Finding 2023-001 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ended June 30, 2023, the Corporation made ten of the required monthly mortgage and escrow payments. Furthermore, the Corporation has two delinquent monthly mortgage payments from a prior year resulting in four total delinquent mortgage payments as of June 30, 2023. Additionally, the Corporation incurred late fees of $2,705 during the year ended June 30, 2023.
Criteria: The Loan Agreement and the Regulatory Agreement with HUD requires the Corporation to make all required monthly mortgage and escrow payments by its due date.
Effect: Noncompliance with HUD regulations and mortgage default.
Cause: Vacancy and cash flow shortages.
Context: A test to compare the required mortgage payments and escrow deposits to the actual mortgage payments and escrow deposits was performed. During the year ended June 30, 2023, the Corporation made ten mortgage payments and escrow deposits. Additionally, the Corporation has two delinquent monthly mortgage payments from a prior year resulting in four total delinquent mortgage payments as of June 30, 2023.
Questioned Costs: $2,705
Recommendation: We recommend that management and the board of directors work to improve occupancy and submit special claims requests to HUD for vacant units to improve cash flow to ensure timely payment of the mortgage payments and escrow deposits.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the required mortgage payments and escrow deposits were not made. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company is increasing advertising to fill vacancies and submitting special claims requests to improve the cash flow. Additionally, the new management company is working with the lender to make additional mortgage payments and escrow deposits as cash flow permits.
Finding 2023-002 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: The Corporation did not submit the data collection form and required reporting package to the Federal Audit Clearinghouse (FAC) for the year ended June 30, 2023 by the required due date.
Criteria: The Uniform Guidance, 2 CFR Part 200 Section 200.512(d), Report Submission, requires any non-federal entity that expends Federal awards which must be audited under Subpart F of 2 CFR to electronically submit to the FAC the data collection form and the reporting package described in 2 CFR Part 200 Section 200.512. The Uniform Guidance, 2 CFR Part 200 Section 200.512(a)(1), Report Submission, requires the data collection form and the reporting package described in 2 CFR Part 200 Section 200.512 to be submitted within the earlier of 30 calendar days after the receipt of the auditor's report(s) or nine months after the end of the audit period.
Effect: Noncompliance with Uniform Guidance regulations.
Cause: Prior management oversight and non-responsiveness.
Context: The annual audit was not completed by the due date of the required reporting package to the FAC. Questioned Costs: N/A
Recommendation: We recommend the board of directors and management ensure that the audit and data collection forms are completed timely and the data collection form and required reporting package are submitted electronically to the FAC each fiscal year going forward.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledge that the data collection form for the year ended June 30, 2023 is past the required due date. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company will ensure the data collection forms are submitted electronically to the FAC each fiscal year.
Finding 2023-003 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: The Corporation did not submit the annual financial report to HUD for the year ended June 30, 2023 by the required deadline.
Criteria: The Regulatory Agreement requires the Corporation to submit to HUD the annual financial report within 90 days following the end of each fiscal year.
Effect: Noncompliance with HUD regulations.
Cause: Prior management oversight and non-responsiveness.
Context: The annual audit was not completed by the required HUD annual financial report due date.
Questioned Costs: N/A
Recommendation: We recommend the board of directors and management ensure that the annual financial reports to HUD are submitted by the required due dates.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the annual financial report to HUD for the year ended June 30, 2023 is past the required due date. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company will ensure the annual financial reports to HUD are submitted once the audits are back on track with the scheduled due dates.
Finding 2023-004 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ended June 30, 2023, the Corporation only made ten of the required monthly deposits to the replacement reserve account resulting in delinquent deposits for the current year of $1,482. Furthermore, the Corporation also has delinquent deposits of $1,482 from the prior year resulting in total delinquent reserve deposits of $2,964 as of June 30, 2023. Criteria: HUD Handbook 4370.2 REV-1 CHG-1, Chapter 2, Section 2-7 and the Regulatory Agreement specifies that the replacement reserve account must be maintained in a separate account, with monthly deposits made as required.
Effect: Noncompliance with HUD regulations.
Cause: Vacancy and cash flow shortages.
Context: A test to compare actual deposits to the replacement reserve account to the required deposits to the replacement reserve account was performed. During the year ending June 30, 2023, only ten of the required deposits were made to the replacement reserve account.
Questioned Costs: N/A
Recommendation: We recommend that management and the board of directors work to improve occupancy and submit special claims requests to HUD for vacant units to improve cash flow to ensure timely monthly deposits to the replacement reserve account are made as required.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the required reserve deposits were not made. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company is increasing advertising to fill vacancies and submitting special claims requests to improve the cash flow.
Finding 2023-005 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ending June 30, 2023, supporting documentation was not available for some requested disbursements.
Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 Section 12 states a request for a check must have supporting documentation (i.e., invoice itemizing amount requested with an authorized signature) in order for approval to be obtained to make the disbursement. Checks must be approved by an individual authorized to approve checks.
