Finding 2021-002 – Allowable Costs/Cost Principles – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
Management fee payments are limited to amounts determined in accordance with the terms of the
management agreement.
Condition
During the year ended September 30, 2021, HES paid the management agent for costs in excess of
amounts incurred by the management agent totaling $30,803 of which $18,674 remians outstanding.
Cause
Internal controls were not in place to ensure that payments to the management agent were allowable
costs.
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Questioned Costs
$18,674
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-002).
Auditor Noncompliance Code: J – Unauthorized management fees
Finding Resolution Status: Unresolved
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted
Finding 2021-003 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
HUD regulations at HUD Handbook 4381.5, the Management Agent, require HES'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 HES with the highest gross potential rent.
Condition
Management did not maintain fidelity bond coverage as required by HUD regulations.
Cause
Internal controls were not in place to fidelity bond coverage was in place.
Effect or Potential Effect
Management did not maintain fidelity bond coverage in violation of HUD regulations.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-003).
Recommendation
Management should obtain fidelity bond coverage as required by HUD regulations immediately.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-004 – Reporting – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
HUD under the Uniform Financial Reporting Standards Rule implementing requirements of 24 CFR,
Part 5, Subpart H, requires not-for-profit multifamily program participants to submit financial
statement data electronically to Real Estate Assessment Center ("REAC") within 90 days after their
fiscal year-end. If the owner is not prepared to submit the audited financial information, then an
owner-certified report must be submitted within 90 days of fiscal year-end.
Condition
The audited annual financial statement data for the year ended September 30, 2021 was not timely
submitted to HUD via the Real Estate Assessment Center REAC system.
Cause
Management did not have internal controls in place to allow for a timely audit which resulted in
delays in timely submitting the report to REAC.
Effect or Potential Effect
The audited annual financial statement data was not filed timely to REAC.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-004).
Recommendation
Financial statements should be timely filed.
Auditor Noncompliance Code: S - Internal control deficiency
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-005 – Reporting – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
The OMB has issued Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (commonly called "Uniform Guidance"), which requires institutions
of higher education and nonprofit institutions that expend $750,000 or more in federal funds to
annually conduct a detailed, organization-wide audit that complies with the established criteria.
Additionally, the Uniform Guidance reporting package and the data collection form are required to
be submitted to the Federal Audit Clearinghouse (“FAC”) the earlier of 30 days after the receipt of
the auditors reports or nine months after the end of the audit period, unless a longer period of
time was agreed to in advance by the cognizant or oversight agency for the audit.
Condition
A detailed, organization-wide audit that complies with Uniform Guidance established criteria was
not timely completed and submitted to the FAC.
Cause
Management did not have internal controls in place to allow for a timely audit which resulted in
delays in timely submitting the report to FAC.
Effect or Potential Effect
A detailed, organization-wide audit that complies with the established criteria was not timely
completed resulting in HES not being in compliance with Uniform Guidance requirements.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior finding number 2020-005).
Recommendation
Management should ensure timely completion of a Uniform Guidance audit, as required.
Auditor Noncompliance Code: S - Internal control deficiency
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-006 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
In accordance with 24 CFR Part 200 Subpart M section 200.625 requires program participants to
provide an Affirmative Fair Housing Marketing Plan (“AFHMP”) approved by HUD. In addition, HUD’s
equal housing opportunity logo is required to be displayed on marketing materials.
Condition
HES was unable to produce an approved AFHMP and did not display the HUD-approved equal housing
opportunity logo on marketing materials.
Cause
Management did not have internal controls in place to ensure an AFHMP was in place and the equal
opportunity logo was displayed in accordance with HUD requirements.
Effect or Potential Effect
HES is not in compliance with HUD regulations.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-006).
Recommendation
Management should obtain a HUD approved AFHMP and add the equal opportunity logo to marketing
materials.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-007 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
The regulatory agreement requires that the project make monthly deposits to its replacement reserve.
Condition
During the year ended September 30, 2021, the project did not make the required monthly deposits to the replacement reserve in the amount of $6,563. The project is required to make monthly deposits to the reserve in the amount of $1,313.
