Audit 355300

Finding 2024-001: Tenant Files Identification of the federal program: Assistance Listing Number 14.157—Supportive Housing for the Elderly, United Statements Department of Housing and Urban Development. Compliance Requirements: Eligibility. Type of Finding: Significant Deficiency. Criteria: According to the U.S. Department of Housing and Urban Development (HUD) regulations and contractual agreements, it is required that housing inspections be conducted on an annual basis to ensure that units meet the necessary health, safety, and quality standards. Per the relevant regulation 24 CFR 982.405, housing authorities are required to conduct an annual inspection of each unit to assess its compliance with HUD's Housing Quality Standards (HQS). HUD Notice PIH 2019-19 also outlines the expectations and responsibilities for housing authorities regarding the frequency of inspections to ensure that units are maintained in a manner that complies with federal standards. Failure to comply with these regulations could lead to health and safety risks for residents and potential non-compliance with federal funding requirements.. Condition: During the 2024 audit of the tenant files, the auditors discovered that property management had not conducted the annual inspection of tenant units. Cause: The Project did not successfully schedule or complete the annual tenant inspection within the designated timeframe due to limited staffing resources. Effect or Potential: If the annual inspection is omitted, there is an increase risk that the units may not meet required minimum HUD standards regarding unit adequacy, safety, and sanitation. Recommendation: We recommend the Project stay up to date with their annual tenant inspections to ensure compliance with HUD-required living standards. Perspective: A sample of 16 tenant files was reviewed from the total population of 160. The review revealed a lack of evidence supporting the completion of the required annual inspections for the 2024 year. This finding was subsequently confirmed through communication with property management, indicating that the annual inspections for 2024 were not conducted for all units. Questioned costs: N/A Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding. The Managing Agent has, at its own expense, contracted with US Inspection Group to complete a full inspection of every unit before April 15, 2025. The Managing Agent has prepared a new internal tasking schedule for enhance tracking of unit inspections by the maintenance, management and executive teams. The Managing Agent will reinforce the critical importance of annual unit inspection during its annual Maintenance Conference and its annual Management Conference. Auditor’s evaluation of the views of responsible officials: The Managing Agent’s response is appropriate to address the noncompliance that occurred.

Finding 2024-002: Replacement Reserve Identification of the federal program: Assistance Listing Number 14.157—Supportive Housing For the Elderly, United Statements Department of Housing and Urban Development. Compliance Requirements: Special Tests and Provisions. Type of Finding: Material Weakness. Criteria: Under 24 CFR 891.405 and 24 CFR 891.605, HUD regulations require that owners of properties receiving HUD funding obtain prior written approval from HUD before making certain withdrawals or expenditures. Specifically, 24 CFR 891.405: This regulation outlines the responsibilities of owners and the requirement to obtain HUD approval before making withdrawals from project funds for non-routine or non-ordinary expenses. These regulations are in place to ensure that HUD funds are properly managed and utilized in accordance with federal guidelines. Any withdrawal or expenditure made from the replacement reserve without prior HUD approval may result in non-compliance with program requirements. Condition: During the 2024 audit of the replacement reserve activity, the auditors discovered that the the Project made two withdrawals without HUD approval totaling $68,528. Subsequent to year-end, management restored the funds to the replacement reserve account. Cause: The Project did not adhere to the required compliance procedures to request and obtain HUD approval prior to withdrawing funds from the replacement reserves. Effect or Potential: Without the necessary approval, the Project is at risk of depleting the HUD reserve funds, which are designated to provide financial relief for maintenance or repair needs. Recommendation: We recommend that the Project establish controls to ensure that approval is obtained prior to any withdrawals. Perspective: During the 2024 audit of the replacement reserve activity, it was found that the owners made two withdrawals, totaling $68,528, without obtaining prior HUD approval. This lack of compliance with HUD approval requirements raises concerns regarding the management of the replacement reserve fund. Questioned costs: $68,528 Views of Responsible Officials and Planned Corrective Actions: The Managing Agent has requested and received authorization from HUD for the expenditure of funds from the Operating Account related to the design and planning of the Seismic Retrofit. The Managing Agent restored the funds expended from the Replacement Reserve Account from the Operating Account in February 2025, subsequent to year-end. Management changes (including a revision of leadership) as well as a better understanding of HUD requirements will ensure this error does not happen again. Auditor’s evaluation of the views of responsible officials: The Managing Agent’s response is appropriate to address the noncompliance that occurred.

