Audit 366834

Criteria: The Regulatory Agreement for Multifamily Housing Projects dated May 20, 2008, states in section 2.(c), that the owners shall establish and maintain, in addition to the reserve fund for replacements, a residual receipts fund by depositing thereto, with the mortgagee, the residual receipts, as defined herein, within 60 days after the end of the semiannual or annual fiscal period within which such receipts are realized. Condition: During our testing of the surplus cash calculation and residual receipts account, we noticed the surplus cash computed as of the September 30, 2024 fiscal year was not deposited in the residual receipts fund account held by the mortgagee. Cause: During the fiscal year 2024, the majority of the Project’s sole member’s assets were sold to two other organizations. As such, several staff transferred to the new organization. The Project was left with only the current CFO and no accounting staff. Management did not have the appropriate controls or staff in place to ensure the surplus cash was deposited timely with the mortgagee. Effect: The Project did not deposit the surplus cash amount of $140,440 calculated as of September 30, 2024, with the mortgagee within 60 days of the fiscal year end.

Criteria: The Regulatory Agreement for Multifamily Housing Projects dated May 20, 2008, states in section 2. (c), that the owners shall establish and maintain, in addition to the reserve fund for replacements, a residual receipts fund by depositing thereto, with the mortgagee, the residual receipts, as defined herein, within 60 days after the end of the semiannual or annual fiscal period within which such receipts are realized. Condition: During our testing of the surplus cash calculation and residual receipts account, we noticed the surplus cash computed as of the September 30, 2023 fiscal year was not deposited in the residual receipts fund account held by the mortgagee. It was not completed as Ridgecrest at Richfield did not deposit the funds from prior year in 2024. This finding was not resolved in the schedule of status of prior year findings and questioned costs. Cause: During the fiscal year 2023, the majority of the Project’s sole member’s assets were sold to two other organizations. As such, several staff transferred to the new organization. The Project was left with only the current CFO and no accounting staff. Management did not have the appropriate controls or staff in place to ensure the surplus cash was deposited timely with the mortgagee. Effect: The Project did not deposit the surplus cash amount of $22,818 calculated as of September 30, 2023, with the mortgagee within 60 days of the fiscal year end. Questioned Costs: None noted. Recommendation: We recommend that management implement controls to review the calculation of surplus cash as soon as possible after the fiscal year end and forward any surplus cash computed to the mortgagee within 60 days of the fiscal year end.

Criteria: Per 24 CFR 5.801 and HUD Handbook 4350.3, all tenant certifications must be supported by a completed HUD Form 50059, this documentation is required to verify tenant eligibility, rent calculations, and subsidy amounts and must retained in tenant files for review and audit purposes. Condition: During our testing of lease eligibility, we noted that HUD form 50059 was not available for two of the tenant files selected for testing. The client was unable to provide the executed forms during our audit. Considered a finding. Cause: During the fiscal year 2024, the majority of the property was sold during the fiscal year 2024, and certain tenant records may not have been retained or transferred appropriately during the transition period. As a result, the required documentation could not be located. Effect: The absence of HUD Form 50059 limits our ability to verify tenant eligibility and the accuracy of housing assistance payments. This may result in unallowable costs being charged to the program and noncompliance with HUD record retention requirements. Questioned Costs: None noted. Recommendation: We recommend that management implement controls and procedure to ensure that all required tenant documentation, including HUD Form 50059, is retained in accordance with HUD and program record retention requirements, especially during and after property transitions. In addition, management should evaluate current recordkeeping practices and establish controls to prevent similar occurrences in the future.