Cause
Management did not have internal controls in place to ensure required deposits were made to the replacement reserve.
Effect or Potential Effect
Failure to make monthly payments resulted in an underfunding the replacement resere and a violation of the regulatory agreement.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendation
Management should review the project budget to determine if nonessential costs can be cut or request a loan from the sponsor to ensure that the replacement reserve is funded in accordance with the terms of the regulatory agreement.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations will be adopted
Finding 2021-008 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons
with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
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 one out of two tenants tested did not have
documentation in their lease file that their income was verified.
Cause
Management did not have internal controls in place to ensure tenant income was verified.
Effect or Potential Effect
The procedures for determining tenant eligibility and maintaining 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
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendation
Management should establish procedures and monitor compliance with those procedures to ensure
that tenant eligibility is correctly determined and that the tenant lease files are properly maintained
in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of
Subsidized Multifamily Housing Programs.
Auditor Noncompliance Code: R – Section 8 program administration
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations will be adopted.
Finding 2021-002 – Allowable Costs/Cost Principles – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
Management fee payments are limited to amounts determined in accordance with the terms of the
management agreement.
Condition
During the year ended September 30, 2021, HES paid the management agent for costs in excess of
amounts incurred by the management agent totaling $30,803 of which $18,674 remians outstanding.
Cause
Internal controls were not in place to ensure that payments to the management agent were allowable
costs.
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Questioned Costs
$18,674
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-002).
Auditor Noncompliance Code: J – Unauthorized management fees
Finding Resolution Status: Unresolved
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted
Finding 2021-003 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
HUD regulations at HUD Handbook 4381.5, the Management Agent, require HES'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 HES with the highest gross potential rent.
Condition
Management did not maintain fidelity bond coverage as required by HUD regulations.
Cause
Internal controls were not in place to fidelity bond coverage was in place.
Effect or Potential Effect
Management did not maintain fidelity bond coverage in violation of HUD regulations.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-003).
Recommendation
Management should obtain fidelity bond coverage as required by HUD regulations immediately.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-004 – Reporting – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
HUD under the Uniform Financial Reporting Standards Rule implementing requirements of 24 CFR,
Part 5, Subpart H, requires not-for-profit multifamily program participants to submit financial
statement data electronically to Real Estate Assessment Center ("REAC") within 90 days after their
fiscal year-end. If the owner is not prepared to submit the audited financial information, then an
owner-certified report must be submitted within 90 days of fiscal year-end.
Condition
The audited annual financial statement data for the year ended September 30, 2021 was not timely
submitted to HUD via the Real Estate Assessment Center REAC system.
Cause
Management did not have internal controls in place to allow for a timely audit which resulted in
delays in timely submitting the report to REAC.
Effect or Potential Effect
The audited annual financial statement data was not filed timely to REAC.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-004).
Recommendation
Financial statements should be timely filed.
Auditor Noncompliance Code: S - Internal control deficiency
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-005 – Reporting – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
The OMB has issued Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (commonly called "Uniform Guidance"), which requires institutions
of higher education and nonprofit institutions that expend $750,000 or more in federal funds to
annually conduct a detailed, organization-wide audit that complies with the established criteria.
Additionally, the Uniform Guidance reporting package and the data collection form are required to
be submitted to the Federal Audit Clearinghouse (“FAC”) the earlier of 30 days after the receipt of
the auditors reports or nine months after the end of the audit period, unless a longer period of
time was agreed to in advance by the cognizant or oversight agency for the audit.
Condition
A detailed, organization-wide audit that complies with Uniform Guidance established criteria was
not timely completed and submitted to the FAC.
Cause
Management did not have internal controls in place to allow for a timely audit which resulted in
delays in timely submitting the report to FAC.
Effect or Potential Effect
A detailed, organization-wide audit that complies with the established criteria was not timely
completed resulting in HES not being in compliance with Uniform Guidance requirements.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior finding number 2020-005).
Recommendation
Management should ensure timely completion of a Uniform Guidance audit, as required.
