FAC Explorer

Audit 356265

FY End
2024-07-31
Total Expended
$4.35M
Findings
6
Programs
3
Organization: First Housing Corporation D/b/a Cathedral Manor (CT)
Year: 2024 Accepted: 2025-05-14
Auditor: Cohnreznick LLP

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
560358 2024-001 - Yes N
560359 2024-002 - Yes N
560360 2024-003 Material Weakness Yes E
1136800 2024-001 - Yes N
1136801 2024-002 - Yes N
1136802 2024-003 Material Weakness Yes E

Programs

ALN Program Spent Major Findings
14.134 Mortgage Insurance_rental Housing $3.48M Yes 2
14.195 Section 8 Housing Assistance Payments Program $826,573 Yes 1
14.870 Resident Opportunity and Supportive Services - Service Coordinators $42,351 - 0

Contacts

Name Title Type
VX7NZ6G7XME6 Kimalee Williams Auditee
8605277600 Robert Balchunas Auditor
No contacts on file

Notes to SEFA

Title: Basis of Presentation Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: First Housing Corporation d/b/a Cathedral Manor has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. The accompanying schedule of expenditures of federal awards ("Schedule") includes the federal award activity of First Housing Corporation d/b/a Cathedral Manor, HUD Project No. 017-11105, under programs of the federal government for the year ended July 31, 2024. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards ("Uniform Guidance"). Because the Schedule presents only a selected portion of the operations of First Housing Corporation d/b/a Cathedral Manor, it is not intended to and does not present the financial position, changes in net assets, or cash flows of First Housing Corporation d/b/a Cathedral Manor.
Title: Department of Housing and Urban Development mortgage insurance Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: First Housing Corporation d/b/a Cathedral Manor has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. First Housing Corporation d/b/a Cathedral Manor has received U.S. Department of Housing and Urban Development mortgage insurance under Section 201 of the National Housing Act. The balances outstanding at the beginning of the year are included in the federal expenditures presented in the Schedule. First Housing Corporation d/b/a Cathedral Manor received no additional loans during the year. The balance of the outstanding loan at July 31, 2024 consists of the following: Outstanding Federal Assistance balance at Listing Number Program name July 31, 2024 14.134 Mortgage Insurance - Rental Housing $ 3,378,293
Title: Subrecipients Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: First Housing Corporation d/b/a Cathedral Manor has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. There were no payments to subrecipients in any of the federal awards programs during the year ended July 31, 2024.

