FAC Explorer

Audit 366194

FY End
2024-12-31
Total Expended
$2.65M
Findings
4
Programs
1
Organization: Pro Viviendas Iv, Inc. (PR)
Year: 2024 Accepted: 2025-09-12
Auditor: Galindez LLC

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
576321 2024-001 Significant Deficiency Yes N
576322 2024-002 Material Weakness - N
1152763 2024-001 Significant Deficiency Yes N
1152764 2024-002 Material Weakness - N

Programs

ALN Program Spent Major Findings
14.195 Project-Based Rental Assistance (pbra) $2.65M Yes 2

Contacts

Name Title Type
DJBRXA7BNEP8 Carmen Gloria Rivera Auditee
7877254545 Rafael Nieves Auditor
No contacts on file

Notes to SEFA

Title: Basis of presentation Accounting Policies: Summary of significant accounting policies a. The Schedule is prepared from Pro Viviendas VI’s, Inc. accounting records and is not intended to present its financial position or the results of its operations. b. The financial transactions are recorded by Pro Viviendas VI, Inc. in accordance with the terms and conditions of the grants, which are consistent with accounting principles generally accepted in the United States of America. c. Expenditures are recognized in the accounting period in which the liability is incurred, if measurable or when actually paid, whichever occurs first. d. Expenditures are reported on the Schedule following the cost principles contained in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (45 CFR Part 75), wherein certain types of expenditures may or may not be allowable or may be limited as to reimbursement. e. Pro Viviendas VI, Inc. has elected not to use the ten percent de minimis indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: Pro Viviendas VI, Inc. has elected not to use the ten percent de minimis indirect cost rate as allowed under the Uniform Guidance. The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of Pro Viviendas IV, Inc. under programs of the federal government for the year ended December 31, 2024. The information in the Schedule is presented in accordance with the requirements of the Title 2 U.S. Code of Federal Regulations (CFR) 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 Pro Viviendas IV, Inc., it is not intended to, and does not, present the financial position, changes in net assets or cash flows of Pro Viviendas IV, Inc.
Title: Assistance Listing Number (ALN) Accounting Policies: Summary of significant accounting policies a. The Schedule is prepared from Pro Viviendas VI’s, Inc. accounting records and is not intended to present its financial position or the results of its operations. b. The financial transactions are recorded by Pro Viviendas VI, Inc. in accordance with the terms and conditions of the grants, which are consistent with accounting principles generally accepted in the United States of America. c. Expenditures are recognized in the accounting period in which the liability is incurred, if measurable or when actually paid, whichever occurs first. d. Expenditures are reported on the Schedule following the cost principles contained in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (45 CFR Part 75), wherein certain types of expenditures may or may not be allowable or may be limited as to reimbursement. e. Pro Viviendas VI, Inc. has elected not to use the ten percent de minimis indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: Pro Viviendas VI, Inc. has elected not to use the ten percent de minimis indirect cost rate as allowed under the Uniform Guidance. The Assistance Listing Numbers (ALN) included in the Schedule are determined based on the program name, review of grant contract information and the public descriptions of federal assistance listings published by the U.S. Government in sam.gov.
Title: Major federal programs Accounting Policies: Summary of significant accounting policies a. The Schedule is prepared from Pro Viviendas VI’s, Inc. accounting records and is not intended to present its financial position or the results of its operations. b. The financial transactions are recorded by Pro Viviendas VI, Inc. in accordance with the terms and conditions of the grants, which are consistent with accounting principles generally accepted in the United States of America. c. Expenditures are recognized in the accounting period in which the liability is incurred, if measurable or when actually paid, whichever occurs first. d. Expenditures are reported on the Schedule following the cost principles contained in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (45 CFR Part 75), wherein certain types of expenditures may or may not be allowable or may be limited as to reimbursement. e. Pro Viviendas VI, Inc. has elected not to use the ten percent de minimis indirect cost rate as allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: Pro Viviendas VI, Inc. has elected not to use the ten percent de minimis indirect cost rate as allowed under the Uniform Guidance. Major programs are identified in the Summary of Auditors’ Result Section in the Schedule of Findings and Questioned Cost. Federal programs are presented by federal agency.