Auditor Noncompliance Code: S - Internal control deficiency
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-006 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
In accordance with 24 CFR Part 200 Subpart M section 200.625 requires program participants to
provide an Affirmative Fair Housing Marketing Plan (“AFHMP”) approved by HUD. In addition, HUD’s
equal housing opportunity logo is required to be displayed on marketing materials.
Condition
HES was unable to produce an approved AFHMP and did not display the HUD-approved equal housing
opportunity logo on marketing materials.
Cause
Management did not have internal controls in place to ensure an AFHMP was in place and the equal
opportunity logo was displayed in accordance with HUD requirements.
Effect or Potential Effect
HES is not in compliance with HUD regulations.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-006).
Recommendation
Management should obtain a HUD approved AFHMP and add the equal opportunity logo to marketing
materials.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-007 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
The regulatory agreement requires that the project make monthly deposits to its replacement reserve.
Condition
During the year ended September 30, 2021, the project did not make the required monthly deposits to the replacement reserve in the amount of $6,563. The project is required to make monthly deposits to the reserve in the amount of $1,313.
Cause
Management did not have internal controls in place to ensure required deposits were made to the replacement reserve.
Effect or Potential Effect
Failure to make monthly payments resulted in an underfunding the replacement resere and a violation of the regulatory agreement.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendation
Management should review the project budget to determine if nonessential costs can be cut or request a loan from the sponsor to ensure that the replacement reserve is funded in accordance with the terms of the regulatory agreement.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations will be adopted
Finding 2021-008 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons
with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
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 one out of two tenants tested did not have
documentation in their lease file that their income was verified.
Cause
Management did not have internal controls in place to ensure tenant income was verified.
Effect or Potential Effect
The procedures for determining tenant eligibility and maintaining 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
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendation
Management should establish procedures and monitor compliance with those procedures to ensure
that tenant eligibility is correctly determined and that the tenant lease files are properly maintained
in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of
Subsidized Multifamily Housing Programs.
Auditor Noncompliance Code: R – Section 8 program administration
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations will be adopted.
Finding 2021-002 – Allowable Costs/Cost Principles – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
Management fee payments are limited to amounts determined in accordance with the terms of the
management agreement.
Condition
During the year ended September 30, 2021, HES paid the management agent for costs in excess of
amounts incurred by the management agent totaling $30,803 of which $18,674 remians outstanding.
Cause
Internal controls were not in place to ensure that payments to the management agent were allowable
costs.
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Questioned Costs
$18,674
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-002).
Auditor Noncompliance Code: J – Unauthorized management fees
Finding Resolution Status: Unresolved
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted
Finding 2021-003 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
HUD regulations at HUD Handbook 4381.5, the Management Agent, require HES'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 HES with the highest gross potential rent.
Condition
Management did not maintain fidelity bond coverage as required by HUD regulations.
Cause
Internal controls were not in place to fidelity bond coverage was in place.
Effect or Potential Effect
Management did not maintain fidelity bond coverage in violation of HUD regulations.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-003).
Recommendation
Management should obtain fidelity bond coverage as required by HUD regulations immediately.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-004 – Reporting – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
HUD under the Uniform Financial Reporting Standards Rule implementing requirements of 24 CFR,
Part 5, Subpart H, requires not-for-profit multifamily program participants to submit financial
statement data electronically to Real Estate Assessment Center ("REAC") within 90 days after their
fiscal year-end. If the owner is not prepared to submit the audited financial information, then an
owner-certified report must be submitted within 90 days of fiscal year-end.
Condition
The audited annual financial statement data for the year ended September 30, 2021 was not timely
submitted to HUD via the Real Estate Assessment Center REAC system.
Cause
Management did not have internal controls in place to allow for a timely audit which resulted in
delays in timely submitting the report to REAC.
Effect or Potential Effect
The audited annual financial statement data was not filed timely to REAC.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-004).
Recommendation
Financial statements should be timely filed.
Auditor Noncompliance Code: S - Internal control deficiency
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-005 – Reporting – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
The OMB has issued Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (commonly called "Uniform Guidance"), which requires institutions
of higher education and nonprofit institutions that expend $750,000 or more in federal funds to
annually conduct a detailed, organization-wide audit that complies with the established criteria.