Finding Details

Finding 2024-001
Department of Housing and Urban Development Finding No. 2024-001; Federal Assistance Listing Number 14.134, Mortgage Insurance - Rental Housing. Criteria According to 24 CFR 891.400(e), residual receipts reserve deposits should be made within 90 days of year end. Condition During the years ended July 31, 2019, 2020, 2021, 2022, 2023 and 2024, management did not make the required residual receipts reserve deposit in the amount of $81,489 that was required within 90 days of year ended July 31, 2018, as required by HUD. The residual receipts amount has not been deposited as of the date of this report. Cause Controls were not in place in 2019 to ensure that required residual receipts reserve deposits are made timely. Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Questioned Costs None Context The annual calculation was not prepared by the management agent, and accordingly, the required deposit was not made. The auditor notes that the deposit requirement was calculated with the inclusion of a subsidy receivable due from HUD that was not received until after the 90-day period. However, we also note that at the time the subsidy was received, the delinquent deposit should have been made and was not made. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2023-001). Recommendation Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely. Auditor's Noncompliance Code: B - Failure to make required residual receipts deposits Finding Resolution Status: Unresolved Views of Responsible Officials - As of July 31, 2024, the amount due to the residual receipts has not been deposited, until the property is in a positive cash flow position, management is not able to commit to any type of repayment plan and management is looking for forgiveness on the amount.
Finding 2024-002
Finding No. 2024-002; Federal Assistance Listing Number 14.134, Mortgage Insurance - Rental Housing. Criteria According to the HUD Handbook 4350.1, Appendix 2, the terms of the loan from the reserve for replacement required repayment from the proceeds of the Section 8 subsidy. Condition During the years ended July 31, 2019, 2020, 2021, 2022, 2023 and 2024, management did not fully repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an unauthorized distribution. As of July 31, 2024, the amount due to the reserve for replacement has been partially repaid. The remaining amount due as of July 31, 2024 is $9,669. Cause Management did not maintain adequate controls in 2019 over the reserve for replacement requirements established with the loan advance to ensure the timely repayment of the loan upon receipt of the delayed Section 8 subsidy. Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Questioned Costs None Context HUD approved a loan from the reserve for replacement with the stipulation that the loan be repaid when the delinquent Section 8 subsidy was paid by HUD. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2023-002). Recommendation Management should establish internal controls and procedures to ensure that required payments are made timely. Auditor's Noncompliance Code: N - Reserve for replacements deposits Finding Resolution Status: In process Views of Responsible Officials - The updated loan agreement was signed on March 14, 2024 to repay the $9,669 balance of the loan borrowed to the Lender, with a payment of $100 each month until the loan is repaid in full.
Finding 2024-003
Finding No. 2024-003; Federal Assistance Listing Number 14.195, Section 8 Housing Assistance Payments Program 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 Compliance procedures were not followed regarding the timely use of Enterprise Income Verification (“EIV”) system during annual recertification or initial certification process. Cause Management's policies with respect to the determination of tenant eligibility and the maintenance of tenant lease files in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs were not consistently followed. Effect or Potential Effect The procedures for determining tenant eligibility and maintaining tenant 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 In connection with our lease files review we noted the following deficiencies: 2 out of 8 existing tenants tested, the Project completed Enterprise Income Verification ("EIV"), but it was not performed within 120 days prior to tenant's annual recertification, which constitutes noncompliance with HUD regulations regarding tenant eligibility and the maintenance of lease files. 1 out of 1 new tenant tested, the Project completed Enterprise Income Verification ("EIV"), but it was not performed within 90 days after the tenant's move-in date, which constitutes noncompliance with HUD regulations regarding tenant eligibility and the maintenance of lease files. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2023-003). Recommendation Management should monitor compliance with established procedures to ensure that tenant eligibility is correctly determined and that 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: In process Views of Responsible Officials-Management has implemented compliance monitoring measures that ensures every file is fully audited for signatures, dates and proper calculations. The compliance manager utilizes a monthly checklist which now includes confirming signatures and dates are present.
Finding 2024-001
Department of Housing and Urban Development Finding No. 2024-001; Federal Assistance Listing Number 14.134, Mortgage Insurance - Rental Housing. Criteria According to 24 CFR 891.400(e), residual receipts reserve deposits should be made within 90 days of year end. Condition During the years ended July 31, 2019, 2020, 2021, 2022, 2023 and 2024, management did not make the required residual receipts reserve deposit in the amount of $81,489 that was required within 90 days of year ended July 31, 2018, as required by HUD. The residual receipts amount has not been deposited as of the date of this report. Cause Controls were not in place in 2019 to ensure that required residual receipts reserve deposits are made timely. Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Questioned Costs None Context The annual calculation was not prepared by the management agent, and accordingly, the required deposit was not made. The auditor notes that the deposit requirement was calculated with the inclusion of a subsidy receivable due from HUD that was not received until after the 90-day period. However, we also note that at the time the subsidy was received, the delinquent deposit should have been made and was not made. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2023-001). Recommendation Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely. Auditor's Noncompliance Code: B - Failure to make required residual receipts deposits Finding Resolution Status: Unresolved Views of Responsible Officials - As of July 31, 2024, the amount due to the residual receipts has not been deposited, until the property is in a positive cash flow position, management is not able to commit to any type of repayment plan and management is looking for forgiveness on the amount.
Finding 2024-002
Finding No. 2024-002; Federal Assistance Listing Number 14.134, Mortgage Insurance - Rental Housing. Criteria According to the HUD Handbook 4350.1, Appendix 2, the terms of the loan from the reserve for replacement required repayment from the proceeds of the Section 8 subsidy. Condition During the years ended July 31, 2019, 2020, 2021, 2022, 2023 and 2024, management did not fully repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an unauthorized distribution. As of July 31, 2024, the amount due to the reserve for replacement has been partially repaid. The remaining amount due as of July 31, 2024 is $9,669. Cause Management did not maintain adequate controls in 2019 over the reserve for replacement requirements established with the loan advance to ensure the timely repayment of the loan upon receipt of the delayed Section 8 subsidy. Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Questioned Costs None Context HUD approved a loan from the reserve for replacement with the stipulation that the loan be repaid when the delinquent Section 8 subsidy was paid by HUD. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2023-002). Recommendation Management should establish internal controls and procedures to ensure that required payments are made timely. Auditor's Noncompliance Code: N - Reserve for replacements deposits Finding Resolution Status: In process Views of Responsible Officials - The updated loan agreement was signed on March 14, 2024 to repay the $9,669 balance of the loan borrowed to the Lender, with a payment of $100 each month until the loan is repaid in full.
Finding 2024-003
Finding No. 2024-003; Federal Assistance Listing Number 14.195, Section 8 Housing Assistance Payments Program 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 Compliance procedures were not followed regarding the timely use of Enterprise Income Verification (“EIV”) system during annual recertification or initial certification process. Cause Management's policies with respect to the determination of tenant eligibility and the maintenance of tenant lease files in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs were not consistently followed. Effect or Potential Effect The procedures for determining tenant eligibility and maintaining tenant 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 In connection with our lease files review we noted the following deficiencies: 2 out of 8 existing tenants tested, the Project completed Enterprise Income Verification ("EIV"), but it was not performed within 120 days prior to tenant's annual recertification, which constitutes noncompliance with HUD regulations regarding tenant eligibility and the maintenance of lease files. 1 out of 1 new tenant tested, the Project completed Enterprise Income Verification ("EIV"), but it was not performed within 90 days after the tenant's move-in date, which constitutes noncompliance with HUD regulations regarding tenant eligibility and the maintenance of lease files. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2023-003). Recommendation Management should monitor compliance with established procedures to ensure that tenant eligibility is correctly determined and that 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: In process Views of Responsible Officials-Management has implemented compliance monitoring measures that ensures every file is fully audited for signatures, dates and proper calculations. The compliance manager utilizes a monthly checklist which now includes confirming signatures and dates are present.