Effect: Noncompliance with HUD regulations.
Cause: Prior management oversight and non-responsiveness.
Context: A sample of cash disbursements totaling $58,527 were tested to determine if the cash disbursements were in accordance with HUD Handbook 4370.2. A total of $25,781 of cash disbursements tested did not have supporting documentation and therefore unable to be tested for compliance with HUD Handbook 4370.2 and deemed noncompliant. By extrapolating our identified error rate on cash disbursements tested that were noncompliant (44%) over the total population of cash disbursements for the year ending June 30, 2023 of $455,836, $200,796 of cash disbursements could be noncompliant based on the above error rate.
Questioned Costs: $200,796 Recommendation: We recommend that management ensure supporting documentation is maintained for all disbursements from project operations.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledge the requested disbursements did not have supporting documentation available. During the change in management effective June 1, 2023, the prior management company did not provide new management company with all invoices or other supporting documents for some disbursements and did not provide the requested invoices to the auditor for testing. The new management will ensure supporting documentation is maintained for all disbursements from project operations during their management.
Finding 2023-006 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ending June 30, 2023, supporting documentation was not available for some of the requested deposits.
Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 Section 12 states that all cash receipts must deposited in the name of the project, numbered rent receipts shall be used and reconciled to actual collections, an adequate recording system shall be employed to note all checks received and deposited and all collections shall be promptly deposited on the day received.
Effect: Noncompliance with HUD regulations.
Cause: Prior management oversight and non-responsiveness.
Context: A sample of cash receipts totaling $48,454 were tested to determine if the cash receipts were in accordance with HUD Handbook 4370.2. A total of $10,397 of cash receipts tested did not have supporting documentation and therefore unable to be tested for compliance with HUD Handbook 4370.2 and deemed noncompliant. By extrapolating our identified error rate on cash receipts tested that were noncompliant (21%) over the total population of cash receipts for the year ending June 30, 2023 of $462,780, $99,296 of cash receipts could be noncompliant based on the above error rate.
Questioned Costs: N/A
Recommendation: We recommend that management ensure supporting documentation is maintained for all cash receipts of the project.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledge the requested cash receipts noted did not have supporting documentation available. During the change in management effective June 1, 2023, the prior management company did not provide new management company with supporting documentation for cash all cash receipts and did not provide the requested cash receipts supporting documents to the auditor for testing. The new management will ensure supporting documentation is maintained for all cash receipts from project operations during their management.
Finding 2023-001 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ended June 30, 2023, the Corporation made ten of the required monthly mortgage and escrow payments. Furthermore, the Corporation has two delinquent monthly mortgage payments from a prior year resulting in four total delinquent mortgage payments as of June 30, 2023. Additionally, the Corporation incurred late fees of $2,705 during the year ended June 30, 2023.
Criteria: The Loan Agreement and the Regulatory Agreement with HUD requires the Corporation to make all required monthly mortgage and escrow payments by its due date.
Effect: Noncompliance with HUD regulations and mortgage default.
Cause: Vacancy and cash flow shortages.
Context: A test to compare the required mortgage payments and escrow deposits to the actual mortgage payments and escrow deposits was performed. During the year ended June 30, 2023, the Corporation made ten mortgage payments and escrow deposits. Additionally, the Corporation has two delinquent monthly mortgage payments from a prior year resulting in four total delinquent mortgage payments as of June 30, 2023.
Questioned Costs: $2,705
Recommendation: We recommend that management and the board of directors work to improve occupancy and submit special claims requests to HUD for vacant units to improve cash flow to ensure timely payment of the mortgage payments and escrow deposits.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the required mortgage payments and escrow deposits were not made. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company is increasing advertising to fill vacancies and submitting special claims requests to improve the cash flow. Additionally, the new management company is working with the lender to make additional mortgage payments and escrow deposits as cash flow permits.
Finding 2023-002 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: The Corporation did not submit the data collection form and required reporting package to the Federal Audit Clearinghouse (FAC) for the year ended June 30, 2023 by the required due date.
Criteria: The Uniform Guidance, 2 CFR Part 200 Section 200.512(d), Report Submission, requires any non-federal entity that expends Federal awards which must be audited under Subpart F of 2 CFR to electronically submit to the FAC the data collection form and the reporting package described in 2 CFR Part 200 Section 200.512. The Uniform Guidance, 2 CFR Part 200 Section 200.512(a)(1), Report Submission, requires the data collection form and the reporting package described in 2 CFR Part 200 Section 200.512 to be submitted within the earlier of 30 calendar days after the receipt of the auditor's report(s) or nine months after the end of the audit period.
Effect: Noncompliance with Uniform Guidance regulations.
Cause: Prior management oversight and non-responsiveness.