Additionally, the Uniform Guidance reporting package and the data collection form are required to
be submitted to the Federal Audit Clearinghouse (“FAC”) the earlier of 30 days after the receipt of
the auditors reports or nine months after the end of the audit period, unless a longer period of
time was agreed to in advance by the cognizant or oversight agency for the audit.
Condition
A detailed, organization-wide audit that complies with Uniform Guidance established criteria was
not timely completed and submitted to the FAC.
Cause
Management did not have internal controls in place to allow for a timely audit which resulted in
delays in timely submitting the report to FAC.
Effect or Potential Effect
A detailed, organization-wide audit that complies with the established criteria was not timely
completed resulting in HES not being in compliance with Uniform Guidance requirements.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior finding number 2020-005).
Recommendation
Management should ensure timely completion of a Uniform Guidance audit, as required.
Auditor Noncompliance Code: S - Internal control deficiency
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-006 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
In accordance with 24 CFR Part 200 Subpart M section 200.625 requires program participants to
provide an Affirmative Fair Housing Marketing Plan (“AFHMP”) approved by HUD. In addition, HUD’s
equal housing opportunity logo is required to be displayed on marketing materials.
Condition
HES was unable to produce an approved AFHMP and did not display the HUD-approved equal housing
opportunity logo on marketing materials.
Cause
Management did not have internal controls in place to ensure an AFHMP was in place and the equal
opportunity logo was displayed in accordance with HUD requirements.
Effect or Potential Effect
HES is not in compliance with HUD regulations.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-006).
Recommendation
Management should obtain a HUD approved AFHMP and add the equal opportunity logo to marketing
materials.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-007 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
The regulatory agreement requires that the project make monthly deposits to its replacement reserve.
Condition
During the year ended September 30, 2021, the project did not make the required monthly deposits to the replacement reserve in the amount of $6,563. The project is required to make monthly deposits to the reserve in the amount of $1,313.
Cause
Management did not have internal controls in place to ensure required deposits were made to the replacement reserve.
Effect or Potential Effect
Failure to make monthly payments resulted in an underfunding the replacement resere and a violation of the regulatory agreement.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendation
Management should review the project budget to determine if nonessential costs can be cut or request a loan from the sponsor to ensure that the replacement reserve is funded in accordance with the terms of the regulatory agreement.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations will be adopted
Finding 2021-008 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons
with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
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 one out of two tenants tested did not have
documentation in their lease file that their income was verified.
Cause
Management did not have internal controls in place to ensure tenant income was verified.
Effect or Potential Effect
The procedures for determining tenant eligibility and maintaining 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
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendation
Management should establish procedures and monitor compliance with those procedures to ensure
that tenant eligibility is correctly determined and that the tenant lease files are properly maintained
in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of
Subsidized Multifamily Housing Programs.
Auditor Noncompliance Code: R – Section 8 program administration
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations will be adopted.
Finding 2021-002 – Allowable Costs/Cost Principles – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
Management fee payments are limited to amounts determined in accordance with the terms of the
management agreement.
Condition
During the year ended September 30, 2021, HES paid the management agent for costs in excess of
amounts incurred by the management agent totaling $30,803 of which $18,674 remians outstanding.
Cause
Internal controls were not in place to ensure that payments to the management agent were allowable
costs.
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Questioned Costs
$18,674
Effect or Potential Effect
The overpaid amount is an unauthorized distribution and therefore considered to be questioned
costs.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-002).
Auditor Noncompliance Code: J – Unauthorized management fees
Finding Resolution Status: Unresolved
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted
Finding 2021-003 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
HUD regulations at HUD Handbook 4381.5, the Management Agent, require HES'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 HES with the highest gross potential rent.
Condition
Management did not maintain fidelity bond coverage as required by HUD regulations.
Cause
Internal controls were not in place to fidelity bond coverage was in place.
Effect or Potential Effect
Management did not maintain fidelity bond coverage in violation of HUD regulations.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-003).
