.
Effect or Potential Effect: The Project has made an unauthorized loan to the management company as a result of overpaying management fees of $52,384.
Auditor Non-Compliance Code: J – Unauthorized Management Fees.
Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: The Project should implement procedures to monitor the expiration of HUD required documents to ensure timely preparation and approval.
Response Indicator: Agree.
Completion Date: 3/31/2025
Response: Management is in the process of obtaining a new management agent certification. Questioned Costs – Department of Housing and Urban Development $52,384
Total Questioned Costs – Department of Housing and Urban Development $111,585