Finding Details

Finding 2024-001
Finding Number: 2024-001 REPLACEMENT RESERVE DEPOSITS Program Title: Section 8 Project Based Cluster / Project Base Rental Assistance (PBRA) Name of Federal agency: U. S. Department of Housing and Urban Development (HUD) ALN Number: 14.195 Category Other matter Criteria Pursuant to Section 2 (a) of the Regulatory Agreement, the Property is required to make monthly deposits to the reserve for replacements fund as required by HUD. Owners shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally insured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve funds. All disbursements from the reserve must be approved by HUD. Condition The Project deposited the required January 2024 monthly amount on the month of February 2024. Cause The project management was unaware that the total amount to be deposited into the replacement reserve had to be made in the first few days of the corresponding payment month, rather than as an annual or periodic deposit throughout the year. Effect The Project failed to make the corresponding deposit in the month of January 2024 and later deposited in February 2024 affecting interest earned on that deposit. Questioned cost None since the deposit was made in February 2024. Context Condition observed on one of the twelve deposits required by the Regulatory Agreement. Repeated finding Finding No. 2023-001 Recommendation Management should monitor monthly the activity of the replacement reserve account, and tenant’s security deposit account. Required deposits should be made to the correct account on a monthly basis to avoid deficiencies in the reserve account balance. Views of responsible officials and planned corrective actions The Project’s management agrees with this finding. Please refer to the corrective action plan on page 41-42.
Finding 2024-002
Finding Number: 2024-002 – RESERVE FOR REPLACEMENT FUNDS Program Title: Section 8 Project Based Cluster / Project Base Rental Assistance (PBRA) Name of Federal agency: U. S. Department of Housing and Urban Development (HUD) ALN Number: 14.195 Category Material weakness Compliance requirement N. Special Tests and Provisions Criteria Pursuant to Section 2(a) of the Regulatory Agreement, the Property is required to make monthly deposits to the reserve for replacements fund as required by HUD. The owner shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in an interestbearing account. All earnings including interest on the reserve must be added to the reserve. All disbursements from the reserve must be as approved or directed by HUD or the state agency. An amount as required by HUD shall be deposited monthly in the reserve fund in accordance with the Regulatory Agreement or HAP contract. Condition To secure and guarantee the payment and performance under a loan agreement, the Project pledged and assigned the restricted replacement reserve account and used it as collateral to obtain the loan. We did not observe any approval from HUD for such transaction. Cause As explained by management, they currently lack sufficient cash reserves to meet the covenant required reserves without leveraging HUD reserves as collateral for financing. To secure additional funding, they have initiated a transfer of reserves from the HUD account to the accounts required by Puerto Rico Popular Bank. While they acknowledge that HUD has granted them authorization limited to amounts payable under the HAP (Housing Assistance Payment) Contract, they argue that in their specific case, where the mortgage has been fully paid off, compliance with HUD regarding the reserves may no longer be necessary. Effect In an event of default on the loan agreement, the lender may authorize the application of the balance in such fund to the amount due or defaulted. Questioned Cost None since Project funds has not been disbursed. Context As of December 31, 2024, the Replacement Reserve fund and the long-term related with the pledge had a balance of $423,274 and $3,085,381, respectively. On December 11, 2024, the Project, the secured party, and HUD signed a consent from HUD to assign the HAP contract as security interest by the owner to the lender for a loan. However, such document also clarifies that consent to assignment does not means that HUD or the contract administrator has reviewed, approved, or agreed to the terms of any financing or refinancing; to any term of the loan documents; or the terms of any assignment of the HAP contract by the owner to the lender as security for the loan. The consent for the loan does not change the terms of the HAP contract in any way. It does not alter the rights and obligations of HUD and the owner under the HAP contract, including the Project's operation under the Regulatory Agreement. Repeated finding No Recommendation We recommend that management ensure compliance with the HAP (Housing Assistance Payment) Contract terms and the Regulatory Agreement. Specifically, the creation or transfer of any security interest in the HAP Contract should be limited to amounts payable under the HAP Contract unless explicitly approved by HUD. Any security interest assignment should be done per the terms specified in the HAP contract and the regulatory agreement. It's important to review the HAP Contract thoroughly and consult legal or financial professionals to ensure proper compliance and understanding of the terms. The HAP Contract typically outlines the specific terms and conditions under which payments are made to the property owner or manager. These terms may include the amount of the Housing Assistance Payments, the duration of the contract, and other obligations and rights of the parties involved. By limiting security interests to amounts payable under the contract, you ensure that any financing or assignment is in line with these contractual terms. Views of responsible officials and planned corrective actions The Project’s management agrees with this finding. Please refer to the corrective action plan on page 41-42.