Recommendation
Management should obtain fidelity bond coverage as required by HUD regulations immediately.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-004 – Reporting – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
HUD under the Uniform Financial Reporting Standards Rule implementing requirements of 24 CFR,
Part 5, Subpart H, requires not-for-profit multifamily program participants to submit financial
statement data electronically to Real Estate Assessment Center ("REAC") within 90 days after their
fiscal year-end. If the owner is not prepared to submit the audited financial information, then an
owner-certified report must be submitted within 90 days of fiscal year-end.
Condition
The audited annual financial statement data for the year ended September 30, 2021 was not timely
submitted to HUD via the Real Estate Assessment Center REAC system.
Cause
Management did not have internal controls in place to allow for a timely audit which resulted in
delays in timely submitting the report to REAC.
Effect or Potential Effect
The audited annual financial statement data was not filed timely to REAC.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-004).
Recommendation
Financial statements should be timely filed.
Auditor Noncompliance Code: S - Internal control deficiency
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-005 – Reporting – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
The OMB has issued Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (commonly called "Uniform Guidance"), which requires institutions
of higher education and nonprofit institutions that expend $750,000 or more in federal funds to
annually conduct a detailed, organization-wide audit that complies with the established criteria.
Additionally, the Uniform Guidance reporting package and the data collection form are required to
be submitted to the Federal Audit Clearinghouse (“FAC”) the earlier of 30 days after the receipt of
the auditors reports or nine months after the end of the audit period, unless a longer period of
time was agreed to in advance by the cognizant or oversight agency for the audit.
Condition
A detailed, organization-wide audit that complies with Uniform Guidance established criteria was
not timely completed and submitted to the FAC.
Cause
Management did not have internal controls in place to allow for a timely audit which resulted in
delays in timely submitting the report to FAC.
Effect or Potential Effect
A detailed, organization-wide audit that complies with the established criteria was not timely
completed resulting in HES not being in compliance with Uniform Guidance requirements.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior finding number 2020-005).
Recommendation
Management should ensure timely completion of a Uniform Guidance audit, as required.
Auditor Noncompliance Code: S - Internal control deficiency
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-006 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
In accordance with 24 CFR Part 200 Subpart M section 200.625 requires program participants to
provide an Affirmative Fair Housing Marketing Plan (“AFHMP”) approved by HUD. In addition, HUD’s
equal housing opportunity logo is required to be displayed on marketing materials.
Condition
HES was unable to produce an approved AFHMP and did not display the HUD-approved equal housing
opportunity logo on marketing materials.
Cause
Management did not have internal controls in place to ensure an AFHMP was in place and the equal
opportunity logo was displayed in accordance with HUD requirements.
Effect or Potential Effect
HES is not in compliance with HUD regulations.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is a repeat finding (see prior year finding number 2020-006).
Recommendation
Management should obtain a HUD approved AFHMP and add the equal opportunity logo to marketing
materials.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.
Finding 2021-007 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
The regulatory agreement requires that the project make monthly deposits to its replacement reserve.
Condition
During the year ended September 30, 2021, the project did not make the required monthly deposits to the replacement reserve in the amount of $6,563. The project is required to make monthly deposits to the reserve in the amount of $1,313.
Cause
Management did not have internal controls in place to ensure required deposits were made to the replacement reserve.
Effect or Potential Effect
Failure to make monthly payments resulted in an underfunding the replacement resere and a violation of the regulatory agreement.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendation
Management should review the project budget to determine if nonessential costs can be cut or request a loan from the sponsor to ensure that the replacement reserve is funded in accordance with the terms of the regulatory agreement.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations will be adopted
Finding 2021-008 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons
with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
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 one out of two tenants tested did not have
documentation in their lease file that their income was verified.
Cause
Management did not have internal controls in place to ensure tenant income was verified.
Effect or Potential Effect
The procedures for determining tenant eligibility and maintaining 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
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendation
Management should establish procedures and monitor compliance with those procedures to ensure
that tenant eligibility is correctly determined and that the tenant lease files are properly maintained
in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of
Subsidized Multifamily Housing Programs.
Auditor Noncompliance Code: R – Section 8 program administration
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations will be adopted.