Audit 353488

2024-001 – Annual Income Recertifications Federal Program – U.S. Department of Housing and Urban Development Assistance Listing Number 14.157 – Supportive Housing for the Elderly (Section 202) Material Weakness & Noncompliance Category of Finding – Eligibility Criteria - The Compliance Supplement requires owners and management agents of properties with Section 202 project rental assistance contracts to complete annual income recertifications for all tenants. These recertifications must be conducted timely, with notices sent at least 120 days prior to the effective date and all required documentation collected to ensure accurate rent calculations and continued eligibility. Condition - During the audit, a review of tenant files revealed that income recertifications were either not completed or not completed in a timely manner. Specifically: • 2 out of 3 tenant files reviewed lacked completed income recertifications within the required timeframe. Context - Of the total population of 30 units, 3 were tested. Questioned costs are not applicable to this finding. Based on our sample, inquiry of employees and a master list of late annual recertifications provided by management, we understand this finding to be prevalent at the Organization throughout the year. Cause - The identified deficiencies appear to be due to inadequate oversight and ineffective tracking of the recertification process by property management. Factors contributing to the issue include not utilizing a tracking system to track recertification deadlines and timely distribution of recertification notices; insufficient staff training on federal compliance requirements; and staff turnover resulting in inconsistent adherence to required procedures. Effect (Potential Effect) - Failure to complete or timely conduct income recertifications can lead to several compliance and financial risks, including: incorrect rent calculations, resulting in overpayment or underpayment of housing assistance subsidies; loss of subsidy for tenants who fail to complete recertification, potentially leading to eviction risks; increased administrative burden to resolve delayed recertifications and financial discrepancies; and risk of noncompliance findings in HUD’s Management and Occupancy Reviews (MORs), potentially leading to corrective actions or penalties. Identification of repeat finding – No Recommendation - To ensure compliance with HUD recertification requirements, management should utilize available tracking systems to monitor and enforce recertification deadlines; provide staff training on HUD Handbook 4350.3 recertification procedures and requirements; establish a quality control process to verify recertifications are completed on time and properly documented in tenant files; and conduct periodic internal audits to identify and correct any deficiencies in the recertification process. Views of responsible officials and planned corrective actions - The Organization agrees with the finding and has implemented strategies to address the finding. To address this finding, management has assembled and deployed a team of external consultants and temporary workers to assist site staff in completing tenant recertifications and hired a team of additional roving property management/compliance teams to cover open property management positions and to support site staff in completing tenant recertifications. Currently, management plans to transition 50% of its real estate portfolio to new property management in 2025.

2024-001 – Annual Income Recertifications Federal Program – U.S. Department of Housing and Urban Development Assistance Listing Number 14.157 – Supportive Housing for the Elderly (Section 202) Material Weakness & Noncompliance Category of Finding – Eligibility Criteria - The Compliance Supplement requires owners and management agents of properties with Section 202 project rental assistance contracts to complete annual income recertifications for all tenants. These recertifications must be conducted timely, with notices sent at least 120 days prior to the effective date and all required documentation collected to ensure accurate rent calculations and continued eligibility. Condition - During the audit, a review of tenant files revealed that income recertifications were either not completed or not completed in a timely manner. Specifically: • 2 out of 3 tenant files reviewed lacked completed income recertifications within the required timeframe. Context - Of the total population of 30 units, 3 were tested. Questioned costs are not applicable to this finding. Based on our sample, inquiry of employees and a master list of late annual recertifications provided by management, we understand this finding to be prevalent at the Organization throughout the year. Cause - The identified deficiencies appear to be due to inadequate oversight and ineffective tracking of the recertification process by property management. Factors contributing to the issue include not utilizing a tracking system to track recertification deadlines and timely distribution of recertification notices; insufficient staff training on federal compliance requirements; and staff turnover resulting in inconsistent adherence to required procedures. Effect (Potential Effect) - Failure to complete or timely conduct income recertifications can lead to several compliance and financial risks, including: incorrect rent calculations, resulting in overpayment or underpayment of housing assistance subsidies; loss of subsidy for tenants who fail to complete recertification, potentially leading to eviction risks; increased administrative burden to resolve delayed recertifications and financial discrepancies; and risk of noncompliance findings in HUD’s Management and Occupancy Reviews (MORs), potentially leading to corrective actions or penalties. Identification of repeat finding – No Recommendation - To ensure compliance with HUD recertification requirements, management should utilize available tracking systems to monitor and enforce recertification deadlines; provide staff training on HUD Handbook 4350.3 recertification procedures and requirements; establish a quality control process to verify recertifications are completed on time and properly documented in tenant files; and conduct periodic internal audits to identify and correct any deficiencies in the recertification process. Views of responsible officials and planned corrective actions - The Organization agrees with the finding and has implemented strategies to address the finding. To address this finding, management has assembled and deployed a team of external consultants and temporary workers to assist site staff in completing tenant recertifications and hired a team of additional roving property management/compliance teams to cover open property management positions and to support site staff in completing tenant recertifications. Currently, management plans to transition 50% of its real estate portfolio to new property management in 2025.