Audit 354782

Condition: During 2024, replacement reserve deposits were made in the amount of $12,435. Additionally, catch up deposits of $7,028 were made in 2024. As of December 31, 2024, there is a shortfall of $17,414 in required deposits into the reserve for replacements. Criteria: As of December 31, 2024, in accordance with the Section 811 Capital Advance Program ("Program") Regulatory Agreement ("Agreement") with the United States Department of Housing and Urban Development ("HUD"), the Corporation is obligated to establish and maintain a reserve for replacements in a separate bank account under the Corporation's name. The Corporation is required to make monthly payments of $1,036 from April 1, 2022, through December 31,2024, or until a different amount or schedule is approved in writing by HUD. During 2024, the Corporation made the required monthly deposits into the reserve, plus an additional $9,770 resulting in a cumulative shortfall of $17,414. Cause: Failure to make all required payments into the replacement reserve during the period under audit as result of the Corporation not having the cash to make the deposits. Effect or Potential Effect: Noncompliance with the terms and requirements of the Agreement as well as the compliance requirements of the Program in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Recommendation: We recommend that the Corporation make up the shortfall of deposits in the subsequent period and on a going forward basis, make the monthly required reserve for replacement deposits. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the auditor’s finding and recommendation. The Corporation will subsequently make the necessary deposits to align the reserve for replacement balance with the requirements of the Section 811 Capital Advance Program Regulatory Agreement.

Condition: Two tenant files from a sample of five tenant files tested were missing one or more documents required by HUD regulations including:  One tenant file was missing the annual certification  Insufficient documentation provided for income verification purposes in one instance  Absence of required birth certificate documentation in one instance  Lack of move in inspection in two instances  Missing pre-rental application documentation in one instance Criteria: Properly maintained tenant files are supposed to include all required items. Cause: The management company had an oversight in internal controls to ensure that all required documents are maintained in tenant files. Effect or Potential Effect: The Corporation is not in compliance with its Project Rental Assistance Contract and Tenant Selection Plan. Recommendation: Management should design and implement internal controls to ensure all required documentation is collected and maintained for all tenants and will conduct an inspection of all tenant files to ensure completeness. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the auditor’s finding and recommendation. Housing Opportunities Corporation will implement a comprehensive internal control system to ensure all tenant files include all required documentation.

Condition: During 2024, replacement reserve deposits were made in the amount of $12,435. Additionally, catch up deposits of $7,028 were made in 2024. As of December 31, 2024, there is a shortfall of $17,414 in required deposits into the reserve for replacements. Criteria: As of December 31, 2024, in accordance with the Section 811 Capital Advance Program ("Program") Regulatory Agreement ("Agreement") with the United States Department of Housing and Urban Development ("HUD"), the Corporation is obligated to establish and maintain a reserve for replacements in a separate bank account under the Corporation's name. The Corporation is required to make monthly payments of $1,036 from April 1, 2022, through December 31,2024, or until a different amount or schedule is approved in writing by HUD. During 2024, the Corporation made the required monthly deposits into the reserve, plus an additional $9,770 resulting in a cumulative shortfall of $17,414. Cause: Failure to make all required payments into the replacement reserve during the period under audit as result of the Corporation not having the cash to make the deposits. Effect or Potential Effect: Noncompliance with the terms and requirements of the Agreement as well as the compliance requirements of the Program in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Recommendation: We recommend that the Corporation make up the shortfall of deposits in the subsequent period and on a going forward basis, make the monthly required reserve for replacement deposits. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the auditor’s finding and recommendation. The Corporation will subsequently make the necessary deposits to align the reserve for replacement balance with the requirements of the Section 811 Capital Advance Program Regulatory Agreement.

Condition: Two tenant files from a sample of five tenant files tested were missing one or more documents required by HUD regulations including:  One tenant file was missing the annual certification  Insufficient documentation provided for income verification purposes in one instance  Absence of required birth certificate documentation in one instance  Lack of move in inspection in two instances  Missing pre-rental application documentation in one instance Criteria: Properly maintained tenant files are supposed to include all required items. Cause: The management company had an oversight in internal controls to ensure that all required documents are maintained in tenant files. Effect or Potential Effect: The Corporation is not in compliance with its Project Rental Assistance Contract and Tenant Selection Plan. Recommendation: Management should design and implement internal controls to ensure all required documentation is collected and maintained for all tenants and will conduct an inspection of all tenant files to ensure completeness. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the auditor’s finding and recommendation. Housing Opportunities Corporation will implement a comprehensive internal control system to ensure all tenant files include all required documentation.