Finding 2024-001: Tenant Files Identification of the federal program: Assistance Listing Number 14.157—Supportive Housing for the Elderly, United Statements Department of Housing and Urban Development. Compliance Requirements: Eligibility. Type of Finding: Significant Deficiency. Criteria: According to the U.S. Department of Housing and Urban Development (HUD) regulations and contractual agreements, it is required that housing inspections be conducted on an annual basis to ensure that units meet the necessary health, safety, and quality standards. Per the relevant regulation 24 CFR 982.405, housing authorities are required to conduct an annual inspection of each unit to assess its compliance with HUD's Housing Quality Standards (HQS). HUD Notice PIH 2019-19 also outlines the expectations and responsibilities for housing authorities regarding the frequency of inspections to ensure that units are maintained in a manner that complies with federal standards. Failure to comply with these regulations could lead to health and safety risks for residents and potential non-compliance with federal funding requirements.. Condition: During the 2024 audit of the tenant files, the auditors discovered that property management had not conducted the annual inspection of tenant units. Cause: The Project did not successfully schedule or complete the annual tenant inspection within the designated timeframe due to limited staffing resources. Effect or Potential: If the annual inspection is omitted, there is an increase risk that the units may not meet required minimum HUD standards regarding unit adequacy, safety, and sanitation. Recommendation: We recommend the Project stay up to date with their annual tenant inspections to ensure compliance with HUD-required living standards. Perspective: A sample of 16 tenant files was reviewed from the total population of 160. The review revealed a lack of evidence supporting the completion of the required annual inspections for the 2024 year. This finding was subsequently confirmed through communication with property management, indicating that the annual inspections for 2024 were not conducted for all units. Questioned costs: N/A Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding. The Managing Agent has, at its own expense, contracted with US Inspection Group to complete a full inspection of every unit before April 15, 2025. The Managing Agent has prepared a new internal tasking schedule for enhance tracking of unit inspections by the maintenance, management and executive teams. The Managing Agent will reinforce the critical importance of annual unit inspection during its annual Maintenance Conference and its annual Management Conference. Auditor’s evaluation of the views of responsible officials: The Managing Agent’s response is appropriate to address the noncompliance that occurred.

Finding 2024-002: Replacement Reserve Identification of the federal program: Assistance Listing Number 14.157—Supportive Housing For the Elderly, United Statements Department of Housing and Urban Development. Compliance Requirements: Special Tests and Provisions. Type of Finding: Material Weakness. Criteria: Under 24 CFR 891.405 and 24 CFR 891.605, HUD regulations require that owners of properties receiving HUD funding obtain prior written approval from HUD before making certain withdrawals or expenditures. Specifically, 24 CFR 891.405: This regulation outlines the responsibilities of owners and the requirement to obtain HUD approval before making withdrawals from project funds for non-routine or non-ordinary expenses. These regulations are in place to ensure that HUD funds are properly managed and utilized in accordance with federal guidelines. Any withdrawal or expenditure made from the replacement reserve without prior HUD approval may result in non-compliance with program requirements. Condition: During the 2024 audit of the replacement reserve activity, the auditors discovered that the the Project made two withdrawals without HUD approval totaling $68,528. Subsequent to year-end, management restored the funds to the replacement reserve account. Cause: The Project did not adhere to the required compliance procedures to request and obtain HUD approval prior to withdrawing funds from the replacement reserves. Effect or Potential: Without the necessary approval, the Project is at risk of depleting the HUD reserve funds, which are designated to provide financial relief for maintenance or repair needs. Recommendation: We recommend that the Project establish controls to ensure that approval is obtained prior to any withdrawals. Perspective: During the 2024 audit of the replacement reserve activity, it was found that the owners made two withdrawals, totaling $68,528, without obtaining prior HUD approval. This lack of compliance with HUD approval requirements raises concerns regarding the management of the replacement reserve fund. Questioned costs: $68,528 Views of Responsible Officials and Planned Corrective Actions: The Managing Agent has requested and received authorization from HUD for the expenditure of funds from the Operating Account related to the design and planning of the Seismic Retrofit. The Managing Agent restored the funds expended from the Replacement Reserve Account from the Operating Account in February 2025, subsequent to year-end. Management changes (including a revision of leadership) as well as a better understanding of HUD requirements will ensure this error does not happen again. Auditor’s evaluation of the views of responsible officials: The Managing Agent’s response is appropriate to address the noncompliance that occurred.