Finding 2024-001
Finding Number: 2024-001 REPLACEMENT RESERVE DEPOSITS Program Title: Section 8 Project Based Cluster / Project Base Rental Assistance (PBRA) Name of Federal agency: U. S. Department of Housing and Urban Development (HUD) ALN Number: 14.195 Category Other matter Criteria Pursuant to Section 2 (a) of the Regulatory Agreement, the Property is required to make monthly deposits to the reserve for replacements fund as required by HUD. Owners shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally insured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve funds. All disbursements from the reserve must be approved by HUD. Condition The Project deposited the required January 2024 monthly amount on the month of February 2024. Cause The project management was unaware that the total amount to be deposited into the replacement reserve had to be made in the first few days of the corresponding payment month, rather than as an annual or periodic deposit throughout the year. Effect The Project failed to make the corresponding deposit in the month of January 2024 and later deposited in February 2024 affecting interest earned on that deposit. Questioned cost None since the deposit was made in February 2024. Context Condition observed on one of the twelve deposits required by the Regulatory Agreement. Repeated finding Finding No. 2023-001 Recommendation Management should monitor monthly the activity of the replacement reserve account, and tenant’s security deposit account. Required deposits should be made to the correct account on a monthly basis to avoid deficiencies in the reserve account balance. Views of responsible officials and planned corrective actions The Project’s management agrees with this finding. Please refer to the corrective action plan on page 41-42.
Finding 2024-002
Finding Number: 2024-002 – RESERVE FOR REPLACEMENT FUNDS Program Title: Section 8 Project Based Cluster / Project Base Rental Assistance (PBRA) Name of Federal agency: U. S. Department of Housing and Urban Development (HUD) ALN Number: 14.195 Category Material weakness Compliance requirement N. Special Tests and Provisions Criteria Pursuant to Section 2(a) of the Regulatory Agreement, the Property is required to make monthly deposits to the reserve for replacements fund as required by HUD. The owner shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in an interestbearing account. All earnings including interest on the reserve must be added to the reserve. All disbursements from the reserve must be as approved or directed by HUD or the state agency. An amount as required by HUD shall be deposited monthly in the reserve fund in accordance with the Regulatory Agreement or HAP contract. Condition To secure and guarantee the payment and performance under a loan agreement, the Project pledged and assigned the restricted replacement reserve account and used it as collateral to obtain the loan. We did not observe any approval from HUD for such transaction. Cause As explained by management, they currently lack sufficient cash reserves to meet the covenant required reserves without leveraging HUD reserves as collateral for financing. To secure additional funding, they have initiated a transfer of reserves from the HUD account to the accounts required by Puerto Rico Popular Bank. While they acknowledge that HUD has granted them authorization limited to amounts payable under the HAP (Housing Assistance Payment) Contract, they argue that in their specific case, where the mortgage has been fully paid off, compliance with HUD regarding the reserves may no longer be necessary. Effect In an event of default on the loan agreement, the lender may authorize the application of the balance in such fund to the amount due or defaulted. Questioned Cost None since Project funds has not been disbursed. Context As of December 31, 2024, the Replacement Reserve fund and the long-term related with the pledge had a balance of $423,274 and $3,085,381, respectively. On December 11, 2024, the Project, the secured party, and HUD signed a consent from HUD to assign the HAP contract as security interest by the owner to the lender for a loan. However, such document also clarifies that consent to assignment does not means that HUD or the contract administrator has reviewed, approved, or agreed to the terms of any financing or refinancing; to any term of the loan documents; or the terms of any assignment of the HAP contract by the owner to the lender as security for the loan. The consent for the loan does not change the terms of the HAP contract in any way. It does not alter the rights and obligations of HUD and the owner under the HAP contract, including the Project's operation under the Regulatory Agreement. Repeated finding No Recommendation We recommend that management ensure compliance with the HAP (Housing Assistance Payment) Contract terms and the Regulatory Agreement. Specifically, the creation or transfer of any security interest in the HAP Contract should be limited to amounts payable under the HAP Contract unless explicitly approved by HUD. Any security interest assignment should be done per the terms specified in the HAP contract and the regulatory agreement. It's important to review the HAP Contract thoroughly and consult legal or financial professionals to ensure proper compliance and understanding of the terms. The HAP Contract typically outlines the specific terms and conditions under which payments are made to the property owner or manager. These terms may include the amount of the Housing Assistance Payments, the duration of the contract, and other obligations and rights of the parties involved. By limiting security interests to amounts payable under the contract, you ensure that any financing or assignment is in line with these contractual terms. Views of responsible officials and planned corrective actions The Project’s management agrees with this finding. Please refer to the corrective action plan on page 41-42.