Context: The annual audit was not completed by the due date of the required reporting package to the FAC. Questioned Costs: N/A
Recommendation: We recommend the board of directors and management ensure that the audit and data collection forms are completed timely and the data collection form and required reporting package are submitted electronically to the FAC each fiscal year going forward.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledge that the data collection form for the year ended June 30, 2023 is past the required due date. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company will ensure the data collection forms are submitted electronically to the FAC each fiscal year.
Finding 2023-003 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: The Corporation did not submit the annual financial report to HUD for the year ended June 30, 2023 by the required deadline.
Criteria: The Regulatory Agreement requires the Corporation to submit to HUD the annual financial report within 90 days following the end of each fiscal year.
Effect: Noncompliance with HUD regulations.
Cause: Prior management oversight and non-responsiveness.
Context: The annual audit was not completed by the required HUD annual financial report due date.
Questioned Costs: N/A
Recommendation: We recommend the board of directors and management ensure that the annual financial reports to HUD are submitted by the required due dates.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the annual financial report to HUD for the year ended June 30, 2023 is past the required due date. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company will ensure the annual financial reports to HUD are submitted once the audits are back on track with the scheduled due dates.
Finding 2023-004 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ended June 30, 2023, the Corporation only made ten of the required monthly deposits to the replacement reserve account resulting in delinquent deposits for the current year of $1,482. Furthermore, the Corporation also has delinquent deposits of $1,482 from the prior year resulting in total delinquent reserve deposits of $2,964 as of June 30, 2023. Criteria: HUD Handbook 4370.2 REV-1 CHG-1, Chapter 2, Section 2-7 and the Regulatory Agreement specifies that the replacement reserve account must be maintained in a separate account, with monthly deposits made as required.
Effect: Noncompliance with HUD regulations.
Cause: Vacancy and cash flow shortages.
Context: A test to compare actual deposits to the replacement reserve account to the required deposits to the replacement reserve account was performed. During the year ending June 30, 2023, only ten of the required deposits were made to the replacement reserve account.
Questioned Costs: N/A
Recommendation: We recommend that management and the board of directors work to improve occupancy and submit special claims requests to HUD for vacant units to improve cash flow to ensure timely monthly deposits to the replacement reserve account are made as required.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the required reserve deposits were not made. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company is increasing advertising to fill vacancies and submitting special claims requests to improve the cash flow.
Finding 2023-005 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ending June 30, 2023, supporting documentation was not available for some requested disbursements.
Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 Section 12 states a request for a check must have supporting documentation (i.e., invoice itemizing amount requested with an authorized signature) in order for approval to be obtained to make the disbursement. Checks must be approved by an individual authorized to approve checks.
Effect: Noncompliance with HUD regulations.
Cause: Prior management oversight and non-responsiveness.
Context: A sample of cash disbursements totaling $58,527 were tested to determine if the cash disbursements were in accordance with HUD Handbook 4370.2. A total of $25,781 of cash disbursements tested did not have supporting documentation and therefore unable to be tested for compliance with HUD Handbook 4370.2 and deemed noncompliant. By extrapolating our identified error rate on cash disbursements tested that were noncompliant (44%) over the total population of cash disbursements for the year ending June 30, 2023 of $455,836, $200,796 of cash disbursements could be noncompliant based on the above error rate.
Questioned Costs: $200,796 Recommendation: We recommend that management ensure supporting documentation is maintained for all disbursements from project operations.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledge the requested disbursements did not have supporting documentation available. During the change in management effective June 1, 2023, the prior management company did not provide new management company with all invoices or other supporting documents for some disbursements and did not provide the requested invoices to the auditor for testing. The new management will ensure supporting documentation is maintained for all disbursements from project operations during their management.
Finding 2023-006 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ending June 30, 2023, supporting documentation was not available for some of the requested deposits.
Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 Section 12 states that all cash receipts must deposited in the name of the project, numbered rent receipts shall be used and reconciled to actual collections, an adequate recording system shall be employed to note all checks received and deposited and all collections shall be promptly deposited on the day received.
Effect: Noncompliance with HUD regulations.
Cause: Prior management oversight and non-responsiveness.
Context: A sample of cash receipts totaling $48,454 were tested to determine if the cash receipts were in accordance with HUD Handbook 4370.2. A total of $10,397 of cash receipts tested did not have supporting documentation and therefore unable to be tested for compliance with HUD Handbook 4370.2 and deemed noncompliant. By extrapolating our identified error rate on cash receipts tested that were noncompliant (21%) over the total population of cash receipts for the year ending June 30, 2023 of $462,780, $99,296 of cash receipts could be noncompliant based on the above error rate.
Questioned Costs: N/A
Recommendation: We recommend that management ensure supporting documentation is maintained for all cash receipts of the project.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledge the requested cash receipts noted did not have supporting documentation available. During the change in management effective June 1, 2023, the prior management company did not provide new management company with supporting documentation for cash all cash receipts and did not provide the requested cash receipts supporting documents to the auditor for testing. The new management will ensure supporting documentation is maintained for all cash receipts from project operations during their management.